Artificial Intelligence in Post Merger Integration

by admincf | Mar 30, 2025 | Insight, Newsroom

Post Merger Integration on the beach

pmiGPT: Good morning, Peter, how can I support you today?
Taking into account the milestones of our latest target and considering your email communication on the closing conditions, the closing should take place in the next few days.
Shall we have a look at the plan for Day One?

Peter: Please provide me with the complete schedule for Day One. Consider our usual procedure and also look at the latest discussions with the target's works council.

pmiGPT: I'll get straight to work, boss.
…

Peter: Oh, I almost forgot – I’ll also need the scripts for the speeches, the presentations and my moderation cards with the key points.

pmiGPT: Of course, as soon as I have the schedule ready, I'll get right on it.
…

As Peter sips his cappuccino, he thinks about the fact that his avatar could actually handle the job on Day One – allowing him to extend his workation by another three days...

Science fiction or soon to be reality?

Back to reality. For now, these are still just dreams.

Although artificial intelligence is already used in one in five M&A transactions (BAIN, M&A Insights, March 2025), its large-scale application primarily focuses on the transaction process — specifically, the phase before signing. After signing or closing, AI usage remains limited today.

Setting aside the fact that an avatar on Day One might help Peter optimize his personal work-life balance, it certainly doesn’t contribute to building goodwill with new employees.

Artificial intelligence is already significantly reducing manual effort in many areas. Generative AI unlocks entirely new possibilities and will become even more influential in the months and years ahead.

The scenario from the introduction is still futuristic. How long that remains the case largely depends on creativity and the willingness to experiment. Technology must be embraced to drive progress — and the first step is to start experimenting.

To make that process a little easier, I’ll share some use cases and ideas here. I won’t bother with the obvious no-brainers, like having written communication proofread or generating custom images to support messaging.

Supplier Screening Support

Wherever there is data — preferably large amounts of it — artificial intelligence can be leveraged effectively, delivering significant efficiency gains. This is why it has been widely adopted, particularly during the transaction phase, with a strong focus on due diligence.

We can feed the AI with all supplier contracts and have it identify “critical” passages. This not only saves us the time we would otherwise spend reading but also allows us to focus immediately on the AI-prioritized “red flags.” For example, we can mitigate risks through the change-of-control clause. After all, no one wants to hear from their suppliers: “It was nice having you as a customer — until yesterday.”

Similar approaches work in any area with numerous contracts or large volumes of data. In sales, this applies to customer contracts; in HR, to remuneration agreements, and much more. Of course, data protection and GDPR compliance are ensured, provided that key principles are followed when selecting the AI model, the place of hosting, and configuring various AI settings.

Reorganization – Ready on Day One

Now, let’s take a step into the future. Following the acquisition, the accounting departments — I like this traditional term; it fits well into our modern discussion — of both companies are set to merge. This isn’t just about consolidating a location and a management level; it’s also about modernization — introducing agile processes and increasing efficiency.

There are countless articles on this topic online, along with best practices from large, mid-sized, and small consulting firms. So why not feed all these organizational charts and concepts into our pmiGPT? We can also include the current organizational structures of both accounting departments, along with growth plans for the coming years. And, of course, we won’t forget to incorporate other relevant framework conditions.

Then, pmiGPT will generate suggestions for the structure of the new accounting department — including a detailed description and an analysis of the respective advantages and disadvantages. In a single step, it will optimize management spans and, who knows, maybe even consider the team members’ star signs — for particularly energetic collaboration.

When employees arrive at the office on Day One, they’ll find themselves standing in front of a large table displaying the new seating arrangements — almost like a wedding reception.

Phew! Maybe that’s a bit too much automation and top-down decision-making. But some of these approaches significantly boost efficiency and are no longer just a futuristic vision.

Avatars for accounting standards

After our journey into the future, let’s return to what’s already possible today. On Day One, Target employees face a lot of new information — from parking and canteen use to booking meeting rooms and understanding the buyer’s accounting standards.

Of course, all of this could be documented in a traditional how-to guide. But that approach feels outdated. For years, learning content has been delivered through videos featuring someone reciting the information. AI can already do this much more effectively.

