M&As without Integration: the new optimal?

  • This topic has 11 replies, 12 voices, and was last updated 1 year ago by Ali Ahmed Alshehri.
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  • #36384
    Ali Ahmed Alshehri
    Participant

    Are there cases where even after the merger is complete the acquiring company opts not to integrate with the target?
    Can a company have multiple and redundant product lines and competing brands?

    #39128
    Mirinda Lowe
    Participant

    If the merger were a conglomerate merger it would likely not integrate, but would continue to run as a completely separate business. Some tech acquisitions will sometimes remain separate as well, if the culture is substantially different and the objective is the separate platform. Not sure having redundant similar product lines competing would make financial sense, but I’m sure it’s happened.

    #39142
    Pawankumar Sharda
    Participant

    I agree that many PE firms once acquire their potential targets, allow the company to run on its own as an independent company. Only changes if any could be like executive changes like CEO /CFO and replace with the executives who are aligned with the PE board or so. Many times personnel from the PE oversee the initial functioning of the company, make changes to the processes & help to adapt to the new PE owner’s requirements. Later, the company runs as a normal business.

    #39153
    Meg Ver
    Participant

    Not sure if an acquired company can decide to opt out after Post Close. Terms and conditions specified in merger dictate the future of acquired company which gets discussed prior to the finalization of the deal.
    In event of merger being part of portfolio expansion strategy, it makes sense for the two businesses to operate separately. But if both of the companies own similar line of products and operate in similar LoB, then it will hurt operating as two different entities as they face the risk of cannibalization of their products.
    In high-tech, it is common practice for acquired company to operate separately for specific period until all the OUs or BUs integrate.

    #39168
    Thabet AlYousef
    Participant

    The level of integration should have been addressed already on the rationale of the deal. I think the AUTO industry is an example where you have acquisitions but remain separate with similar products though catering for different segments

    #39190
    Jess Munford
    Participant

    I reviewed this video which is a case study of a company who had done a number of acquisitions but not integrated. The consultant talks about how they integrated the 10 different brands much later after acquiring.

    #39209
    Anandan Rajagopalan
    Participant

    My former employer was acquired by the private equity consortium for creating value in the services industry and remains fully supportive of current structure strategies and its management, allowed the company to run on its own as an independent company, only changes they did was replaced with new CEO & CFO who are more aligned to PE’s board and strategy. After few years of its successful operation, the plan was to sell the company but due to oil price decline and its effect on the industry the company could not be sold.

    #39251
    Wessam AlZamil
    Participant

    It depends on the M&A case. For example, big companies sometime own various entities that they become wholly-owned subsidiaries without integration on the operational level with the parent company. I believe that sometimes it is better to reduce complexities on that particular business, and to minimize liabilities on the parent company specifically if they operate in a different country.

    #39252
    Stephane Hetroy
    Participant

    I do agree this is really a case-by-case situation and is usually planned ahead of the deal when the strategy is defined (to keep or sell in a few years). I have seen cases, where the target was left running ‘independently’ with only a few top executives changed (easier sometimes on culture, operations, and systems, also cheaper).

    #39264
    James Elding
    Participant

    I am part of a transaction where integration is desired. However, there are some concerns from some state authorities that integration might produce monopoly effects. The acquired company is being set up as a wholly owned subsidiary and Integration matters will be considered in years to come. The acquiring company may need to first divest some of its newly acquired assets before it can integrate. The purchase is seen as a strategic move in capturing market share.

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