Merger Styles and Business Integration Approaches

At one point in my career, I had more-or-less the same position for ten years; but during that time I was employed by five different companies.  And over those ten years, those five companies acquired dozens of other companies.  Each time I was acquired or we did the acquiring, I was responsible for ensuring that the two companies operated together seamlessly; from Marketing and Sales to Technical Support there was a need to be efficient and effective, as quickly as possible. No pressure!

There are many reasons that companies merge.  It is important to know what style of acquisition you are looking at before you decide how to approach integrating the organizations.

One of the first styles of acquisition I was exposed to was a straight market share grab.  The two companies were in the exact same business serving the same market and wanted to reduce the number of competitors.  In this case, integration is pretty straight forward; get on the acquiring companies processes and systems as quickly as possible.  There is nothing differentiating in this situation so move fast!

A technology acquisition is relatively straight forward also, especially if there is a relatively small installed base of customers.  I’ve participated in dozens of this style of merger; they are pretty commonplace in the technology sector.  In this situation the focus is on integrating R&D.  On the operational side, you typically just have to get the general ledger balances moved to the acquiring company’s books, link the networks and web sites and you’re in business.  Simple enough, right?

Acquiring a company which provides you a new product line might not be too complex as long as it’s a product similar to those you already have.  In this case, you will still be using the acquiring company’s processes and systems.  You have to do the technology acquisition work along with product set ups, some data conversion and new employee training; but it’s still pretty straight forward.  I have done a couple of these where the integration was done within the first 180 days post close.  I even did one where the merged company was operating on Day One!

From here it gets a little more interesting (Interesting is an IT term that means the cost and complexity just went up exponentially!).  There are three styles where significant diligence should be applied to determine the best integration approach.  I have been involved in acquisitions of each type.

The first is what I call a new business model.  This means we’re in the same business but there is a new go-to-market model involved.  In my example, an enterprise supplier (low volume-high dollar) acquired a distribution supplier (high volume-low dollar).  This is a nice blend for expanding market penetration.

The second style is new market segment.  A company with a consumer orientation is going to merge with an enterprise focused company.  This has the all considerations of the new business model along with different target markets.  This adds another layer of complexity.

The final style is the partial merger.  In this case you have to split some part of the business out of the parent company, this can be simple (like a single product line) or not.  There are lots of things to think about in this scenario!

There is no one approach that works best in the last three scenarios.  I have used neither (did a full new implementation for the merged company requirements), used the acquired company’s or used the acquiring company’s processes and systems.  In any of these last three styles the approach is that most common answer – “It depends!”

Have I left out any styles that you’ve had to handle?

Photo Credit: Scott Maxwell – Fotolia

© Ellen Terwilliger 2012