Value Creation || Post-Merger Management: It's All in the Design

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25Post-Merger Management: it’s All in the DesignEric Bartels, Tomas Koch, and Philip Eykerman

Many companies generate value by growing through mergers or acquisitions.When, often after months of negotiating, the parties concerned announce thatthey have reached an agreement and state the purchase price, the benchmark isset against which the success of the transaction will be judged. The price, includ-ing the strategic premium, reflects the negotiating power of both parties and theirexpectations of the potential synergies. Post-merger integration cannot turn a baddeal into a winner; however, if properly implemented, it can realize the estimatedsynergies and often identify additional potential. Successful post-merger integra-tion also stabilizes the organization and secures the business, which prevents themerger from causing short-term falls in profit that can end up destroying morevalue than the synergies create.In the first edition of this book, we estimated the capital market’s expectations

on the value creation of a merger by the development of the total return to share-holders in both the short term (five days) and the long term (two to three years).In that edition, our chart showed that only half of all mergers in the chemicalindustry succeeded in creating value. We have updated this analysis, and worry-ingly the success rate has fallen to just 40 percent (Fig. 25.1). We believe thatmuch of the blame for this can be placed on poor post-merger management ratherthan on poor deals being struck in the first place.There is, of course, no instant recipe for success in post-merger integration.

Companies must find the path that is right for them, even if they have enjoyedsuccessful mergers in the past. Each situation is different, with industrydynamics, the legal context, and the starting position of the companies all playinga part in determining the best approach. Perhaps the only universal truth is thatcareful planning and staying power are certain to be indispensable.

Value Creation: Strategies for theChemical Industry. 2nd Edition. F. Budde, U.-H. Felcht, H. Frankem�lle (Eds.)Copyright � 2006 WILEY-VCH Verlag GmbH & Co. KGaA, WeinheimISBN: 3-527-31266-8

Fig. 25.1 Classification of major mergers in the chemical industry (1993–2004).

25.1Phases of an Integration

The integration process is typically split into two phases. During the first, thedesign phase, management makes all the fundamental decisions on the orienta-tion of the new company and plans the implementation. This can take two tothree months depending on the project’s scope and complexity. The second phase,the execution phase, is when the company works out the individual integrationactions in concrete terms and implements them. This tends to take one to twoyears.The design phase is critical – in most cases the first hundred days are decisive

in determining whether the merger will be a success. During this period the com-pany needs to clarify the form that the integration should take. There are four pos-sibilities:

1. In a bolt-on, the acquired firm is added to the acquiring firm but largelyretains its own structures. Value is generated by cross-selling the acquiredcompany’s products through the acquirer’s sales channels. Internet net-working company Cisco Systems is one of the great exponents of thismodel;

2. In a takeover, the acquiring firm simply integrates the target;3. A best-of-both approach combines the best structures, approaches, and pro-

cesses of the two organizations;4. The final option is a transformation, where the existing structures, ap-

proaches, and processes of both companies are, at least partially, replaced

25 Post-Merger Management: it’s All in the Design328

by new and better ones. The merger of Ciba-Geigy and Sandoz, for exam-ple, was a transformation that eventually allowed the companies to achievea completely new level of performance as Novartis.

The first two or three months are also crucial for winning the support of employ-ees affected by the merger. The companies should provide convincing reasons forwhy the deal is taking place and seek to create an atmosphere of starting anew.Many companies fail to implement this first phase with enough rigor. Some

even overlook it altogether. This is often because top management is still involvedin the final throes of the transaction itself, or has started immediately implement-ing integration actions. Many of the problems encountered during mergers canbe traced back to mistakes made in this initial design phase, in particular failureto plan the integration in a systematic and focused manner.

Fig. 25.2 Main tasks in the design phase.

In the first few weeks, top management should concentrate on quickly complet-ing four key tasks (Figure 25.2):

1. Deriving the new company’s aspirations and translating these into bindingtargets and values;

2. Identifying all the value creation potential that can be tapped over theshort, medium, and long term;

3. Determining the cornerstones of the organization;4. Drawing up the integration plan.

In the second phase, management must ensure that the planned integration isimplemented rigorously. The success factors during this stage are essentially thesame as those associated with other major change processes (such as turnaroundsor restructurings), so the rest of this chapter focuses specifically on the tasks car-ried out in the design phase.