Let’s have an avatar deliver the training. With AI-driven learning, it can even use pedagogical techniques to make the content more engaging and easier to absorb. Digitalization offers countless possibilities — documents and videos can be searched or tailored to specific target groups.

But this is just the beginning. If something small — or even significant — changes, the avatar can update the content with a single click. In the past, this would have required reshooting and editing an entire video.

Here, AI not only enhances efficiency and effectiveness but also improves quality at the same time. The best part? This isn’t a vision of the future — it’s already a reality. And who knows, involving people from both organizations in the avatar creation process might even become a key step toward cultural integration.

Making cultural differences visible

Cultural integration — the key term for our next use case. At the core of cultural integration — and here, “integration” does not mean assimilation — is the mutual recognition of differences. The famous elephant in the room needs to be brought into the spotlight.

In the past, this required extensive processes. First, surveys; then, data analysis; and finally, workshops with mixed teams from both organizations. The outcome was a visualization of cultural differences.

A complex process that not only takes time but can also only begin after Day One. And with all the urgent tasks that need to be tackled after Day One, cultural integration often takes a back seat.

Culture is particularly evident in communication — on websites, in job postings, in external and internal content (aka posts), and even in emails. So why not feed this data into an AI and let it analyze the cultural differences? This technology has been available for some time and is already being used in other areas.

This provides a starting point for discussions within teams and among managers — meaning cultural integration is already underway. All without requiring extensive time from employees and, most importantly, without delay.

Culture Clash Meter

Once we have analyzed cultural differences with AI and then refined them through input from those involved, the first step is successfully completed.

Going forward, it’s especially important to recognize when discussions in meetings or conversations shift into the cultural realm — often at the expense of constructive dialogue.

In larger meetings, moderators are often brought in to oversee discussions. With their experience and a targeted briefing, they ensure conversations stay on track and intervene when cultural differences lead to unproductive exchanges.

Today, bots are already recording numerous meetings. If AI can analyze cultural differences, it will eventually be able to detect them in real time — or at least with minimal delay.

Now, we let AI calculate an indicator. The more frequently cultural misunderstandings or culturally driven discussions arise, the higher the value climbs — and it decreases as these instances become less frequent. This creates the Culture Clash Meter, a tool that can be used in every meeting, video call, phone conversation, or face-to-face discussion.

Integration Path Optimization

Last but not least — even if the scenario from the intro isn’t reality yet, we can still hand over the plans of all individual workstreams, functions, or teams to AI for analysis. By supplementing these with relevant topic details and overarching milestones, we create a more comprehensive picture.

This enables AI to identify dependencies that we previously mapped out manually. The insights provide teams with valuable input for discussions and collaboration — an essential step in growing together and ensuring the success of post merger integration.

The road ahead

How far are we from AI not only creating the post merger integration plan but also detailing every step — what needs to be done, when, and by whom? And how long until it takes over these tasks entirely, just like the avatar delivering the Day One speech?

Generating such a plan might take hours, maybe even days — but what is that compared to 100 days of integration or even three years to finalize every detail?

Today, we are still far from this scenario. However, AI already offers numerous opportunities to enhance post merger integration. The maturity levels of these use cases vary, and the full potential of AI in this field is far from being realized.

Parallel Integration - Success in Mergeritis

by admincf | Feb 27, 2025 | Insight, Newsroom

Waiting until the day after tomorrow

“We're not starting the integration yet. There are more add-ons in the pipeline, and we'll know more in two months.” This — or something similar — is what many CEOs pursuing a buy-&-build strategy are currently saying.

Although some add-ons have already been acquired, further takeovers are still pending. If you begin integration now, how will you handle the next acquisitions? The first integration isn’t even complete, and the next closing is already imminent.

One option is to integrate the new acquisition alongside the ongoing process. Another is to put the company on hold for now. But if you start too early, you won’t be able to incorporate insights from future acquisitions into the process.

“So it makes no sense to start now.” Right? In the end, you just keep waiting — until the day after tomorrow.

It is not uncommon

Buy-&-build strategies have become an integral part of many private equity investments. No wonder — the low-hanging fruits are particularly rock bottom here. However, this no longer refers to the classic multiple arbitrage that once seemed almost automatic: larger company, higher multiple.

