Wanted: Well-oiled merger machine

Mergers and acquisitions are back (after a downturn in 2001-2002), but most still fail to deliver value to the shareholder. To avoid pitfalls and better manage the process, many companies have begun to structure and formalize their integration practices, according to a study by The Conference Board. The key is to have a "well-oiled integration engine."

The problem for CIOs is that IT integration has historically been an afterthought. I suspect that's changing for the better, though only at companies that are "serial acquirers" and have set up the aforementioned well-oiled merger machine.

Some positive signs from the report:

There is general agreement that the earlier the integration program gets underway, the better the end results. At Stanley Works, there is a highly regimented procedure for tracking the 5-10 acquisitions the company usually has every year. Dashboards are used to track progress on a weekly, bi-weekly, or monthly timeline.

Home Depot's M&A group has an "e-room" that makes collaborative tools and templates available online to help pilot current integrations and prepare employees for future acquisitions.

Two of the report's recommendations:

Access the expertise of integration professionals during the deal negotiation and due diligence phases. Getting an early start on integration planning not only eases the hand-off from the deal team to the integration team, it enables integration professionals to lead the due diligence process, thereby challenging some of the valuation assumptions of the deal team.

Give higher priority to the greatest challenges. Integrating corporate cultures, merging IT systems, and building solid management teams continue to be the most significant roadblocks to successful mergers.


Copyright © 2007 IDG Communications, Inc.

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