32925.1 Phases of an Integration

25 Post-Merger Management: it’s All in the Design

25.2Defining and Communicating the Aspirations

The new company’s aspirations should be announced quickly because a clearvision prevents uncertainty among staff, sets the priorities that lie ahead, andhelps guide any decisions that need to be made. A clear vision also allows manage-ment to explain to the capital markets that it firmly intends to follow a differentcourse. Veba and Viag formulated such aspirations. The day the merger wasannounced, management presented a clear perspective on two core areas of busi-ness – energy and chemicals. The energy business would be expanded over thelong term to create a company operating at the European level. The chemicalsbusiness would focus even more on specialty chemicals through intensive stream-lining of the portfolio, and would also be expanded. The merger eventually led tothe formation of Degussa, now the world’s largest multi-specialty chemicals com-pany.Once the company’s aspirations have been set, they have to be broken down

into measurable targets. These can be cascaded down the organization by man-agement. At the front line, these targets create a direct link between the com-pany’s aspirations and day-to-day operations; and also serve to make the expecta-tions comprehensible and tangible for all employees.Management should also lay down and communicate the values that reflect the

new company’s orientation and help the organization to behave consistently.When Ford bought Volvo’s passenger car division, CEO Jacques Nasser madeclear from the outset that the �Swedish’ aspects of the Volvo brand would beretained, and explained what this meant for the product and service range and thecorporate culture.Forming the aspirations, targets, and values and communicating them through-

out the organization is generally an iterative process requiring repeated correctionand adjustment (see section 25.5.3). However, it is well worth the effort and helpsdirect employees’ attention towards opportunities rather than potential difficulties.As a result, the stability of the entire integration process increases from day one.

25.3Fully Identifying Value Creation Potential

A merger’s success is ultimately measured by the value it generates. Beforeannouncing the transaction, senior management will have estimated the short-term synergies between the two organizations, justifying the transaction premiumand the integration risks. During the merger, the emphasis is on realizing thesesynergies. However, it is often overlooked that an integration usually offers other,much more extensive opportunities for value creation.There are three different types of value creation potential:

1. Short-term cost or revenue synergies, resulting directly from the combinationof both businesses;

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25.3 Fully Identifying Value Creation Potential

2. Standalone potential in the individual businesses that could be tapped irre-spective of the merger, but that is easier to address because of the disconti-nuity of the merger;

3. Potential from new strategic opportunities created by combining thestrengths of the two companies.

It is essential to acquire an in-depth and exhaustive understanding of these poten-tial value creation areas, even in the design phase. Only then can the integrationprocess be geared towards tapping them.An iterative top-down and bottom-up method has proven successful in quantify-

ing the potential. Management sets demanding but realistic goals derived fromthe new company’s aspiration and comparisons with top-performing companiesin the industry (or other industries). These goals send out a clear signal to the or-ganization that the integration is not just �business as usual’; extraordinary thingsare both possible and expected. These top-down goals then need to be under-pinned by the organization at an actionable level of detail. Individual analysesmust identify concrete value drivers and projects that need to be implemented.This bottom-up process serves to make the abstract top-down goals tangible forline management. As a result, the readiness to change increases. Figure 25.3shows a typical process used to identify value drivers.

Fig. 25.3 Identification and activation of value drivers.

This process can begin in the design phase – unless there are restrictions on theexchange of information prior to the official closing of the transaction. In caseswhere such restrictions exist, calling in a �clean team’ (with no employees fromthe companies concerned) to put the company-specific data into an aggregated,comparable form and then evaluate them can save considerable time.

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25.3.1Determining the Synergy Potentials that are Directly Business-related

Merging two companies generally leads to substantial synergies – redundant costscan be reduced and revenues increased due to the expanded customer base. Addi-tional value also results from the targeted exchange of know-how: the two compa-nies, previously separate entities and in many cases competitors, exchange best-practice experiences, which allows them to boost efficiency even further. If twoagrochemicals players merge, for example, the efficiency and effectiveness of theirresearch and development often increases simply through the merging of the twoR&D teams with their own experiences, approaches, and data records.Figure 25.4 shows typical savings for commodity and specialty chemicals com-

panies. It demonstrates that specialty players can extract greater savings fromtheir core areas of expertise – such as marketing and sales – while their commod-ity counterparts can create value in purchasing and administration.

Fig. 25.4 Direct merger synergies.