It was a self-reinforcing effect, almost like a perpetual motion machine or a sleight of hand. Today, that alone is no longer enough. To increase the multiple now, real integration is required — leveraging synergies within the growing organization. Without a targeted allocation of resources, the desired effect won’t be achieved. Yet, despite the additional effort, the investment is worthwhile.

This raises a crucial question: When should integration start? And when new companies are continuously being added, how can they be incorporated into an ongoing integration process?

But buy-&-build strategies aren’t the only path to multiple acquisitions. Traditional growth strategies today also rely on both organic and inorganic expansion — such as add-ons, where suitable companies are acquired. And often, these involve more than just one or two.

Even companies that aren’t actively pursuing expansion face this challenge. Demographic trends are creating numerous succession opportunities that are hard to ignore. Failing to seize them means risking that a competitor will — gaining a decisive advantage in the process.

And suddenly, you've acquired several companies in a short period — and once again face the same question: When does integration begin?

Do you have to choose? Plague or cholera?

The situation is clear: the first integration is already underway, and another target is being added. There are two basic options: either the new company is integrated directly into the ongoing process, or the initial integration is completed first while the new target remains on hold until it is incorporated in a second phase.

So far, so difficult. Parallel integration speeds up the process but risks compromising its stability.

Corporate culture, for example, can be a critical factor. Even with the first acquisition, there were significant differences from the buyer: We’re on a first-name basis versus We’re not. Now, a third player enters the mix — with a completely different culture. This new addition prioritizes clear responsibilities and hierarchies, regardless of how people address each other.

In the original integration, cultural differences were still manageable — they existed along a single dimension. But with the addition of another company, complexity increases: Who represents which culture? And in which direction should the entire organization evolve?

Choosing stability by postponing the second integration means also losing valuable opportunities.

Take IT, for example. As part of the integration, the entire application landscape is under review. A key decision looms: selecting a Manufacturing Execution System (MES) to replace the existing production planning system. Neither the buyer’s solution nor the first target’s system is ideal, but a choice must be made for integration to move forward. The decision falls in favor of the buyer’s system.

However, the second target successfully implemented an integrated MES just a year ago. They have valuable operational experience, identified optimizations, and documented everything thoroughly — after all, they’re the ones with clear structures and hierarchies.

Had this expertise been incorporated early on, the system could have been further improved and developed into the best possible solution. But with a sequential approach, the buyer’s suboptimal system is chosen simply because time and money have already been invested in its migration. Making changes now seems unrealistic.

More stability — at the cost of speed and quality.

The choice between parallel integration — offering speed and flexibility at the expense of stability — and sequential integration is anything but trivial. And even after a decision is made, integration remains a balancing act.

Parallelize with a Playbook

A classic buy-&-build strategy simplifies decision-making. A solid platform company with stable, efficient processes serves as the foundation for consolidating a highly fragmented market by acquiring significantly smaller companies. The platform company’s target operating model is simply adopted as the standard.

With a well-defined playbook outlining each step of the integration, multiple targets can be integrated in parallel—without unnecessary risks. Processes can also start at different times. Such a playbook details the objectives and the required measures, structured by topic or function.

Careful preparation or documented experience from previous integrations helps establish realistic time frames, dependencies, priorities, and milestones. These milestones — which can also serve as internal communication tools or mark key events — might include a completed rebranding, the start of production, or the acquisition of new customers.

One of my favorite examples is Mister Car Wash, a U.S. chain of conveyor car washes. Mister — as the company affectionately calls itself — expands almost exclusively by acquiring individual locations or small chains. Each integration follows a standardized playbook, covering everything from site conversions to employee training in the company’s own academy.

Similar playbooks are common in hotel (re)openings. In addition to the playbook itself, specialized (re)opening teams often assist local staff during the initial phase. Their support spans both content — since they know the target vision and playbook inside out — and operational aspects, providing extra hands to tackle unexpected challenges.

A clearly structured roadmap creates space to accommodate the unique aspects of each acquisition. There are always valuable best practices that can be adopted across the group, which are then rolled out and incorporated into the playbook.

Because playbooks are not set in stone. They are regularly updated — not completely overhauled, but continuously refined with lessons from the latest integration processes.

Without a playbook - just listen

What about the other end of the M&A scale? When there’s neither a playbook nor extensive post merger integration experience? When the target picture for the new organization isn’t defined from the outset but instead develops throughout the process? Can another acquisition still be meaningfully involved in an ongoing integration?

