In order to take advantage of the synergy expected from an acquisition, it is imperative that both organizations are seamlessly integrated.
The term “Acquisition Integration” is most frequently used in the context of mergers and acquisitions, where it refers to the process of integrating two companies after a buyout. When a company acquires another company, it is often in the best interest of the acquiring company to make changes to integrate their new business.
In terms of IT integration, Fintalent’s Acquisition integration consultants notes that the key tasks for acquisition integration is that IT assets of each company must be identified, evaluated, announced to workforce, managed through procurement activities and tool management. Executing the acquisition by integrating organization charts, IT operations methodologies and respective project management processes across two organizations would then follow. During the final phase, after the closing of transaction is finalized there are several key tasks that need to be accomplished such as transition of employees from both companies along with managing any return on investment (ROI) for the new merged entity.
Contrary to the public opinion, during an acquisition integration, the acquirer’s IT department is not in control of the process. Instead they lead and direct it, while providing a limited amount of resources. The management from both companies will have to do most of the work required to integrate their operations.
The following outlines some ways that a company may accomplish proper acquisition integration.
Merger: When two companies are combined for better results, each remains as an individual subsidiary of the acquiring entity. Integration may vary depending on what type of merger has occurred between both companies since they may have different cultures and needs.
Corporeal Merger: When two companies are merged into one combined entity, all employees and management remain with their original companies but operate under the umbrella of one entity through a corporeal relationship (e.g., division management).
Strategic Alliance: When two companies join forces to form a new entity aligned towards a common goal, but remain as separate entities under their own direction. Integration may vary depending on how the alliance was formed. For example, one company may take the lead role in driving the alliance’s goals and objectives while the other company may be passive or inactive in the alliance (e.g., strategic partnership).
Conglomerate Merger: When multiple acquiring entities come together to form a larger entity, integration is necessary as new business processes are created and an overarching culture is developed to support all operations (e.g., merger of three large corporations).
There are a number of ways to achieve integration. In recent years, companies have focused on the following methods to integrate acquired businesses:
-Hybrid Integration: This method is often used in cases where two companies are involved in an acquisition. It is also known as “one-size-fits-all” or “integration by surprise” since it is not entirely predictable and often occurs after the acquisition has taken place. Typically a company will take over a business with its existing procedures and then apply the acquiring company’s structure and culture. In some cases, the acquiring company may choose to terminate certain practices in order for them to be replaced with new ones. This is often used if the acquiring company already has a well-structured corporate structure and does not want to bring in another company’s structure. The advantage of this method is that it is fast and efficient, but the disadvantage is that it can seem impersonal to employees.
One-Merger Company: This method is similar to mergers that have occurred in the past where two companies have merged into one entity and retain their own distinct cultures. Each company has its own management team, but all members work under one umbrella entity. This method may be less impersonal than a hybrid integration since there are recognized leaders in place from both entities, but still allows for flexibility by offering cross-training opportunities as needed across both organizations.
-Process Integration: This method involves making changes to integrate both companies’ operational processes through a strategic plan that is developed by individuals experienced in both organizations. Changes may include changes in management levels, organizational structure, and culture. This method is particularly useful in cases where the merging companies are very different if they have similar values but do not operate under similar cultures – for example in cases where two major brand corporations merge, their cultures will differ but still remain as separate entities.
Organizational Merger: In some cases a company may wish to completely merge two or more organizations into one single entity streamlined and centralized around a common purpose/goal. This is often used when an acquiring company has a strong corporate structure and aims to extend this structure across all parts of their portfolio. It may be used to consolidate duplicate assets, or in other cases the company will combine several smaller groups into one large cohesive unit.
Delivery Integration: In many cases a company may choose to integrate through software solutions such as CRM (customer relationship management). This allows for better communication between the two entities (closer contact) and collaboration across both organizations (integration through information) so that customers are serviced faster and with more consistency.
Boom Integration: This method is more like a merger in nature since it requires significantly overlapping skillsets from both entities that are involved in the transaction. In a boom integration, employees from the target company (or companies) are often brought on board to help supplement conflicting areas in the acquiring company. The goal of this method is to improve processes through a shared knowledge base and work structure.
There are several other ways that an acquiring company can achieve integration with an acquired entity. A general rule of thumb is that an integrated business will typically have common goals, resources, leadership, and training methods across all parts of the organization. This allows for greater efficiency within operations and is what allows for true synergies to be realized.