The extent to which synergies may be available depends largely on the startingpoint of the companies. Where two large companies have little overlap beyondcentralized functions – as was the case with Degussa – synergies will inevitably belower than where the overlap is substantial, as may occur when a small companyis acquired.The market context is also very important. If the company has especially high

aspirations then the CEO must set aggressive targets, which means extractingmaximum synergies in all areas. Companies that find themselves in an �acquireor exit’ position or that merge during a downturn must also work that bit harderto capture all the potential.

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25.3 Fully Identifying Value Creation Potential

As a rule, the business-related synergy potential can be identified using a sim-plified business system focusing on four areas.

Reinforcing purchasing strengths. Substantial purchasing savings can usually beachieved soon after a merger. The main levers are:. Selecting the most cost-efficient supplier, while consolidating thesupplier portfolio;

. Realizing discounts on the basis of increased volumes;

. Redesigning purchasing processes and transferring best practiceto the new company.The potential largely depends on the class of material, the volumes purchased,

and the purchasing skills already present. If two companies of equal size and withaverage skills are merged, the total savings potential is usually in the region often percent of the purchase volume. If the companies are of different sizes andalready have excellent purchasing skills, the potential is generally limited toaround four to six percent.

Optimizing production and technology. Savings in operational areas result fromthree approaches:

1. Developing a long-term site strategy: when similar-sized companies merge,the number of production sites and thus the complexity usually doubles.Management must therefore check the extent to which savings are possibleby closing certain sites. Likely candidates are similar production plantswith surplus capacities, high administration costs per site, and redundantresearch facilities;

2. Optimizing production plants through knowledge transfer: if both compa-nies have comparable production plants and/or production processes,benchmarking on the basis of a �virtual plant’ is suitable. This comes fromcombining the cost leaders in the individual process steps;

3. Introducing new service concepts: restructuring product ranges and pro-duction sites usually raises the issue of outsourcing. Many chemical firmsbundle tasks such as power supply, maintenance, and logistics in indepen-dent companies with a pronounced service mentality. This allows the busi-ness units to concentrate on their core business (see also Chapter 20).

Reinforcing marketing and sales. Combining these two activities is the most delicateaspect of the entire merger, as they directly affect the customer. Value can be creat-ed from the global consolidation of the customer portfolio and the sales organiza-tions. Companies should not only adopt the best of the existing systems butshould also consider new sales structures, perhaps reorganizing by market and/orcustomer segments. The expanded customer base also makes it possible to exploitcross-selling opportunities.

Trimming down the management team. Probably the most obvious area for valuecreation is the corporate center. First, define what value the center should add, for

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example should it be confined to the role of a financial holding company or, at theother extreme, should it also have operational control over the business units?Once this has been decided, the tasks, competences, and scale of the corporatecenter can be redefined.

25.3.2Securing the Business and Uncovering Additional Potential

Mergers are associated not only with opportunities, but also with considerablerisks. In the first few months following a merger, many companies often notice adecline in the organization’s efficiency. Operational targets set before the mergerare missed and improvement initiatives fizzle out. This is due to day-to-day opera-tions being neglected: management becomes absorbed in integration planning,the decision-making processes employed thus far begin to falter, and employeemotivation suffers due to fears of possible rationalization. McKinsey studies haveshown that a decline in productivity of between five and ten percent is not unusu-al during the integration phase.During the design phase, therefore, management should take steps to counter

this trend. This includes communicating that original budgets and targets are stillvalid and that management will be held accountable for them, and strictly con-trolling target achievement. The merger partners should also keep a close watchon the market and competitors. The introspection of a merger can lead to custo-mers being neglected and lost – especially as competitors often try to lure attrac-tive customers away. Targeted customer-retention actions can reduce this risk.Along with securing the current business during the design phase, companies

also need to identify standalone sources of value creation in individual businesses.Employees know that a merger usually brings fundamental change and manage-ment should capitalize on this feeling of starting anew by tackling older problemsnot directly connected with the integration. This can be a unique opportunity topush through changes previously blocked by organizational inertia. It may involveredesigning well-worn processes, centralizing tasks, or refilling key positions. It ismuch easier to push through radical measures when other changes are already onthe agenda than during a normal everyday situation.Top management should also attempt to quantify this additional potential in

the top-down and bottom-up process, even though it is usually much less obviousthan the short-term synergy potential. Cross-functional teams, external bench-marking comparisons, and the systematic revisiting of the strategic plans of bothcompanies are typical tools for this task.

