Popp A Modern Post-Merger Integration Playbook

From M&A Models to AI Solutions
1. Auflage 2026
ISBN: 978-3-6957-6728-1
Verlag: BoD - Books on Demand
Format: EPUB
Kopierschutz: 6 - ePub Watermark

E-Book, Englisch, 228 Seiten

Would you want your merger integration project to fail? No. So, how do you understand the many tasks of merger integration, the complexity and management of integration projects? By reading this book. With this book you will be able to 1.Prepare merger integration early with merger integration due diligence 2.Define and execute tasks of M&A integration along the M&A reference model. 3.Ask the right questions while executing successful merger integration. 4.Analyze complexity, dependencies within merger integrations. 5.Determine and manage opportunities and risks of M&A integration projects. 6.Select the right tasks to be automated by artificial intelligence

Dr. Karl Michael Popp (http://www.drkarlpopp.com) is a retired member of the Corporate Development Team at SAP. He continues to work on mergers and acquisitions, product due diligence and post-merger integrations. In his thirty-year career, he has worked on more than 50 partnerships, over 40 acquisitions and integrations and a few divestitures. He is a senior advisor to investment banks, private equity companies, and M&A software vendors. He also is a renowned expert, speaker, and author about mergers and acquisitions, post-merger integration and the software business. Inform yourself online at manda-automation.com.

Autoren/Hrsg.

Popp, Karl Michael

Leseproben

2. Foundations of post-merger integration

In this section, let us define some of the basics of post-merger integration like characteristics of M&A transactions, M&A processes and M&A organization. This will help us better understand the detailed sections later in this book.

2.1 M&A terms

Acquisitions are activities by a buyer entity with the goal of signing a deal to get ownership of certain assets or shares of a target entity.

An asset deal is the transfer of assets from a target company to a buyer company for a compensation. It is used if the buyer is interested in just a few assets of the target or if the seller only wants to sell specific assets. Usually, also employees are transferred with the assets.

A share deal transfers ownership of the target company to the buyer by selling all target company shares to the buyer for compensation.

Mergers are plans for a buyer and target entity to integrate with each other. Merger integration is the execution of such plans. A carve-out is the activity to separate a part of an entity, usually with the plan to sell the result. A reverse merger is a merger integration which results in the buyer to be integrated into the target.

Some companies repeatedly execute mergers and acquisitions and are called serial acquirers.

The terms horizontal and vertical mergers are often used, so let us define them. Horizontal merger means that two companies in the same industry merge. They often have similar products and might also have overlapping customer and supplier bases.

Figure 1: Merger terms

A vertical merger is defined as a combination of two companies from different industries that are connected via a cross-industry supply chain.

A deal-breaker is a fact that could cause a proposed deal fail. It is usually detected during due diligence or earlier in the M&A process.

In mergers and acquisitions, there is information asymmetry between the entities involved. These differences in available information surface when one entity holds a larger or more superior pool of information than its counterpart, which may result in incorrect valuations, plannings and decisions.

This quote summarizes the impact of information asymmetry between entities in the M&A process well: “Companies involved in merger and acquisition deals are up against a fundamental problem when they negotiate. Information is asymmetrical, i.e. unequally divided between buyer and seller. There are two, parallel outcomes. One, the buyer is likely to make an adverse selection. Two, the seller cannot reveal all his information and true value - he has a ‘credible signalling problem’.” [DieKo91]

2.2 Objectives of M&A transactions

To improve understanding of M&A transactions, let us have a look at characteristics of these transactions. This will help us improve the due diligence and management of M&A transactions overall.

Besides shareholders wanting to maximize their shareholder value, all involved entities have objectives of their own, some of which are shown in the following figure.

Objectives of buyers for mergers and acquisitions

Figure 2: Selected objectives of buyer companies in M&A

Business growth measures in sales as well as economies of scale is what companies are targeting. Or they would like to scale up the number of customers via an acquisition or sell their products to customers coming from an acquisition.

Adding products to a company portfolio can be realized by acquisition. It is also possible to choose acquisitions over the development of a new product to save time to market.

Acquisitions usually reduce the number of companies on certain markets and acquirers try to profit from it. At the same time they are under scrutiny of regulatory authorities which try to ensure a certain minimum level of competition in these markets.

In some cases, companies are acquired to add new business models to the portfolio of the acquirer.

2.3 Opportunities and risks of mergers and acquisitions

Considering the complexity and the high number of failed transactions, why are companies entering into mergers and acquisitions? They see opportunities in many ways. For a software company, the following figure shows the most important objectives.

So, software vendors are acquiring IP, products, knowhow, customer data and contracts, employee data and contracts, partner data and contracts, supplier data and license contracts as well as other rights and obligations. They take ownership of company, locations, and contracts in countries etc. Companies wanting to acquire other companies should try to balance the opportunities with the risk of such endeavors.

Figure 3: Selected opportunities in M&A

Mergers and acquisitions are characterized by uncertainty, ambiguity and time pressure as well as being multi-faceted. Many aspects of a specific acquisition task are singular and have not been experienced before, will be resolved by using heuristics and therefore bear manyfold risks [Ver+21]. Nevertheless, many companies are engaging in mergers and acquisitions. Some companies repeatedly execute mergers and acquisitions and are called serial acquirers.

Here is a selection of risks in M&A, which have been studied deeply and culminated in Bruner´s book on deals from hell [Brun09].

Figure 4: Selected risks in M&A - Deals from hell

Now, let us look at the characteristics are business dynamics of target and ac-quirer, deal dynamics, external factors and complexity of target and acquirer.

Business dynamics of target and acquirer

Structural and behavioral dynamics apply for both, the acquiring and the acquired entity as well as the environment of both companies.

We use interaction diagrams to show the structure of systems, in our case how different entities involved in M&A are interacting with each other.

Using an interaction diagram, we can already identify potential dynamics as follows. We look at each of the objects and each of the relationships to identify dynamics.

By looking at the interaction diagram and all potential dynamics of all transactions, you get closer to a complete model of dynamics of a business system (from an outside view).

Figure 5: Dynamics of M&A transactions

A special case of dynamics is strategy dynamics, where changes of strategy, especially of the acquirer´s strategy during the M&A process, can trigger massive changes and trouble in merger integrations.

Time lags also play an important role, since the integration of both companies does not take place instantly. Time lags influence the speed of creating synergies of merger integration.

Figure 6: Sources of deal dynamics

Deal dynamics

We see a multitude of entities that participate in the M&A process or influence buyers and sellers during mergers and acquisitions. To name a few, there are banks providing financing and shareholders who would like to maximize the shareholder value, regulatory authorities which enforce regulations, the buyer´s and the seller´s partner ecosystem of partners, customers, and suppliers.

Most of these entities are included in the following figure, where the software vendor is the buyer. But even this figure is simplified since there are more entities involved during the acquisition process, like external legal advisors and others.

Figure 7: A more detailed interaction model of M&A

The transaction itself carries dynamics, which we can identify by looking at a more detailed interaction diagram of the acquisition transactions taking place.

Each of the external objects involved (e.g., shareholders, regulatory authorities, and acquisition targets) can change their behavior and thus might be in favor of the transaction or not. If one of the involved external objects is not in favor, additional complexity and effort is added to the transaction by having to influence, persuade or to force external objects to be in favor of the transaction.

There are numerous obstacles for merger integration inside and outside of the entities...