Connected Supply Chain Show

Post Merger Integration: Getting the ROI from the Deal

Posted by Peter Edlund on Wed, Sep 28, 2016

Global mergers & acquisitions reached record levels in 2015. And with more than 21,000 deals announced through the second quarter of this year, M&A continues to play a key role for companies’ growth and expansion. As companies focus on acquisitions that help them extend into new markets, and add customers, products and technologies, due diligence and regulatory approvals are all critically important. But once the deal is done, the biggest challenge often lies in merging two distinct businesses. Post-merger implementation is where the rubber meets the road, particularly within the supply chain.

Post-merger Execution: Where the Rubber Meets the Road

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Anyone who has ever integrated two companies knows that it’s a complex process, to say the least. To add to the complexity,  deals have become more global, as companies look beyond geographic borders for new opportunities. The ability to handle a volume of smaller implementations is also important.

Yes, there are still big, marquee-value deals like Microsoft’s acquisition of LinkedIn in play, but more companies are participating in many smaller, strategic opportunities too.  And some deals aren’t mergers or acquisitions at all, as businesses instead shed assets that aren’t core in a push to divest. Each of these trends has the power to significantly complicate post-merger integrations.

Operating in a Non-Standard World

For deals that cross country lines, integrating global supply chains is particularly challenging. There are often cultural issues. For example, business rules can vary from country to country, and in some countries, business rules don’t exist.

There are also different technical standards to overcome. Companies may have different ERP systems that can take years to fully integrate. And even when they use the same ERP system, issues can arise. For example, when Kraft bought Cadbury in 2010, there was significant speculation on how the two companies would handle the integration, specifically around the ERP system. Even though both were using the same system, there were enough variations in their approaches to significantly complicate the implementation.  

Integration: The Need for Speed

The speed of integration while limiting disruption in service to customers is critical. This is particularly challenging when managing large volumes of smaller deals. Delays can often significantly impact post-merger ROI.  And with corporate divestitures on the rise, unwinding business connections provides special challenges, in which the separation of businesses can be more complex and disruptive to customers and suppliers than an integration.

The Path to M&A ROI 

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Realizing the planned-for return on investment for the deal requires careful planning, collaboration, and can be aided by use of some creative solutions. Some companies have set up supply chain integration hubs.  These are essentially neutral, third-party solutions that are often supplied by a managed services provider.

An integration hub can be set up before the deal is even signed, and can solve for not only disparate systems, but address the need to move quickly. A hub can eliminate barriers related to systems, global issues, and scalability and can provide a single view of supply chain data so company leadership doesn’t have to wait for systems to be merged.  And, perhaps more importantly, an integration hub can provide a single view across the merged supply chains.

When it comes to M&A, there are countless stories of companies with deals that did not meet expectations.  Deals can fail for many reasons, but integration remains one of the biggest issues for companies. Putting an integration hub can help take some of the pressure off and set the company up for success across multiple acquisitions or divestitures. 

What other ideas do you have for successful post-acquisition integration?  What success stories (or lessons learned) can you share?

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