In corporate practice, mergers and acquisitions (M&A) are commonly chosen as a way to overcome the limits of organic growth, to enter new markets or increase the depth of value added.
The success of M&A projects often becomes apparent only after the transaction. The first hurdle to overcome is integration, a key factor for enabling the expected synergies. From the company’s perspective, the real work starts only after contract signing, when post-merger integration begins. Often the focus lies on value-adding business processes and units at first. Unfortunately, many projects neglect to give sufficient consideration to the fact that a consistent management approach which matches the business profile is a key success factor for companies – and their mergers.
The finance department not only plays a central role in negotiations and financing; after the transaction is concluded it finds itself confronted with a changed situation in the organisation. On the one hand, the CFO – as a business partner to management – makes a significant contribution to the success of the acquisition and the realisation of potential synergies. On the other hand, his or her own finance organisation has to adapt in order to provide the newly-formed company with optimal support.
The following items should be on every post-merger integration checklist:
- Information base for external reporting (IFRS requirements): create the information base for external reporting at an early stage and communicate expected synergies to the capital markets and banks.
- Degree of integration: define further integration activities in accordance with the company's strategy. A financial holding company requires significantly fewer integration efforts than a management holding.
- Adaptation and integration of internal reporting: quickly adapt and integrate internal reporting to create transparency and allow the new company to be well managed.
- Harmonisation of performance management: use harmonised key performance indicators, joint incentive systems and unified accounting standards to direct management attention to important and critical business units, thereby enabling better decisions to be made.
- Performance measurement through synergy controlling: track the change process from planning to implementation, creating transparency around synergies and existing potential.
- Synergies in the finance department: make an additional contribution to business success by centralising and standardising operational finance processes (bookkeeping) and financial systems.
Successful financial integration gives management the tools it needs to manage the new business and therefore represents an important success factor for overall post-merger integration. The tasks involved depend on the degree of integration and can be executed in a zipper-like fashion, allowing each phase of integration to build on the preceding ones.