What are the five big M&A business integration challenges?

Karen Thomas-Bland, founder at Seven, a business transformation consultancy based in London, recently spoke to Channel Futures on the topic of M&A integration. Below is a summary of that conversation.

For the last three business integrations I led or advised on, one was an integration in London, one in New York and one in Dubai. From a cultural perspective the US typically has a longer-hours and a higher-service culture. The UK and Dubai often use more formal language in the workplace. Whilst the US are very happy to work remotely and use video conferencing, (even well before the pandemic) and in Dubai it’s much more of a meeting-in-person way of working. I love all three cultures having lived and worked in all of them, on several occasions.

In my experience, there are five areas that frequently prove to be the biggest integration challenges — across all cultures.

1. Culture — what you often find is an inability to properly, deeply integrate two businesses that feel initially similar and have complementary services and products, but have different cultures, processes and ways of working. On top of country cultures being different, you are also bringing together people with very different sets of values, behaviours, leadership styles, mindsets and policies. The integration challenge is winning the hearts and minds of both sets of employees and giving them a compelling vision to buy into.

2. Customer — with leadership being distracted by the deal and integration process, it is not uncommon to lose focus on the customer. Customers are known to defect in times of uncertainty and competitors may see this as a good time to strike. The challenge is retaining customers through the business integration process, ensuring they don’t experience any loss in service quality.

3. Talent — currently it’s a candidate-driven rather than employer-driven employment market and many skills are in high demand. In times of uncertainty like a merger top talent may think about moving and competitors are likely to pounce — therefore the business integration challenge is having retention strategies lined up, so that you hang on to your best people.

4. Synergies — deals are often predicated on driving out a set of synergies to save costs and deliver growth opportunities. But many companies struggle and find they have an inability to drive the expected synergies from the deal. Due diligence helps you understand some of the risks and opportunities but it’s impossible to discover all them all before you buy the company. The business integration challenge is often managing ‘cost-to-achieve’ with the same rigour as synergies.

5. Technology — bringing together business applications, technology landscape and system configuration are a challenge. The integration approach needs to have a clear understanding of current technology assets, liabilities and the key risk areas that affect day one and beyond planning; for example, understanding how data integration efforts will impact key systems such as ERPs. What you really want to avoid is critical system outages that, for example, affect people being paid on time.

Based in London and with over 24 years’ global experience, Karen Thomas-Bland is often cited as one of the top M&A integration consultants and coaches in the world. She is a trusted advisor to boards, executive teams and investors, creating sustainable, long-term value for FTSE/Fortune businesses and PE funds. She writes for many publications including The Times, FT, Association of MBAs and Management Today.