25.3.3Determining the Potential from New Strategic Opportunities

Merging two companies can open up new strategic opportunities that the compa-nies could never have captured independently. When, for example, Linde’s indus-trial gases division acquired AGA of Sweden, the expected cost savings were

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25.4 Determining the Cornerstones of an Effective Organization

quickly determined. Another factor, however, was very important for the sustainedsuccess of the organization: the merger gave Linde access to AGA’s gaseous ther-apeutics activities, and the combined companies were able to build a stronghealthcare business. Today, this business is one of the strongest growth optionsfor Linde’s industrial gases.Other companies have found that mergers have enabled them to reach the criti-

cal mass required to become leading and profitable players in a particular marketor region. Mergers can also create a basis for further acquisitions or the develop-ment of new technologies. For example, Bayer’s acquisition of AventisCropScience strengthened its herbicide research and gave it access to biotechnol-ogy know-how.Estimating the potential of these strategic options is difficult, but nevertheless

essential. It can have a decisive impact on the new company’s set-up and on wherethe emphasis of the integration program should lie. A separate team should beassigned to this task at the earliest opportunity.

25.4Determining the Cornerstones of an Effective Organization

The cornerstones of the organization need to be determined in the design phaseto make the new entity functional as fast as possible. Management must tacklefour closely related issues: aligning the management team behind a commongoal, quickly defining the organizational structures, building a performance cul-ture, and managing top talent. If any of these �soft’ topics are neglected, the suc-cess of the merger can be placed in jeopardy (Fig. 25.5). Sir Richard Evans, formerchairman of BAE Systems – a very acquisitive company – captured this idea whenhe said, “Managing a merger is a case of complex change management. If you getthe people part wrong, you will never recover.”

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Fig. 25.5 Why mergers fail.


25.4.1Aligning Management Behind a Common Goal

There is often a lack of unity at many management levels, even in day-to-dayoperations. Rarely are all top managers completely aligned; perhaps because per-sonal targets differ, or because of a lack of clarity around business priorities. Theresult, however, is always the same: a lack of coordination, prolonged decision-making processes, and a poor level of performance.Unity is particularly important for post-merger integration. The new manage-

ment team usually lacks common roots or experiences, which means its interestsand ideas may be divergent. But various decisions must be made during an inte-gration, often quickly and decentrally. This can happen only if top managers allpull in the same direction and are speaking the same language.Interviews and consensus workshops are good ways of ensuring that top man-

agement is focused on common goals. The exact method, scale, and time requiredwill depend on how divergent the managers’ ideas are at the outset. The endresult, though, should be a company able to rely on a committed and alignedmanagement team. All members must know their role within the team and beaware of the team’s contribution to achieving the targets.

25.4.2Rapidly Determining New Organizational Structures

Determining the new company’s organizational structures is not easy. Even a nor-mal reorganization can be a political minefield – let alone a full-blown merger.There is also a danger of getting bogged down in detailed discussions. In thedesign phase management should concentrate on a few key decisions relating tothe structure:. Creating a shared understanding of the organizational principles ofthe new company, dividing up responsibilities along the core pro-cesses, and establishing the main performance indicators;

. Marking out the tasks and responsibilities of the corporate center,(shared) service units, and business units;

. Defining the top level of the organization to allow the board to takecontrol of all critical functions;

. Deriving the headcount of the individual units, ideally on the basis of abusiness plan.

With these cornerstones in place, the company can refine the structures and detailthe key processes in the second phase. Using a staggered procedure allows all theappointed managers to determine their relevant reporting structures in cascadesfrom top to bottom.

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25.4 Determining the Cornerstones of an Effective Organization

25.4.3Building a Shared Performance Culture

The integration of the corporate cultures does not happen by itself. Even if all theother success factors are met, a merger can still fail due to the lack of a sharedcorporate culture. In the short term, management needs to focus on identifyingand addressing potential cultural flashpoints. These may include the form andscope of communication, or relate to the location of the new corporate center.When two chemical companies merged, the relocation of the headquarters to anew, third location had a significant impact on the corporate culture. Employeesused to working in the nerve center suddenly felt they had been demoted to inci-dental roles, and even employees not directly affected by the relocation left thecompany after the decision. If the merger is cross-border then integrating the cor-porate cultures is even harder. However, there are success stories. When pharma-ceutical companies SmithKline and Beecham merged, they tackled cultural inte-gration systematically from the outset and successfully avoided major conflicts.Even in the design phase, top management must actively control the process of

building the future, shared corporate culture, and take the following points intoaccount:. Fact-based decisions: differences between the companies must bemade transparent. Possible approaches range from in-depth inter-views with managers through to broadly-structured employee sur-veys;

. Consideration for internal differences: there are often cultural differ-ences within a company. Sales, for example, will typically havequite different working methods and back-office requirements.These differences also need to be highlighted;

. Role-model function of the management team: management musttake up the cause of cultural integration and ensure that it stayson the agenda. The team should not only actively drive forwardthe necessary changes, it should serve as a role model for theentire organization;

. Communication: communicating the new culture within theorganization is also important. This may involve symbolicactions, such as introducing new department names and titles(see section 25.5.3).

