M&A activity is projected to increase 20% YoY in 2024, slowly returning to pre-pandemic levels. It’s crucial to maintain momentum in M&A transformations, which is only possible with wisely executed post-merger integration (PMI). This article explores the PMI specifics and best practices. Keep reading to discover the following:
PMI benefits
Roles and responsibilities during the PMI process
Main post-merger integration process steps and its place on the M&A timeline
Best PMI practices
Best data rooms for post-merger integration success
What is post-merger integration?
Post-merger integration (PMI) occurs when two companies reorganize and unify their assets, operations, and people to create a combined business after a merger or acquisition.
Post-merger integration may take over two years for most deals regardless of size. It usually takes 1%–7% of the deal value (all deal sizes) and occurs within the following business functions.
Business function
Integration time in successful acquirers
Finance
~4–5 months
Human resources
<6 months
Sales and marketing
~7–8 months
Logistics
~7–8 months
Procurement
~8–9 months
After-sales service
~8–9 months
Production
<10 months
Research & development (R&D)
~11–12 months
Internet technology (IT)
~1.5 years
Why is post-merger integration important for businesses?
PMI is the main driver for M&A success. Here are several reasons why successful post-merger integration matters:
Corporate synergies. If done correctly, consolidation improves production efficiency and leads to economies of scale. A combined entity can produce more products and services at the same or lower cost.
High market share. A merged company enjoys the combined capabilities, reputation, customer base, and markets of two organizations.
High shareholder returns. Successful PMI maximizes business performance and stock growth, contributing to higher shareholder returns.
Who is responsible for the post-merger integration?
Here is the optimal management structure of post-merger integration.
Post-merger integration team
Definition
Responsibilities
Composition
Steering committee
Advisory board committee responsible for PMI
PMI planning, strategic oversight, and high-level decision-making
Board members and C-suite executives
Integration management office (IMO)
A temporary office that oversees and coordinates PMI
PMI coordination, daily management, and execution
Integration leader, functional project managers
Functional teams
Project execution teams dedicated to specific PMI areas
PMI execution
Functional experts
What are the main steps of post-merger integration?
Post-merger integrations start way before dealmakers sign closing agreements and involve the following steps:
Successful acquirers initiate post-merger integration due diligence as soon as general diligence captures key deal drivers and synergies. Acquirers consider the following questions during the PMI due diligence process:
✅ What are operational redundancies?
✅ Do we aim at full or partial integration?
✅ How are synergies measured?
✅ How do technologies overlap?
✅ Where can we retain efficiency while cutting costs?
✅ How do we ensure business continuity while transferring ownership?
✅ What cultural differences are there?
2. Planning
Post-acquisition integration planning also starts during due diligence with the intent to have the process up and running on Day 1 post-closing.
Successful integration is heavily based on due diligence findings when companies adjust deal expectations and (sometimes) reframe synergy goals. Successful companies consider the following aspects during PMI planning:
Scope and KPIs. Understand which core business processes will be integrated. Consider strategic objectives and define integration milestones and KPIs. Envision the final state for each business function.
Resource allocation. Allocate appropriate resources to survive the first 100 days and avoid fatigue afterward. Acquirers consider integration spending for the next 12–18 months after closing.
Execution. Understand how and who will execute the integration. Determine integration teams, develop execution timelines for each stream, and consider complexity and risks.
Cultural alignment. Consider communication strategies to align the target company’s employees. Assess benefit plans, compensation levels, and organizational features to maximize employee retention.
PMI planning results in a well-defined post-merger integration plan capturing each business function. Afterward, PMI teams prepare for Day One.
3. Governance
At the PMI governance stage, an acquiring company sets workflow and prepares working environments:
Assemble PMI teams. Form an IMO and functional teams. Consider experiences and capabilities for various PMI streams. Acquirers may also involve the same advisors they use for due diligence.
Define a communication environment. Consider a dedicated M&A workspace, like a virtual data room, for smooth PMI execution and coordination. Make sure your M&A software enables clear user roles, task workflows, and Q&As.
Conduct necessary meetings. Align all teams on the integration plan and evaluate the operational readiness checkpoints. Acquirers usually do this a few months before the operational day one to minimize disruptions.
4. Execution
During PMI execution, functional teams begin implementing PMI plans developed at earlier stages of the PMI timeline. Day One starts with the following:
Kick-off meeting. All PMI members consider the corporate strategy, reiterate integration plans, review issues, and share key considerations.