Of course. After all, regular status or steering committee meetings provide a forum for discussing integration progress with key stakeholders. These meetings determine whether the future will follow the yellow or green variant. Representatives from the new acquisition should be involved early on — they, too, are relevant stakeholders.

Decisions already made regarding the target vision don’t need to be immediately applied to the new acquisition; that can happen in a second phase. However, their input can be incorporated early, offering two key advantages.

First, the new target feels included from the very beginning. Its expertise and experience contribute to the process rather than being overlooked. At the same time, it gains direct insight into the organization’s direction, ensuring transparency in the integration process.

Second, valuable insights from the new acquisition aren’t lost. Returning to the earlier example of selecting a Manufacturing Execution System (MES). Instead of being limited to two suboptimal options, the new target may introduce a superior solution — one that can be incorporated into the future IT landscape.

This approach may even unlock additional internal resources. Instead of relying on costly interim managers, underutilized talent from the new target can support the integration. This not only reduces costs but also creates direct points of contact, helping the organizations grow together more effectively.

There is always a Day One

Even if the real integration of a new acquisition is postponed, Day One still happens. It marks the day after closing when the buyer takes full control of the company. On this day, employees expect a warm welcome, an inspiring speech from the CEO, and clear guidance. (I shared my experiences and thoughts on this in my last article.)

Whether the new company is integrated immediately or later, this milestone cannot be overlooked or handled half-heartedly. It deserves the same careful preparation and serious execution as any other key moment in the integration process.

The solution? Almost doesn’t matter

As is often the case in life, there is no perfect solution — especially when evaluations must be made in advance. However, the two extreme cases outlined here provide guidance and reference points for your own very specific situation.

Many roads lead to Rome — and to a successfully integrated organization. More important than choosing the perfect approach is making a clear decision and following through consistently. After all, postponing integration until the day after tomorrow means losing valuable time.

As long as the new acquisition isn’t treated as second-class, employees are informed transparently and authentically, and they are involved as much as circumstances allow — everything will work out.

And if it is not yet good, then the integration is not yet over.

Integration on Day One

by admincf | Feb 2, 2025 | Insight, Newsroom

Absolute Radio Silence

"After the closing, we didn't hear from our new owner for six months." - Instead of celebrations on Day One, this company faced endless waiting. Ever since I heard this story from a CEO a few years ago, it has topped my personal list of the biggest Day One faux pas — by a wide margin.

The CEO of this company faced an enormous challenge. On one hand, he had no information about the new owner's vision, strategy, or goals due to complete radio silence. On the other hand, he had to meet employees' expectations, provide some form of guidance, and keep morale high. Meanwhile, external stakeholders also needed information. And as if that weren’t enough, business operations had to continue—his responsibility as well.

How Should You Organize Day One? What should you do? What is expected? These are the questions we address in this article.

When Is Day One?

The famous Day One — but when does it actually take place? It is rarely set in the purchase agreement. The closing — the formal completion of the transaction — also cannot always be predetermined. Various closing conditions must first be met, including regulatory approvals. Sometimes this process is swift, but it often takes weeks or even months.

Closing marks the economic and legal transfer from seller to buyer. The buyer takes full control of the target company, and a new era begins for both organizations. Day One is the first day of this new age.

Day One: Just Another Day?

What makes this day so special? It often falls on the first of the month, but sometimes it’s mid-month. A new beginning is something special, but does it really require so much attention?

Imagine a new employee’s first day. This moment is undoubtedly important to him. If the newcomer is the new CEO, tasked with leading a major transformation, then the first day is just as significant for the entire workforce.

New employees expect a proper welcome — not necessarily flowers or champagne, but at least orientation. Where is their office? What tools do they have? What tasks await them? They want to start quickly and eliminate uncertainty.

Now, apply this to an entire workforce — 50, 100, 500, or even 1,000 people. Their expectations are similar: a warm, sincere welcome, clear guidance, and a sense of security. They are asking themselves: What happens next? What does this mean for the company, my department, my manager, my colleagues — and for me personally?

Welcome to Day One — the day of high expectations.

The Day One Multitool

I have never met anyone who deliberately ignored these expectations. To be honest, I’ve never met the buyer from the introduction either.