The long-term goal is to build a performance culture that will enable targets to bemet. This may mean completely redesigning management and evaluation pro-cesses.

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25.4.4Managing Top Talent

Employees can understandably become insecure in the face of a looming merger.Their professional future is uncertain and many in the acquired company will feellet down. Competitors will happily take advantage of this and lure away top talent,so companies need to take immediate action. The following steps are particularlyimportant:. Identify key talent early: both in top management and at other lev-els of the organization, especially in critical areas such as R&D,IT, or the field service;

. Build employee loyalty: perhaps through financial incentives, invol-vement in integration activities, or special development pro-grams;

. Fill key positions quickly: this can counteract uncertainty. When BPand Amoco merged, several hundred senior management posi-tions were filled within a few weeks of the announcement.

It is also important to check how many staff will need to be recruited. Boards tendto hesitate in this area. A merger creates a company that is usually substantiallylarger and has different areas of focus – and therefore may require different skills.Reviewing the available pool of talent with the help of an external personnel con-sultant can help create an objective basis for a decision.

25.5Tailoring the Integration Approach

Once all the starting parameters – aspirations, value creation potential, and orga-nizational cornerstones – have been determined for the new company, the rest ofthe integration approach needs to be planned in detail. This involves defining theproject organization, selecting the project management tools, and steering thecommunication.

25.5.1Setting up a Powerful Project Organization

A clearly structured project organization is required to deal with the numerouscomplex individual integration tasks. This typically has three levels: (1) a steeringcommittee, responsible for laying down guidelines, making human and financialresources available, and deciding on the integration actions; (2) an integrationoffice that provides general support to and manages the project teams; and (3) theproject teams, which work out the individual integration actions and have respon-sibility for implementing them. Special steering committees are often used for

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25.5 Tailoring the Integration Approach

large mergers with numerous project teams, in order to decide on the actions tobe taken by the various sub-projects.The individual elements and the division of tasks will depend on the particular

context of the integration. The following points, among others, need to be clari-fied.Role of the CEO and the integration manager: management can carry out the inte-

gration itself or use a separate team with an integration manager. In a best-of-both integration or a transformation the CEO usually plays a very active, visiblerole, setting the direction and driving the change – as in the case of Daniel Vasellaat Novartis. In these situations, the integration manager concentrates on processcontrol and is supported by the integration office. In a bolt-on or a takeover, theintegration manager usually assumes the managerial role, while the CEO andmanagement team concentrate on running the business. In either case the inte-gration manager is important. He or she should be someone with a good knowl-edge of both organizations, able to bring extensive experience in project manage-ment to the role and with excellent soft skills.There is no single answer as to which form of decision-making is most appro-

priate for the integration. Those that create a large proportion of their valuethrough operational improvements need the support of on-site employees, sug-gesting largely bottom-up driven decision-making. Structural synergies, on theother hand, can be realized more quickly using top-down decisions.Role of the integration office: the integration office can actively drive the integra-

tion or simply coordinate activities. In most cases, it will push forward the integra-tion activities. One of the most important tasks in this context is exercising overallcontrol over the merger. This means developing and managing a master plan thatcontains all the projects and their targets, the responsibilities, the status of theworkout and implementation of actions, and the deadlines. Using the masterplan, the integration office can monitor the progress and quality of the integrationactivities, and prepare decision drafts for the steering committee.The integration office may also assume an arbitration function and moderate

discussions in difficult situations, for example when an optimum organizationaldesign is being derived for individual units. Additional tasks may include develop-ing the communication strategy or clarifying personnel matters.Such an active role is particularly appropriate if the integration activities are

very extensive and/or the companies concerned have little M&A experience. Inthe example of an automotive industry merger, however, the integration office wasdeliberately given only a coordinating role and integration activities were largelycarried out within the context of day-to-day operations. This meant it was possibleto maintain a general overview of the scope of the changes (both companies hadalready experienced mergers). The members of the integration office shouldalways be managers with a good reputation in both organizations.Role of the project team: individual project teams are the cells of the merger. They

devise the actions that ensure the new company can function and capture value.The number of project teams can vary substantially. In most cases there are initial-ly around ten, but in major global mergers the number can rise very rapidly. The

