“After the acquisition, the work really starts.” Anyone who has already bought a business knows about
the correctness of this statement.
Ensure the exchange of information
The successful integration of a purchased company preserves and creates considerable value. It is therefore obvious already
to consider in the run – up to the transaction which synergies and potentials for improvement should be raised and how
unit to be purchased can be successfully integrated into the existing structure. The due diligence is in addition to the structuring
the transaction is the central element of the pre-deal phase in which the identified target
Products, organization form etc. is examined. For this reason, it makes sense to interlink the due diligence teams with post-merger integration experts (PMI experts) at this point in time.
Interaction between due diligence and post-merger integration is often neglected
The interaction between due diligence and PMI is regularly neglected. Because these are two different ones
Processes in the M & A process, in which also different organizational units, experts, external consultants and interests
are involved, each perceiving different points of view.
On the one hand, the due diligence teams should be informed about the desired new structures, if possible
to be able to satisfy later information needs of the PMI in their analyzes. On the other hand, the structuring
The PMI should consider important aspects early on, increase the speed and success of the integration or destroy the value
Prevent integration difficulties. Organizationally, the e.g. done through an integration due diligence
which collects and, if necessary, controls the information from the other due diligence disciplines and adds specific aspects.
In the following topics, the interaction between due diligence and the PMI phase is particularly evident.
- Formation of reporting units
Financial due diligence often reviews existing accounting and reporting systems,
to get your analyzes right. In the external accounting (annual and consolidated financial statements), this implies the previous accounting rules and the exercising of options and discretions with regard to the individual balance sheet items.
The transformation into the accounting policy of the buyer often means a considerable conversion effort. Same for controlling and the management reporting system. The target company should be integrated into the existing systems as quickly as possible in order to make the company’s development transparent within the new structure. This also applies in particular to the introduction or adaptation of so-called key performance indicators (KPIs) in the interests of the buyer.
- Allocation of financing (Debt Push Down)
Sometimes the financing of the transaction, which is initially made by the buyer, should be “knocked down” to the target company. Such rescheduling is partly associated with corporate reorganization. With it such “debt push-down” in the PMI phase can be tackled swiftly, it is already necessary during the due diligence or during the structuring phase to determine the requirements of the target company.
- Integration of management and personnel
Integration into work processes and synergies
Much of the synergy in a business combination can be gained by merging departments such as Finance or Human Resources. As a result, this often leads to staff reshuffling and / or termination of employment relationships. It often becomes clear during the due diligence process, which parts of the
Personnel after the merger are no longer needed. However, the purely financial impact is always
Also to consider further: How much know-how is lost on dismissal or how do dismissals affect
on the mood and thus on the productivity in the target company? In addition, the extent of staff reduction is not clear from the start. It must be determined exactly which positions or persons are no longer needed.
Logically, Such an analysis is also carried out during due diligence.
Adjustment of remuneration structures
Remunerations of management are often the result of many years of development and internal circumstances. Becomes
A company whose management is paid higher, will do so to the buyer’s management
i.d.R.bekannt. This can lead to discussions within the buying company or to conflicts with the management to be transferred. Both burden future cooperation. Therefore, it is important that already clearly defined in advance
will be how the two groups will be remunerated after the transaction and what adjustment mechanisms will be used.
The same applies to the workforce. Frustrations that are transferred to the buyer often prevent or delay integration
and lead to exclusion (“the and we”), some of which continue to operate in merged units for decades.
- Career and job planning
The units to be acquired often provide a pool of required qualifications. To uncover these qualifications
should be the subject of any due diligence. In the “traditional” area, the buyer may fill vacant positions with qualified personnel from the acquired unit. This reduces costly with the increasing shortage of skilled personnel
and high-risk search processes, is an important sign to the entire acquired unit and increases or facilitates
thus the integration.
- IT integration
Different EDP landscapes often lead to inefficiencies after the takeover. An IT due diligence should be next to
the collection and analysis of the infrastructure prevalent in the target company, the future interfaces and the
Determine the need for adjustment. This may also mean that the purchaser adapts their systems to the more suitable systems of the acquired unit and thereby triggers an innovation boost.
- Integration into the supply chain
Estimation of potentials and risks at the target enables the planning of the integration and the integration of the right one
Experts. Productivity along the supply chain, inventories, quality, throughput time and on-time delivery are just as much potentials
Consider such as verifying variable and fixed costs, in conjunction with the ability to outsource parts
the current supply chain of the target. When it comes to risks, the necessary ones are particularly important for manufacturing companies
To identify investments, to confirm existing investment projects, problems due to the age of technology and
Identify equipment and explore possible capacity limits along the entire supply chain.
The integration of the supply chain from the target into the existing structure is the central task of integration, with the potential
lifted, risks are addressed and the new supply chain is created as an important success factor of the new structure. in the
As part of the adaptation to the future business model, it is also the distribution of comprehensive functions within the
new target group (does the target work, inter alia, as an internal service provider, extended workbench, subcontractors, etc.). Furthermore, the target has to be integrated into the concept for flexibilization and scalability and to fulfill the new role.