There is no magic formula or secret sauce for a flawless Day One, but there is an extensive toolkit you can use. However, it’s essential to understand the priorities of the organizations involved and the requirements of post merger integration.

Employees need orientation and security. That means they must be informed — clearly, consistently, and authentically. This is where the integration story comes in. It answers key questions. Who are we (as the buyer)? What is our strategy? How do we view the target company? What aspects of the target do we value? (Keyword: appreciation and recognition) What are our goals for this acquisition? What does our joined future look like? How will the integration unfold?

That’s a long list, but these points should already be clear before the signing. On Day One, they need to be communicated in a simple and digestible way.

Day One is also the ideal time to outline the broader integration plan. Messages must be well-structured, easy to understand, and actionable. Of course, they should be reinforced over time — but they need to be right the first time.

The Magic of Day One

Every new beginning carries its own magic. Day One marks the official start of the integration. It’s an opportunity to harness the momentum of change and generate energy for the months of transformation ahead.

It’s also a chance to create touchpoints, points of contact between employees from both organizations. These interactions are the catalyst for the teams to grow together - and thus for successful integration. On Day One, it’s important to create these touchpoints deliberately.

The Welcome Package

Small gifts not only maintain friendships but also can go a long way in making a transition smoother. A well-thought-out welcome package is more than just branded office supplies — it conveys appreciation and sets the stage for constructive collaboration.

For example, a personal letter from the new CEO — short, authentic, and personally signed. It's a lot of work, but it carries genuine appreciation. If a rebranding has already be decided, new business cards can reinforce a sense of belonging. But what about those who won’t be part of the journey? How do you communicate this honestly and respectfully?

The Q&A Page

A Q&A page on the company intranet helps reinforce key messages and allows employees to access information when they need it. What questions might employees have? What answers can be provided immediately?

Even if not all details are settled, collecting open questions and addressing them in due course builds trust. A hotline — such as an email inbox or an internal forum — can also be valuable. The key is to respond promptly and update the Q&A with relevant new information.

The good old Roadshow

With remote work becoming more common, you might be tempted to hold Day One virtually. The new CEO could deliver a speech from their home office — or even their couch. Technically possible, but a really bad idea. The nonverbal message? A lack of appreciation or genuine interest.

Presence matters. Being on-site and physically available on Day One makes a huge difference. It shows that leadership takes integration seriously and values personal connection. But what if the target company has multiple locations?

A live video broadcast can help ensure all employees experience Day One firsthand. Employees understand the CEO can’t be everywhere at once. However, other board members or executives from the acquiring company can visit different locations, reinforcing personal engagement.

And Day One shouldn’t stand alone. The next step? A roadshow — a tour of different locations to maintain momentum. Yes, it’s exhausting. Yes, it might feel repetitive after the fifth or ninth speech. But that’s part of a CEO’s job in post merger integration. There’s no excuse for skipping personal engagement.

Merger of Equals – Is it Good News?

A merger of equals sounds like a fair and balanced process. Shouldn't that evoke positive reactions on both sides? But is this really the case?

When two equal companies merge, neither organization takes the lead, and no one sets the tone. As a result, everything is in question — for both companies. Anyone who has been through this process knows how much uncertainty it creates among employees on both sides.

So how can this uncertainty be managed? Many questions remain unanswered on Day One. What will the future organization look like? Which departments will stay? Who will take on key leadership roles? Often, the consultation process with the works council hasn’t even been completed at this stage.

The solution is both difficult and straightforward: honesty and transparency. If certain decisions haven’t been made or finalized, it’s crucial to communicate that openly. Instead of offering vague reassurance, provide a clear update: The consultation process with the works council is ongoing. We will be holding discussions in the coming days and will update you as soon as we have news.

Employees don’t expect immediate answers — but they do expect consistency and reliability in communication. And that starts with honesty.

Beyond Communication and Leadership

Some situations add another layer of complexity — especially when the target company is no longer fully operational. This can happen in an asset deal involving employee transfers during insolvency or a carve-out where key functions must be rebuilt from scratch.

In such cases, critical questions arise: Who will ensure that wages and salaries are paid on time? Is the supply chain management able to order raw materials for the production?