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project teams are geared toward specific issues such as sources of value creation,business units, functions, regions, locations, or special tasks, e.g., communica-tion. Each team usually has one project leader; having two team leaders makessense only in exceptional cases, for example to secure access to information or ina merger of equals. The teams themselves should be structured such that bothcompanies are represented. Attention should be paid so that only the best people areselected as team members – not just those who happen to be available. Nominationfor a project is also a good way of binding top performers to the organization.Every team should have a charter that describes its targets, tasks, and resources,

lists the end products, and contains an initial rough schedule.

25.5.2Selecting Project Management Tools

Controlling an integration program can be a Herculean task. With projects (andsub-projects) running in parallel and countless individual actions documentedwith concrete end products, responsibilities and deadlines, a high level of com-plexity is guaranteed. In addition, individual project teams often work at differentlocations in different countries.It is therefore all the more important to monitor systematically the progress of

integration activities and the achievement of the targets. Two instruments in par-ticular help here. Implementation controlling makes it possible to track whetherall the actions are being implemented as planned, whether they are being drivenforward with the necessary rigor, whether individual actions, projects, or the over-all program are on schedule, and when each action will be realized. Effect con-trolling, on the other hand, should be set up so that the monetary impact of theactions can be traced in the company’s cost centers. This allows management tocheck whether synergy effects have kicked in as planned, and when an individualaction will have an impact on net income.Specialist software can help with these tasks. Standardized reporting structures,

for example, allow each team to report the project status regularly to the integra-tion office. An automated comparison with the master plan highlights possibledeviations and makes transparent interfaces and dependencies between actions.To help ensure acceptance, existing instruments should be used or modified

appropriately wherever possible. Web-based tools are particularly suitable. If newinstruments are required, then pilots and training programs should be planned ingood time. In principle, preference should be given to quick, pragmatic, individu-al solutions.

25.5.3Communicating Permanently

As already mentioned, the importance of continuous communication in ensuringthe success of a merger cannot be overestimated. Attention should be devoted tothe issue right from the start. When initial negotiations get under way, for exam-

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25.6 Summary

ple, it must be clear how the companies will react if any rumors of the mergerleak. When the merger is announced, the messages conveyed to shareholders,customers, and employees must be clear and aligned. When integration begins, itmust be clearly communicated how the workforce can be motivated to cooperate.Furthermore, there are legal provisions in the area of communication that mustbe taken into account, such as disclosure of information by listed companies.It is important to decide as early as possible who will be responsible for develop-

ing the communication strategy and who will release the specific content. Agree-ing on uniform wording and a few clear core messages early on has proven worth-while. This would cover topics such as why the merger makes sense, what it offersthe companies concerned, and what will change for stakeholders.When developing the communication strategy, the company needs to consider

all the relevant internal and external target groups and prioritize them accordingto their communication requirements. A detailed communication plan should bedrawn up for each target group that describes the aim of the communication, thespecific messages, the new or existing media to be used, the timing of individualcommunication actions, and the people responsible. Feedback mechanisms, suchas regular employee surveys, can be used to keep a constant check on whether themessages are reaching the target groups. If necessary, the communication planscan then be revised and adapted accordingly. Communication plans for the indi-vidual target groups need to be coordinated with one another in terms of theircontent and timing to ensure that no contradictory messages are given out.

25.6Summary

. Mergers and acquisitions have changed the chemical industrylandscape over the last few years. However, the transactions donot always bring about the desired increase in value. Successbecomes predicated on making the integration work.

. The first hundred days of the process are vital, as this is when allthe important decisions on the company structure are decided,and the post-merger integration program is set up.

. The following six success factors need to be considered: (1) valuecreation should be seen as the driving force behind the integra-tion, (2) ambitious goals should be set without losing sight ofwhat is feasible, (3) the existing business should not be neglected,(4) cultural differences should be taken into account at an earlystage, (5) the fears and resistance of employees should be takenseriously, and (6) all stakeholders should receive comprehensive,continuous communication.

. The second phase of the integration process is then concernedwith ensuring that the integration program is implemented rigor-ously, with sustained momentum.

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Value Creation || Post-Merger Management: It's All in the Design

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