Optimal Duration for Post-Merger Integration
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In your experience, what is the optimal time range for post-merger integration, knowing that there are many factors that may come into play?
In my experience this is all dependent on the complexity of the integration, thus putting a specific time frame too it is very difficult. But, most of the more complex integration I have done ran between 1-3 years and the biggest part that pushed out the timelines was the integration of the different technologies. Multiple regions and jurisdiction can also influence this as there are regulatory, compliance and financial requirements that can increase the time to complete the integration.
Great question.
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We aim for 120 days from Day 1. Now that does not mean the integration is complete, but it does mean that the key elements of the post-merger integration has been assigned to the proper teams, and the post-merger integration elements are now really “business as usual”.
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Key areas of culture, communication, employee benefits & payroll, training, etc. area all taken care of. The integration is now in a specialized state.
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For example, as a technology company we have a lot of R&D in our acquisitions. Within 120 days, we have aligned all R&D people to our spectrum of talent, and they have been trained on expectations and growth paths in our company. There will still be a lot of R&D integration work to do, but the primary people integration elements are complete.
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The complete integration would appear to be 2-4 years for us, depending on the size of the acquistion. We are only in our 3rd of integration and have performed 4 acquisitions in that period of time.I would say that integration fully completed within 2 years is the best practice approach. Of course it will depends on the structured approach to the integration the company has in place. The thing is, the more the integration completion is delayed, the less value you would be able to realize from an acquisition.
As the M&A team we try to limit our involvement to 100 days after day 1 of closing and then hand the integration work over to the business. Transformation is obviously not done after 100 days, but it is important for us to not make the success of the integration dependent on the M&A team.
Thanks for the science.
I like to use the term “stabilization” as the day 1 – 100 phase, where key integration tasks are executed to secure the business. Another consideration here can be timing of the year, fiscal and calendar, holiday impacts etc. I’ve seen employee benefits open enrollment, PTO and other static operational factors often play a role in determining this timeline as well, regarding seasonality.
Ultimately it depends on the nature of the integration (& how complex merging together the two companies would be). For example, if both companies are in the same industry (with compatible company cultures), you could aim to conduct a 3-6 month merger. However, if both companies are from different industries (with incompatible cultures), then you may want to extend it to 1-2 years.
It depends on the company type. We have had some that have gone on for a couple of years as we work on operational models etc. Some that are standalone companies its just days after close once financial reporting etc is set up.
Each deal is different, but it seems for every deal, aiming to execute within 180 days post close is optimal. There will still be plenty of work to be done after 180 days, but enabling the each function to operate more in a “business as usual” cadence seems to stabilize the efforts.
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