Post-merger Integration  Poor post-merger integration is one of the primary reasons acquisitions fail.  Must have adequate planning, timing, attention to detail as well as contingency plans. contingency plans.  Acquisition posture  Methods for motivation and integration  Types of integration approaches

Rescue Collaboration Contested Situation Raid Cooperative Adversarial  Acquisition Postures Post-merger Integration

Rescue Collaboration Contested Situation Raid Cooperative Adversarial Acquisition Postures  Acquisition Postures Rescue Post-merger Integration Rescue Financial salvage operation  Financial salvage operation Firm has significant weaknesses Incumbent top management generally leaves (had their chance). Incumbent top management generally leaves (had their chance). Loss of leadership Loss of leadership Target firm employees threatened by layoffs, sell-offs etc. Target firm employees threatened by layoffs, sell-offs etc. Generally good cooperation (target firm employees are still part Generally good cooperation (target firm employees are still part of the vanquished firm). of the vanquished firm). Primary issues Primary issues Rebuild corporate self esteem - Rebuild corporate self esteem - Well-defined sense of direction

Rescue Collaboration Contested Situation Raid Cooperative Adversarial Acquisition Postures  Acquisition Postures Rescue Post-merger Integration Rescue White Knight Scenario  White Knight Scenario Decisions based on expediency (severe time pressure) Decisions based on expediency (severe time pressure) Second guessing (seller), buyers remorse (buyer) Second guessing (seller), buyers remorse (buyer) Significant post-merger surprises Significant post-merger surprises Post-rescue must determine how the firms will interact and Post-rescue must determine how the firms will interact and conduct compatibility studies of the different cultures, conduct compatibility studies of the different cultures, processes and procedures. processes and procedures. Chevron rescue of Gulf oil from T. Boone Pickens. Chevron rescue of Gulf oil from T. Boone Pickens.

Rescue Collaboration Contested Situation Raid Cooperative Adversarial Acquisition Postures  Acquisition Postures Collaboration Post-merger Integration Collaboration  Acquirer generally does not use heavy-handed tactics.  Diplomacy and goodwill are critical.  Often difficult because of poor follow-up management.  Generally less post-merger drift (sag in productivity, loss of morale, etc.). morale, etc.).  American Airlines acquisition of TWA.

Rescue Collaboration Contested Situation Raid Cooperative Adversarial Acquisition Postures  Acquisition Postures ContestedSituation Post-merger Integration Contested situation  Conditions One party has a strong interest in the deal One party has a strong interest in the deal Two parties want very different deals Two parties want very different deals Competitive bid situation Competitive bid situation  Less of a feeling of a victor and vanquished than in “raid” situations.  Competition can lead to increased ambiguity  Significant post-merger drift.  Example: Walmart, J. Sainsbury PLC, and William Morrison Supermarkets PLC competitive bids for Britain’s Safeway PLC. Supermarkets PLC competitive bids for Britain’s Safeway PLC.

Rescue Collaboration Contested Situation Raid Cooperative Adversarial Acquisition Postures  Acquisition Postures Raid Post-merger Integration Raid  Adversarial climate is at its peak (maximum resistance by target firm). firm).  Intense emotional battle  Rumor mill operates in both firms. Target firm generates antagonism among its employees toward the raider (move will hurt employees, morale, and create an uncertain future). Rally around management and become more cohesive in the struggle against a common enemy.  IBM’s hostile takeover of Lotus Development Corp.

Rescue Collaboration Contested Situation Raid Cooperative Adversarial Acquisition Postures  Acquisition Postures Raid Post-merger Integration Raid  If the takeover is successful it does not end the impact of residual antipathy. residual antipathy. Employees of the acquired firm may find it difficult to make the Employees of the acquired firm may find it difficult to make the psychological shift from conflict to brotherhood. psychological shift from conflict to brotherhood. Battles may continue for years (subtle resistance, guerilla Battles may continue for years (subtle resistance, guerilla warfare). warfare). Incumbent management concerns (recant position of defiance Incumbent management concerns (recant position of defiance or resign). or resign).

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