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5 Post-Merger Integration Challenges: Part Five – Evolution

Your Day One transformation is over, so what's next?
Hutton Henry

This is the last blog of a 5-part series on the challenges of Post-Merger Integration - from the technology team's perspective.  See the bottom of this article for links to related blog articles.

Now the technology environments have been merged or separated, cultural differences will appear, and these will underpin the communication between the technology teams, their effectiveness and the impact to future collaboration. But the work does not stop here. All eyes will be on Day Two and Day 100 operations; even though they will have collaborated previously, the new joint technology teams will still be getting used to working together, potentially in new environments with new policies.

Service management will be monitoring the new environment closely to see if these monumental changes have impacted on production services, and, if Transitional Service Agreements are in place, whether these are being met.

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Depending on the outcome and perception of success, post-cutover the team will be experiencing many different emotions.

Key Evolution phases to reach are:

  • Cultural Integration
  • Post Implementation Reviews and Remediation
  • Post-Implementation Support
  • Day Two / Day 100 Enhancements

Common Challenges

1. Cultural Integration

Companies with different cultures often find it difficult to make decisions or operate effectively. If you need to combine two or more cultures (often in a rushed manner) you are in for trouble.

Culture is one of the major barriers to effective company-wide M&A integrations. Cultural integration was the second most commonly cited factor directly contributing to deal failure by companies in Aon Hewitt’s Global Survey, and is increasingly recognized as a key issue in M&A :

“While successful cultural integration is clearly a critical element in deal success, many companies do not know how to successfully navigate it during a transaction. Fifty-eight percent of companies reported that they did not have a specific approach to assessing and integrating culture in a deal.”

Cultural integration is not just a leading cause of deal failure, as highlighted throughout this serise of blogs it is also an indirect factor for integration delays, retention of key knowledge and employees, and overall perception of how matters are post-merger.

Whilst IT due diligence can ferret out things that are measurable, the pressure of completing the deal often means assessmet of the culture of the technology teams is left to chance and therefore, immesurable.

The situation becomes more challenging if you drill-down from company-wide culture to focus on cultures between differing IT teams.  Because, firstly the culture of the target-IT team may not reflect the overall culture of the target-company  and secondly trying to deliver change through opposing cultures between different companies and different technology teams is challenging and there are no easy ways round this.

Culture sensitivity

A privilege of working on a M&A project is being able to witness, in depth and in-person, how different cultures operate and the frequent surprises you encounter.

Some companies are a joy to work in, there’s an obvious positive attitude across the board from the moment you walk into the building. The positive culture shines to the point it makes you wonder why you'd ever want to leave or change the working environment?  But then, as part of the M&A integration team you may be privy to some of the financial information that the staff are not aware of,  you realise there is a veneer and in fact, the company is haemorrhaging money or facing financial uncertainty.

You realise business owners were actually struggling to maintain the positive culture they once had, at the same time it becomes very apparent why they need investment or acquisition.

The culture challenge can be if this so called “happy” environment (which is in reality in dire straits) is moved into a less “happy” place but a more realistic culture which is far more financially secure.  It is unlikely the technology staff will know the underlying issues of the company thy work for so when they move into the new location they don’t realise thy ere moving away from a falsely positive environment.  The bottom line – they can only see the transformation that's taking place negatively.

So for you, as project leadership, it's an uphill struggle as you see the stuation in a more 3-dimensional or complicated view than the staff. 

If company cultures are different, and the IT team cultures are different, it can be very difficult. For instance, information technology within corporations can be very process-driven, and guidelines such as ITIL may be used to govern how a computer system is operated. If an M&A IT team is trying to push forward on their delivery they may have to cut corners or make slightly risky changes in order to make progress, but one of the companies, either buy-side or target-side, may not see this as appropriate. Because there are two teams involved, they may have different opinions; or use ITIL to prevent change , and this will create major delays as you will have design reviews, business operational reviews, and any remediation work necessary to make the change more palatable.

Beyond M&A Scorecard

With the advent of cloud technology, companies and staff may have different opinions on how to mange it and benefits the business. In one company they might be pro-cloud technology, whereas the staff from the other company may be anti-cloud. You can imagine the problems this might cause when trying to get those teams working together.

2. Post-Implementation Review

A post-implementation review (PIR) is a common project management tool used to assess project delivery, and look forward to see if any further benefits can be gained. In the context of a post-merger integration, an entire business and its services have been updated, and the team potentially uprooted.

Hence, the review will be of all the services impacted and transformed as part of the project. Note, it is likely a review of services will be baked-in to the contract, as ultimately the technology service will impact on customers.

Common mistakes encountered when delivering a PIR are not planning to perform the review well ahead of time, meaning that the effort required to create the report is higher than it could have been. If the team has to start the review from scratch, it will eat into valuable resources.

Whilst it is tempting to assess every service that is being delivered, no one has time to assess your findings; they just need to see the important results. Therefore, you need to define a clear scope for the report. A poor scope can also result in collecting unnecessary information, wasting time and the need to set up unnecessary meetings.

3. Day Two / Day 100 Enhancement Planning

Focus is understandably on the Day One transition, so of course there is little time to consider what will happen on Day Two, or Day 100. But with some upfront consideration of both, the business and your customers will benefit, because it is only after Day Two that true synergies can happen.

A common mistake is to stop thinking about technology employee engagement now the initial post-merger integration activity has completed.

The worst case scenario is for the technology team to think, “Nothing has really changed for the better, it just got more complicated and I have more work on my plate.” You may have your work cut out, and need to put in additional effort to engage the team in the next phase of transformational work.

Staff performance may dip significantly, depending on what happened at the start of the project. If the team leadership was profiled and examined for best performance during the Examine phase there will be less risk of staff activity dipping after Day One, because the leaders will be fully behind the entire change programme.

Building on rocky foundations. Another common issue is not fully remediating the technology environment before building further upon it. This can lead to major stress and challenging political situations, which may not be obvious to the C-suite but will undermine the perception of the merger’s success.

No obvious benefit. How exactly will things change? What’s in it for customers, or employees? All too often, companies do not plan or communicate what employee or customer benefits will appear on Day 100.  Without a at the very least a tentative plan it will be difficult to direct the team and let them see and deliver some of the intended benefits. 

4. Performance and Capacity

Whilst both performance and capacity will be assessed, albeit indirectly and technically, as part of both the IT due diligence and the post-implementation review it is important to see this as a separate task, one based on the staff and not the technology.

See it as a ‘book-ended’ task. We started the process by assessing the staff’s readiness to embark on the post-merger integration project, and will now end the process by assessing the individual’s performance and capacity going forwards.

Summary

Ideally, following a "people first" approach to M&A technology integration will help develop a a better-engaged team that continues to be fully supportive of major change programmes.  There's no doubt the projects are a challenge, but envisioned and delivered correctly they can be rewarding - espeically if both companies and individuals develop and grow.

 


This is one part of a series of five blogs on how to deliver a successful post-merger integration, the other sections can be found here:

5 Post-Merger Integration Challenges: Part One - Employee Engagement

5 Post-Merger Integration Challenges: Part Two – IT Due Diligence

5 Post-Merger Integration Challenges: Part Three – Planning and Design

5 Post-Merger Integration Challenges: Part Four – Day One Cutover

5 Post-Merger Integration Challenges: Part Five – Evolution

 

If you would like to discuss your M&A Projeect, contact us for a friendly discussion regarding your needs on 0800 622 6719.

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