These challenges must be addressed in advance to Day One. Typically, the seller remains available to provide support, but this preparation phase should never be underestimated — it determines whether the joint restart works or descends into chaos.

On Day One, all essential matters should be clarified. Clear communication is especially crucial in these high-uncertainty scenarios, as employee concerns are often amplified. Unexpected problems will inevitably arise, but the key is to identify and resolve them quickly — above all, in the best interests of the employees.

What Comes After Day One?

After Day One is still before success. The work continues. Integration must be actively managed and consistently driven forward. The key to long-term success is persistence — keeping at it every day.

Day One marks the start of a new era, but is it the most important day? It’s too early to tell. One thing is certain, it is critical.

Every transaction is different, and there is no one-size-fits-all approach to Day One. However, one truth remains:

On Day One, everyone listens closely — not just with their ears, but with their eyes.

This is the moment when leadership and communication matter most.

I am a firm believer in transparency and honesty. Of course, some situations require discretion — such as when final approval from the works council is still pending. But everything that can be shared should be shared. After all, trust isn’t built on perfection but on clear, reliable communication.

The Hidden Planners of PMI

by admincf | Jan 1, 2025 | Insight, Newsroom

We are out of the game at this point!

“With respect, we have nothing to do with that at all. We're out of the process with the signing.” I received this comment a few weeks ago after my presentation, Why M&A Advisors Need to Consider PMI. from a representative of the sell-side.

Of course, I had expected this reaction, but it still stung. “It's not necessarily friendly in the shark tank,” someone said to me later. The title of my presentation was deliberately provocative: Why M&A Advisors Need to Consider PMI.I had challenged the sell-side — and received the expected reaction.

Everyone agreed that buy-side advisors should think about integration and the realization of acquisition targets. But is that enough? Or would it perhaps be better, easier, and quicker if the sell-side also anticipated the next step?

Two parties with conflicting interests?

In one corner: the sell-side, presenting a beautifully packaged company to be sold in the best possible way. Typically, "best possible" is equated with the highest price. In the other corner: the buy-side, aiming to acquire the company while pursuing their own goals and objectives that they want to achieve with the acquisition. And we all know: “The blessing is in the purchase.” That's why the buy-side is interested in paying as little as possible.

From a bird's eye view, this is exactly what a transaction looks like — highly simplified, yet realistic.

On closer inspection, however, numerous secondary conditions come into play. Time is money: the faster the transaction is closed, the better. The buy-side calculates based on a business case and derives a maximum purchase price from it. This business case includes risks identified during due diligence — risks that the sell-side was unable to refute.

This is where it gets exciting. Some risks can be mitigated through insurance, with the premium factored into the purchase price. Other risks are managed via subsequent purchase price adjustments or earn-out clauses in the contract. Both ultimately affect purchase price expectations.

In the end, everything still revolves around the purchase price — but in a more complex way. To make the process even more complicated, the incentive factor comes into play. I have yet to see a transaction where sell-side advisors were not directly incentivized based on the purchase price.

“Get out of jail free” card

Unlike Monopoly, there are no community-chest cards in M&A transactions to resolve deadlocks. But taking a step aside to adopt a different perspective can help.

The buy-side is interested in achieving its goals with the acquired company and maximizing the business case. This doesn't solely depend on minimizing the purchase price. Once you adopt this perspective, new options emerge. The fascinating part is that these new opportunities benefit not only the buy-side but also the sell-side.

Anyone familiar with game theory knows the prisoner's dilemma: two prisoners are serving short sentences but are offered a leniency program if they testify against the other. If only one testifies, he goes free while the other serves a long sentence. If both testify, the leniency program is void, and they both receive harsher sentences.

The drama of Tosca

Puccini's opera Tosca incorporates such a dilemma in an impressive musical and historical framework. In order not to keep you in suspense, I will not go into the background and historical context.

In the decisive scene, the two protagonists Scarpia and Tosca confront each other. Tosca wants to save her beloved Cavaradossi, sentenced to death by firing squad. Scarpia agrees to use blanks instead of live ammunition — on the condition that Tosca spends the evening with him.

In game theory, this is a perfect example of cooperation: if both cooperate, each achieves their goal but must make sacrifices. Scarpia would have an evening with Tosca but must forgo eliminating his rival, Cavaradossi. Tosca could save her beloved but must endure an evening with Scarpia.

