Mergers and Acquisitions: How to Integrate Two Companies into One Seamlessly
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Published:
July 16, 2023
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7 minutes
Thinking about acquiring a new company or merging with another one? Welcome aboard, then. You’ve landed on the right article.
You see, there are certain things in life that are really simple. However, merger and acquisition is not one of them. In fact, M&A could be one of the most complicated and risky missions you’ll ever undertake. But don’t worry, if you know the right steps and seek help from experienced experts, it may as well be the most profitable decision.
In this article, we’ll shed some light on the history of M&A first. Then, we’ll go through the steps one by one. So, let’s dive into it.
You see, there are certain things in life that are really simple. However, merger and acquisition is not one of them. In fact, M&A could be one of the most complicated and risky missions you’ll ever undertake. But don’t worry, if you know the right steps and seek help from experienced experts, it may as well be the most profitable decision.
In this article, we’ll shed some light on the history of M&A first. Then, we’ll go through the steps one by one. So, let’s dive into it.
History of Mergers and Acquisitions
Although humans have been joining forces to achieve common goals for centuries, merging multiple companies into one became more prevalent in the 18th and 19th centuries. Consider General Electric, for example. In 1892, Edison General Electric and Thomson-Houston Electric consolidated to form the iconic General Electric—which generated more than $76 billion even in 2022. You see, that’s the power of synergy between companies.
Anyway, at least until 1892, M&A was massively unregulated. And when something is unregulated, people take advantage of it. For instance, powerful business owners during that era looked forward to acquiring competitors by hook or crook and achieving a monopoly in the market. This is when the government decided to step in and pass antitrust laws to prevent unfair competition. For example, by 1914, there were three antitrust laws in place: the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. Thanks to these old laws and many similar modern laws, even new visionaries and entrepreneurs can start and run profitable businesses today.
Now that you know a little history about mergers and acquisitions, let’s discuss some of the most noteworthy mergers and acquisitions that have changed many markets forever.
Anyway, at least until 1892, M&A was massively unregulated. And when something is unregulated, people take advantage of it. For instance, powerful business owners during that era looked forward to acquiring competitors by hook or crook and achieving a monopoly in the market. This is when the government decided to step in and pass antitrust laws to prevent unfair competition. For example, by 1914, there were three antitrust laws in place: the Sherman Act, the Federal Trade Commission Act, and the Clayton Act. Thanks to these old laws and many similar modern laws, even new visionaries and entrepreneurs can start and run profitable businesses today.
Now that you know a little history about mergers and acquisitions, let’s discuss some of the most noteworthy mergers and acquisitions that have changed many markets forever.
1. WhatsApp and Instagram (Facebook acquisitions)
In 2012, Facebook, which was spearheaded by Mark Zuckerberg at the time, acquired the photo-sharing app Instagram for $1 billion. Then, using their deep pockets again, Facebook bought WhatsApp for $19 billion. Today, the company has access to billions of users, and as a result, generates billions of dollars in revenue.2. Microsoft and LinkedIn
In 2016, Microsoft acquired LinkedIn for $26.2 billion. You see, LinkedIn is a professional networking site whereas Microsoft has products to sell to professionals, such as Office 365 and Dynamics 365 product lines. The acquisition enabled Microsoft to access LinkedIn's user base of over 700 million professionals and gain access to valuable data and insights.3. Apple’s acquisition of Siri
In 2010, Apple bought Siri Inc. for more than $200 million. Why? Well, if you’re an Apple user, you already know why. Siri’s virtual assistant technology was a technological breakthrough at that time. Yes, “at that time” because 2010 was a long time ago. Siri is an integral part of Apple and the company continues to make it better to this day.KEY TAKEAWAYS
- Early M&A activities were largely unregulated, which led to government intervention and the introduction of antitrust laws, such as the Sherman Act, Clayton Act, and the Federal Trade Commission Act.
How to Conduct Merger And Acquisition Effectively
Alright. Since we’ve aroused some curiosity in you through a history lesson, let’s navigate through the correct merger and acquisition process. Here are the steps you could take to make the most out of an M&A deal.
Example: A clothing retailer outsources manufacturing to another company, which costs them a lot of money. So, the retailer decides to acquire the manufacturing company at once. This vertical integration decreases the cost of product manufacturing by 20%.
Example: Company A is planning to acquire Company B. But during the due diligence process, it was discovered that Company B had an active legal dispute with a supplier. The legal issue involved several instances of breach of contract and many unpaid invoices. For this reason, Company A aborts this M&A mission, and starts looking for another target company.
Example: XYZ Tech Limited acquires a competing tech company. However, the company that’s acquired still uses the Waterfall approach for project management. To ensure proper integration, XYZ Tech hires an Agile coach to incorporate Scrum in the newly integrated company.
Example: Company A merged with Company B to form a whole new organization. While monitoring KPIs, the integration team finds that there’s one critical area that needs modification: logistics. Due to an increased customer base after the merger, the logistics team had been having a hard time delivering a large number of orders on time. To fix this problem, the company implements advanced tracking systems and establishes a partnership with a reliable logistics company.
