In an article published by Deloitte ‘Post merger integration: Hard data, hard truths’, the authors argued that risk factors influencing PMI success can be used to help determine the types of “risk profiles” that pertain to a merger, and identifying the risk profiles before closing a deal is thus crucial. The article mentioned that 35 risk factors could be condensed into four categories of risks — synergy, structure, people and project — that can undermine the success of PMI. From this article, I would like to hear your thoughts on (a) whether a high PMI risk profile should be a reason to abort a proposed merger; (b) whether due diligence can uncover these risk factors to build a PMI risk profile of pre-closing; (c) what can the acquirer and target do to reduce the PMI risk profile pre-closing to increase the success of PMI?
Sounds interesting. On (a) , a high PMI risk profile would only mean that the risk of realizing the synergies is low; as there are many considerations to a doing a merger, this factor alone might not be sufficient to lead to a conclusive argument (i.e. there is other strategic, financial, valuation, operational aspects to consider as well). On (b), it would depend on the extent of the due diligence conducted and the level of information disclosed or interaction the acquirer can have with the functional leads during the due diligence process. While most of the data-driven information can be ‘due diligenced’ with hard work and time behind the desktop, the softer aspects like cultural / team fit would need time; naturally, these aspect are more difficult to foresee. On (c), that would be to get an experienced PMI head to be involved in the DD process as well, to highlight as key PMI issues ahead of time.