Already at the end of the second act, short-sightedness overtakes them both. Scarpia doesn't order the cartridges to be replaced. Tosca seizes the moment and plunges a knife into Scarpia’s chest before their evening takes off.

Both act to maximize their own gain without considering the other's perspective and evaluation of the options as well as independent decision-making. As a result, both pay the lower price for themselves, but neither achieves their desired outcome.

That only happens in fairy tales, doesn't it?

In real life, situations as dramatic as those in Tosca are rare. Nevertheless, I have seen similar behavior time and again in M&A transactions. Fortunately, no one has ever lost their life - but money has, and not a little.

A few years ago, a unit of developers that was to be carved out of a larger company was sold. Cooperation would have required the sell-side to provide greater transparency regarding employees' skills, while the buy-side would have been allowed to communicate with employees before the closing.

This approach could have enabled the buy-side to persuade more developers to join the new carve-out vehicle, thereby improving their business case. In return, the buy-side would have been open to pay a higher purchase price. Greater transparency from the sell-side would have reduced risks for the buy-side, strengthening their case.

Instead, both sides played the roles of Tosca and Scarpia. The outcome was less than ideal — but it provides a compelling introduction for many of my talks: the story of Martin.

An alternative ending

How could things have been different? After signing — and certainly after closing — the sell-side loses influence over the target. This was a major point of our discussion a few weeks ago.

I can't impose my thoughts on anyone, but I can share them to create opportunities and open up new perspectives. Just as I did in my presentation, the sell-side could encourage the buy-side to adopt a broader viewpoint.

If the buy-side isn't planning extensive integration, the business case will include high risk discounts and long stabilization periods before they reach the steady state. Why wouldn't the sell-side propose minimizing risks and shortening timelines through more active integration?

This approach would offer clear benefits: more active integration management would strengthen the buy-side's business case, increase the target's value, and justify a higher purchase price. Of course, the sell-side would need to sacrifice something — such as greater transparency about the target's status. A joint session on integration setup could reveal strengths and weaknesses that could be addressed before closing.

Such processes typically unfold step by step. Both sides make concessions, and both benefit. By cooperating and building mutual trust, they create a foundation for shared success.

Before the curtain falls

Our world is becoming increasingly diverse, colorful, and also complex. The sustainability of an M&A transaction is not apparent at signing but years later.

It is shortsighted to simply blame the buy-side for integration challenges. This returns us to the one-dimensional thinking demonstrated by Tosca and Scarpia.

Successful M&A transactions require foresight. It pays to think several steps ahead, look years into the future, and adopt a broader perspective. It is important to bear in mind that the other side also has its own goals and valuations.

Cooperation is the key to achieving a shared optimum. Anticipating the next step is crucial. In M&A transactions, this means focusing on the integration of the target — even if the buy-side ultimately bears responsibility for implementation.

Perhaps this is precisely why the “get out of jail free” card is not an individual card, but a community-chest card.

Kick-off Call – Akquisitionen zum Erfolg führen

by admincf | Oct 17, 2024 | Insight, Newsroom

Kick-off Call – Insights aus dem Legal Workstream

Akquisitionen zum Erfolg führen: Einblicke in Post-Merger Integrationen mit Dr. Carsten Friedrichs (The Hardt Group)

In dieser Folge begrüßen unsere Gründungspartner RA Thorsten Rohde und RA Dr. Johannes Baier mit Dr. Carsten Friedrichs den Geschäftsführer der The Hardt Group GmbH.

Seine Begeisterung für Transformationsprojekte und Post Merger Integration hat Carsten schon früh in seiner Laufbahn bei der Boston Consulting Group entdeckt. Sein erstes Projekt führt ihn in eine internationale Post Merger Integration: ein Lateinamerikanisches Unternehmen hat einen der Top-3 Player in Europa gekauft.

Auf seiner Reise folgten mehreren Stationen in Portfolio Unternehmen von Private Equity Fonds, bei denen er die Organisationen durch anspruchsvolle Transformationen geführt hat. Bei The Hardt Group – einer Unternehmensberatung für Transformationsprozesse – begleitet er heute mittelständische Unternehmen bei der erfolgreichen Transformation.

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