Here’s all the heavy lifting they can do for you:
Do you see how beneficial it can be to hire an M&A consultant during the acquisition process?
Now, you may be thinking: where can I find a Merger and Acquisition consultant?
Well, here at Consultport, we have over 10,000 pre-vetted, highly experienced consultants in our talent pool. We only choose the best of the best—the ones who have worked with top consulting firms or blue-chip companies.
So, what are you waiting for?
Get in touch with us now. Let us help you find your next M&A consultant.
1. Define your strategic objectives
You should have a really strong reason behind merging with another company. Also, you must articulate it in front of the board of directors, investors, or other stakeholders. Some key strategic objectives could be as follows: expanding market share, accessing new technologies, or diversifying product offerings. But wait, there’s more. Apart from knowing the objectives, you should also know the benefits that your company can gain through mergers and acquisitions. This could be increased revenue, better operational efficiency, cost savings, etc.Example: A clothing retailer outsources manufacturing to another company, which costs them a lot of money. So, the retailer decides to acquire the manufacturing company at once. This vertical integration decreases the cost of product manufacturing by 20%.
2. Conduct due diligence
Before acquiring a company, you must know what you’re getting into. In short, you should ask for any information that you deem relevant. Ideally, you should start with a financial assessment. This includes going through the acquiree’s financial statements, cash flow, debts, and profitability. Next up is legal and regulatory compliance. If a company has a history of not following regulations in its industry, has ongoing litigations, or has a track record of severe illegal behavior, you should probably steer clear. Besides this, you should also assess a target company’s supply chain, production capabilities, human resources, distribution channels, and customer base.Example: Company A is planning to acquire Company B. But during the due diligence process, it was discovered that Company B had an active legal dispute with a supplier. The legal issue involved several instances of breach of contract and many unpaid invoices. For this reason, Company A aborts this M&A mission, and starts looking for another target company.
3. Create a proper integration plan
So, you have chosen a company and conducted your due diligence. That’s great. Now, it’s time to develop an integration plan to merge a new company with yours. The fact is, just buying a company doesn’t really complete the acquisition process. It takes a systematic approach to ensure that the new company is integrated in a professional manner. So, first, you should create an integration roadmap. This roadmap should outline the specific activities, milestones, and timelines for integrating different aspects of the organization. Furthermore, creating a cultural alignment is as important as integrating operations or IT systems. This means that at some point, you’ll need to develop strategies to align values, norms, and behaviors in the organization.Example: XYZ Tech Limited acquires a competing tech company. However, the company that’s acquired still uses the Waterfall approach for project management. To ensure proper integration, XYZ Tech hires an Agile coach to incorporate Scrum in the newly integrated company.
4. Monitor the integration process
Even after the whole M&A process is finished, monitoring and fine-tuning integration may still be required. Ideally, you should create a small integration team that keeps a close eye on the progress of the integration efforts. Some important KPIs to consider during this phase are financial performance, customer satisfaction, employee engagement, operational efficiency, and market share. The evaluation of these KPIs can provide insights into the effectiveness of your integration efforts. Furthermore, it can also highlight any gaps or challenges that need fixing.Example: Company A merged with Company B to form a whole new organization. While monitoring KPIs, the integration team finds that there’s one critical area that needs modification: logistics. Due to an increased customer base after the merger, the logistics team had been having a hard time delivering a large number of orders on time. To fix this problem, the company implements advanced tracking systems and establishes a partnership with a reliable logistics company.
5. Hire Merger and Acquisition (M&A) consultants
Merging with another company is no walk in the park. If you make mistakes, well, then they’re going to be costly. But what if there’s an expert out there who can help throughout the M&A process? If that sounds relieving, let’s introduce you to Merger and Acquisition (M&A) consultants. Smart business owners turn to M&A consultants when it comes to managing strategic or financial acquisitions. They are the guiding lights who navigate the complex ocean of M&A with their time-tested methodologies, transaction execution prowess, and extensive industry contacts.Here’s all the heavy lifting they can do for you:
- Target identification: M&A consultants excel at identifying acquisition targets that align with your strategic goals, providing you with a well-thought-out list of high-value companies that are worth acquiring.
- M&A strategy: Consultants work closely with you to establish objectives and develop a roadmap for your M&A activities, aligning them with your strategic goals.
- Debt and equity financing: Consultants conduct an in-depth analysis of capital markets and determine the best financing structure for your M&A activities.
- Business valuation: Want unbiased and professional estimates of your company's value or a target company's value? You should definitely leave it to an experienced M&A consultant.
- Due diligence: After conducting a thorough assessment of financial, commercial, and operational aspects, consultants can identify risks and challenges early on in the process. In short, they will tell you what exactly you’re getting yourself into.
Do you see how beneficial it can be to hire an M&A consultant during the acquisition process?
Now, you may be thinking: where can I find a Merger and Acquisition consultant?
Well, here at Consultport, we have over 10,000 pre-vetted, highly experienced consultants in our talent pool. We only choose the best of the best—the ones who have worked with top consulting firms or blue-chip companies.
So, what are you waiting for?
Get in touch with us now. Let us help you find your next M&A consultant.
