What Are Your PMI Success Chances? - Management Questions

The following questions can serve as a starting point for those contemplating integration in the wake of a merger. If your leadership team can answer all nine questions concerning your next PMI transaction, that bodes well. If there are gaps in your company’s responses, or some grey areas, then the prospects for a successful PMI may well be reduced. And an abundance of blanks on the answer sheet suggest that the risks may overwhelm a team’s strongest efforts. Your company’s best bet for success would lie in identifying and resolving these issues early in the post-merger integration process.

Are the financial figures for the transaction sound?
- Are the NewCo’s planning timeframe and budget sufficient to actually complete the execution of essential integration measures (such as integrating the IT systems)?
- Does reporting promptly deliver the key figures required to continually measure PMI progress and success?
Have the synergy goals been mapped out in enough detail?
- How broad can the scope of change be in the individual business areas without overburdening the organization or endangering day-to-day business?
- In what areas are synergies targeted? How fast are the synergy targets to be realized?
Has the implementation concept a sufficient operational foundation?
- Does the integration concept embrace all the essential implementation steps such as employee training and harmonizing incentive systems and IT systems?
- Was line management of the acquiring company—and depending on the context, also of the target company—closely involved in the process of confirming synergies?
- Likewise, what operational risks did line management discuss when synergies were being evaluated (e.g. negative impact on current business)?
Do the corporate structures fit well together?
- Do the companies differ in terms of the span of control and degree of decision-making centralization?
- Does the decision-making leeway, in terms of profit and cost centers, differ between buyer and target?
- How dissimilar are the compensation and incentive structures (e.g., the variable portion of remuneration)?
Are core processes similar?
- To what extent do the companies diverge in terms of their product and market orientation? Where do they overlap?
- What differences exist in core activities such as market development, order processing, production of goods and services or extent of outsourcing?
Has a management concept been worked out?
- What criteria will be used to choose the new management team and when will names be announced? Which executive positions are expendable?
- Will the existing team be augmented by external managers (in order to foster restructuring efforts)?
- How can top performers at the target company be identified early on and their commitment to the new company secured? Which areas are likely to face particularly strong resistance from management?
Have the required staff-related measures been itemized?
- How are job cuts distributed between the buyer and target companies? What share of the reductions cannot be made in a “socially acceptable” fashion?
- How much financial room for maneuver is there to provide incentives for voluntary solutions? What additional schemes (e.g., outplacement center, applicant training) are feasible to help redundant employees in their job search?
Is adequate PMI expertise available?
- According to what criteria and processes are the integration project organizations staffed?
- Do these project members, especially those from the integration management team and steering committees, have enough experience with post-merger integrations? And to what extent are their experiences gained from past integrations available (e.g., documented in handbooks)?
Is there enough human resource capacity on hand?
- How are ongoing projects prioritized in relation to the post-merger integration? In what areas is there a dual burden (e.g. due to successive acquisitions)?
- Which PMI task forces need to be formed and staffed by higher-up managers (e.g. second- or third-rank management)?