Post-merger integration checklist: Key areas to address
Table of content
Integrating two companies into one after a deal poses significant challenges, contributing to the high failure rate of 70-90% of all M&A deals. This statistic underscores the critical importance of meticulous post-merger integration planning and execution.
This article dwells on the basics of the post-merger integration process, its key stages and types, and responsible roles. Additionally, we offer a list of best practices for successful post-merger integration and provide the post-merger integration checklist example to use in practice.
Highlights:
- A post-merger integration is a process of consolidating two companies into one, which involves combining their crucial aspects, such as technologies, business functions, and human resources.
- There are 5 main stages of integration: Preparation for Day 1, Day 1, First 30 days, First 30–90 days, and Post 90 days.
- The main areas of post-merger integration include marketing, human resources, IT, finances, legal, integration management office, sales, and supply chain management.
What is post-merger integration?
A post-merger integration is a process of two companies uniting into one and combining their resources, technologies, business functions, and people to maximize the enterprise’s future value. A post-merger integration is the final stage of the M&A process.
Though essential, a post-deal integration is often underestimated. Despite the fact that the overall rates of M&A integration success across strategic, financial and operational areas are much better when compared to 2019, still only 14% of businesses report an elusive level of M&A integration success. 
Source: PwC. Percentage reporting “significant” or “moderate” strategic, financial, and operational success.
5 key stages of post-merger integration process
The whole post-merger integration framework can be divided into 5 main stages:
- Preparation for Day 1
- Day 1
- First 30 days
- First 30–90 days
- Post 90 days
The table below explains what activities take place during each stage of the post-merger integration process.
| Stage | Description |
| Preparation for Day 1 | This phase starts at the moment of the deal closure. The key objectives here are to work on the integration strategy and define key elements to perform. The main tasks generally fall on the Legal, Marketing and Communications, People (HR), and Finance work streams. The responsible integration team works on the mechanics of the post-merger integration process. |
| Day 1 | Day 1 is crucial in terms of connecting teams from two organizations into one and ensuring everyone feels comfortable and understands general goals, and thus, responsibilities. At this stage, the responsible integration team ensures that everything is communicated among employees and sets the tone for future work together. |
| First 30 days | The work involved in this stage of the post-merger integration process can start before Day 1. This phase is about ensuring the best integration practices among both organizations and gaining insights on improving this process based on sales and financial performance. Though this stage has all the work streams involved, the People (HR) and Technology divisions stay on top of all processes. |
| First 30–90 days | This period is devoted to implementing the interim operational state inside the organization. For some companies, this stage may be the final target state. However, for most organizations, this phase is about implementing procedures, technology, and workflows that will enable the combined company to continue operations while the target end-state will be designed. |
| Post 90 days | This is the final phase of the post-merger transition. During this stage, the company integrates the target end-state procedures that were previously well-planned and prepared. The target end-state is based on the combined business strategy and relies on the best practices from both organizations. This is the phase when notable changes take place: two companies start to realize large process adjustments and consolidate their systems. |
4 main types of PMI
There are four main types of post-merger integration:
- Preservation
During preservation, the target company is preserved and operates autonomously. However, financial processes and financial reporting, in particular, are integrated.
- Holding
In holding, the buyer keeps the ownership of the target company but does not integrate it.
- Symbiosis
During symbiosis, the two companies agree on what areas of operations need to be integrated to reach merger objectives.
- Absorption
In this case, the acquiring company fully absorbs the target company, and all the processes are fully integrated.
9 key areas to focus on during PMI
The key elements (or focus areas) of the post-merger integration process generally include, but are not limited to:
- Human resources
This includes integrating all the processes related to human resources: from adjusting the overall organizational structure and payroll approach to optimizing employee policies and benefits.
- Marketing and communications
This entails the development of the marketing strategies for the combined company, rebranding, and communication approaches: both for the customers and employees.
- Finances
This area is about combining financial operations and identifying, as well as implementing, financial synergies.
- Legal
This involves addressing all the legal aspects of the integration process: from tackling regulatory approvals to working with contracts, insurance, agreements, and leadership structure.
- Governance and integration management office (IMO)
This is the key area of the post-merger integration process, since IMO is responsible for the majority of processes: from careful planning to execution and overall support on the way.
- Technology and IT
This area addresses everything connected to the consolidation of two IT systems into one, as well as corporate data migration.
- Products and services
This is about the integration of products and services of the acquiring and acquired company into one.
- Supply chain management (SCM)
This area tackles everything related to the integration of supply chains and procurement processes.
- Real estate
This area entails selling redundant facilities, obtaining new objects, and optimizing the existing real estate assets.
Post-merger integration checklist
One of the crucial items for a successful post-merger integration is a well-prepared post-merger integration checklist.
A post-merger integration checklist is a step-by-step agenda of the actions to perform at each stage of the integration process. With post-merger integration checklists, responsible integration teams can ensure that nothing is missed and all the aspects of transition are timely addressed.
Below, is an example of the post-merger integration checklist based on the main stages and areas of the post-deal integration process.
