Mergers & Acquisitions from A to Z

By Andrew J. Sherman | Go to book overview

CHAPTER 12
Postclosing Challenges

The closing of a merger or acquisition usually leads to a great sigh of relief from the buyer, the seller, and their respective advisors. Everyone has worked hard to ensure that the process went smoothly and that all parties are happy with the end result. But the term closing can be misleading in that it suggests a sense of finality, when in truth, particularly for the buyer and the integration team, the hard work has just begun.

Often one of the greatest challenges for the buyer is the postclosing integration of the two companies. The integration of human resources, the corporate cultures, the operating and management information systems, the accounting methods and financial practices, and related matters is often the most difficult part of completing a merger or acquisition. It is a time of fear, stress, and frustration for most of the employees who were not on the deal team and who may have only limited amounts of information regarding their roles in the postclosing organization. The creation of sustainable value after the merger requires a tremendous amount of strategizing and care in a lot of vital areas. It is estimated that as many as three out of every five M&A deals have an ineffective plan for the integration of the two companies. And even if there is a plan, well, plans don’t always work out as anticipated. The consequences of a weak or ineffective transition plan are the buyer’s inability to realize the transaction’s true value because of either overestimated postmerger synergies, wasted time and resources devoted to solving postclosing problems, a badly conducted due diligence, unsolvable cultural differences, underestimation of stakeholder resistance, or, in

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