Implementations. PMI teams begin implementing post-merger integration activities They migrate data, unify accounting systems, update supply contracts, review benefit plans, communicate with key stakeholders, etc.
Reporting & feedback. PMI teams arrange intermediate meetings to track progress, share feedback, and decide further actions. Usually, PMI teams deliver final reports on Day 100. They may conduct several follow-up meetings.
3 best practices for a successful post-merger integration
Let’s discuss a few integration practices for the best results:
1. Use DD teams
Transferring findings and responsibilities from DD to integration teams may be daunting and exhausting. However, you can use the same DD teams for the PMI job instead. It has a few benefits:
Deep knowledge. DD teams know all the intricacies of the two companies and are very aware of how PMI should be executed.
Seamless transition. Assigning integration to DD teams retains knowledge and minimizes data transfers that would otherwise take plenty of time.
2. Manage cultures
Cultural clashes ruin M&A. That’s why it’s advisable to address cultural differences as early as possible. Integrate cultures smoothly and consider the following questions:
✅ Which incentives prevail in the target company? Financial or emotional?
✅ What are the working norms in the acquired company?
✅ How does the target company hold employees accountable?
Digital security. VDRs use data encryption, multi-factor authentication, and real-time malware protection. Companies can also control traffic from IP addresses, emails, and domains to secure the authorization process.
Information rights management. VDRs prevent unauthorized file sharing with granular access permissions, dynamic watermarking, and screen capture blocking. Most importantly, access permissions can be modified or revoked in downloaded files.
Single-sign-on (SSO). Integrated solutions for SSO reduce password fatigue and set another line of defense against phishing, compromised credentials, and account takeovers.
How do VDRs improve post-merger integration?
VDRs simplify and accelerate synergies during post-merger integration with the following capabilities alongside ironclad data security:
Progress tracking. Ensure all PMI tasks are completed on schedule with instant activity notifications.
Compliance. Collaborate in GDPR, ISO 27001, CCPA, and HIPAA-compliant workspaces.
Collaboration. Manage ongoing matters and coordinate stakeholders and advisors using Q&A sections.
Reporting. Simplify Day 100 reporting with audit trails and drill-down scheduled reports.
Top 3 virtual data rooms for post-merger integration
iDeals
Intralinks
Datasite
iDeals
iDeals empowers over a million users in 175,000+ companies. It offers cutting-edge PMI technology:
Q&A with FAQs. Manage your integration checklist using customizable Q&A workflows with auto-forwarding.
Full audit trail. Track milestones using drill-down activity logs and scheduled reports.
Built-in redaction. Redact information in over 20 file formats.
User roles. Coordinate PMI teams using four business roles: full admins, restricted admins, collaborators, and individual users.
Unlimited preparation. You don’t pay anything until your PMI projects go live.
Dedicated experts. Improve your VDR knowledge with unlimited one-on-one training sessions.
15-minute data room setup. Auto-convert 25+ file formats, upload unlimited files in bulk, and automate user onboarding with Excel templates.
Top security features:
✅ 8 levels of granular access permissions
✅ IRM security
✅ IP, email, and domain allow-lists
✅ View as another user
✅Screenshot blocking
✅ Dynamic watermarking
✅ SSO
✅ Multi-factor authentication
Intralinks
Intralinks supports over 3 million users with dedicated M&A solutions:
Video support. Use Zoom integration to coordinate field PMI processes remotely.
AI redaction. Analyze and redact information faster.
Fully integrated platform. Easily connect VDR to other M&A solutions by Intralinks.
M&A workflows. Clarify PMI matters with Q&A sections and reduce administrative burden with one-click approvals.
Top security features include:
✅ 6 levels of granular access permissions
✅ IRM security
✅ Watermarking
✅ View as another user
✅ SSO
✅ Multi-factor authentication
Datasite
Datasite supports over 3 million users with the following M&A and PMI features:
AI redaction. Automatically find information patterns.
Q&A workflows. Customize Q&As with FAQs and auto-forwarding.
Deal analytics. Schedule drill-down activity reports and receive real-time updates in activity dashboards.
Top security features:
✅ 3 levels of access permissions
✅ IRM security
✅ Watermarking
✅ Session timeouts
✅ SSO
✅ Multi-factor authentication
Key takeaways
Post-merger integration takes 1.5–2 years on average, with IT technology taking the most time to integrate.
PMI steps include due diligence, planning, governance, and execution. Successful acquirers start PMI during general M&A due diligence.
Successful integrations engage due diligence teams, address cultural clashes early, and use data rooms to maximize PMI success.
