News

Webinar to give the low-down on successful post-merger integration

As market trends continue to point toward increasing consolidation in the engineering sector, finding the right growth strategy becomes ever more crucial. The most successful firms find the right balance of organic growth and strategic acquisition to achieve competitive advantage, but experience shows that the hard work put in to concluding a deal is only the start.  Failure to integrate effectively with the target firm can make the difference between achieving or exceeding strategic and financial goals and ending up with no net gain or even a loss.   

Planning for successful post-merger integration (PMI) starts early in the negotiation process and will be informed by the knowledge and issues gleaned at the due diligence stage. However, it is vital that the organisational commitment to a successful PMI is championed at board level and realised through a comprehensive and phased programme of identifying and then realising the full breadth of your strategic and financial goals, by reference to clear deliverables.  

Nelson Ogunshakin, CEO of the ACE said: “The plan needs to create a roadmap to achieving the high level financial and strategic goals which addresses governance and systems alignment as well as the inevitable ‘cultural’ fit challenges that arise – all of which are an integral part of achieving the desired corporate synergies associated with success.” Ogunshakin was speaking ahead of a forthcoming webinar on post-merger integration organised by ACE, Beale & Co and WK Corporate Finance.

“Many less successful PMIs fail to achieve consolidation for reasons that could be avoided through better planning and management - IT systems remaining incompatible, financial reporting not aligned, a continuing ‘them and us’ culture across the two (or more) formerly separate businesses,” Ogunshakin said. According to Dan Nixon of WK Corporate Finance, one often overlooked aspect of the process is “the working capital requirements and funding cycle of the businesses being merged in. It is imperative that this is calculated and mapped pre-deal to ensure the appropriate funding structure is in place for the new combined entity post deal. Quite quickly a working capital need can emerge in the short term, creating a funding requirement that hadn't been budgeted for,” Nixon explained.

Successful PMI also involves a careful implementation of the acquisition contract and ensuring regulatory compliance.  The deal struck may also involve a seller’s earn-out arrangement or other means of incentivisation.  Balancing competing goals of getting the best performance from the seller’s management or top performers, integration of the seller into the newly merged entity and potentially managing actual or potential breaches of sellers’ contractual warranties, needs to be considered. 

Beale & Company partner James Hutchinson says: “Where the sellers remain in the business, it is important to balance the buyer’s right to recover for a warranty breach against the possible destruction of value if a claim were brought. Buyers need to consider PMI from the outset. They should model the impact of a warranty claim on the business and structure the deal and consideration accordingly,” said Hutchinson.

To find out more about the challenges and rewards of PMI, then register a place on the third in a series of webinars on merger and acquisition being organised by ACE, Beale & Co and WK Corporate Finance. The webinar takes place at 12.30pm on Wednesday 27 January 2016.

Book your place on the webinar here