Preparation for Day 1
| IMO | Build up the integration governance and define communication responsibilities Establish main integration work streams Create a list of all the key and extra activities for the Day 1 period Draw up logistics for the Day 1 Develop all the governance mechanisms including risk management, issue management, reporting, and tracking Ensure that Transfer Service Agreements (TSA) are in place |
| Finance | Finish all the closing schedules Prepare the closing financial statements Raise and transfer the required capital and funds Model potential synergies and financial impacts on the transaction based on the financial analysis performed during due diligence |
| Legal | Design an interim legal structure based on the understanding of the current one Get aware of all the ongoing and past litigation processes Get aware of all the intellectual property items, including patents and trademarks Perform an insurance gap analysis Get aware of all the vendor contracts Ensure that all regulatory requirements are met |
| Marketing and communications | Elaborate messaging framework for employees, key stakeholders, and board directors Work on the customer notifications guidelines and messaging Create press releases for partners, associations, regulators, and the board market Create all the required welcome materials (leadership messages, Q&A, FAQ) |
| HR | Get complete lists of all employees, including full-time, part-time, casual, on-leave, and contractors Study the current payroll approach and start designing the interim target one Study the current organizational structure and design the top-level structure for Day 1 Study benefits packages to make sure there won’t be any disruption in the benefits processes during the transition period Evaluate key personnel to define those that will require reassurance discussions |
| Technology | Plan the continued support of the current technology stack during the Day 1 phase and further Assess all the potential areas of risks (such as security or data breaches) Plan and set up a frictionless route of collaboration and communication between all employees (such as Gmail or Slack and a unified data storage solution) Ensure that all the current systems and technologies will be accessible 24/7 |
Day 1
| IMO | Execute the Day 1 plan and support it at all stages Be ready to address all the appearing issues on the way |
| Finance | Complete transferring all funds Get access to the bank accounts and financial systems of the acquired company |
| Legal | Ensure that all the contractual items and conditions are met |
| Marketing and communications | Make a CEO announcement about the Day 1 Hold Q&A sessions with employees Distribute press releases Distribute all the welcome materials Distribute main customer communication |
| HR | Conduct meetings with key personnel who have not been involved in the transaction yet Make sure that employees sign new contracts if that’s required by the integration plan Access all the employees’ data and key HR systems Introduce new staff support programs, if any (such as a buddy program) |
| Technology | Make all the required changes (such as enabling a new email domain, for example) Make a transition of the key access data (such as access rights, for example) Ensure stable communication and collaboration for employees Ensure stable and continuous access to all the necessary systems, tools, and integrated solutions |
First 30 days
| IMO | Plan and conduct discovery sessions across teams Perform all the key activities that the acquisition integration plan presupposes for the first 30 days period Track and report integration process and integration benefits |
| Finance | Ensure that there’s no disruption in the financial processes (such as billing and accounts payable) Review financial projections and budgets for the upcoming period Start developing interim reports for the combined entity |
| Legal | Support all the legal aspects on the way of the transition Make all the required legal changes (such as new contracts, compliance policies, etc) |
| Marketing and communications | Establish regular communication with employees (for example, hold town halls) Review and assess all the current marketing campaigns Make all the required changes on the website if needed (branding, new contract numbers, messaging for clients) Start developing target branding |
| HR | Assess the top and bottom performers in the newly acquired organization and compare them with current resources Ensure tracking key people metrics that are related to the system integration (for example, employee satisfaction rate) Ensure that the initial payroll in the acquired organization is executed without any disruptions |
| Technology | Ensure that all employees have access to all the required systems and tools Conduct security audits in the newly acquired company Start implementing all the technology changes that are mentioned in the integration plan (such as email switches or providing new equipment to new employees, for example) Ensure continuous work of all required services and tools |
| Sales | Study the customer list of each organization and identify where they overlap Closely work with Marketing and Communications work streams to ensure continuous communication among clients Create and update the interim sales budgets and forecasts Study if there are any product overlaps in each organization |
| SCM | Study all the vendors and suppliers across both organizations and review the terms Start negotiations with vendors and initiate signing new contracts (if needed) |
First 30–90 days
| IMO | Support the implementation of interim states across the organization Perform and complete all the key activities of the 30-90 day period Track and report the progress as well as synergies achieved |
| Finance | Consolidate financials, budgets, and reporting as required Perform evaluations to determine what financial system to use in the target state Prepare financial data and reports required to meet any covenants related to the deal financing Together with the IMO stream, track synergies, and important financial metrics |
| Legal | Consolidate insurance coverage Assess the legal structure of the new entity and think of potential rationalization Manage any conflicts of interest Ensure contractual terms are met |
| Marketing and communications | Together with the IT stream, work on the transition of the prior websites to the new website Implement branding changes Consolidate contact databases |
| HR | Work on the first circle of the staff turnover Through evaluations, identify which HR system to use in the target state Identify any changes in the target processes (such as onboarding, recruitment, and learning and development) Assess the current benefits approach and start developing a benefits approach for the target state |
| Technology | Start comparison of technology tools and applications in both companies Merge data centers and ensure their seamless work at all times Launch a standardized security approach across the acquired company Complete any urgent updates to ensure there are no gaps in the technology landscape |
| Sales | Perform CRM evaluations to determine which system to use Allocate responsibilities for shared clients |
Post 90 days
| IMO | Process with and support the implementation of the target states across the new organization Complete all the planned key integration activities Perform tracking and reporting on the progress and achieved synergies |
| Finance | Proceed with the implementation of the new (or consolidated) finance system Finalize closing financials |
| Legal | Deploy all the target legal procedures and policies Transfer IP and contracts to the target legal entity |
| Marketing and communications | Finalize the launch of the target state branding Draft a unified marketing strategy Continue regular external and internal communication and hold required meetings and events |
| HR | Implement the unified HR system Implement the chosen benefits approach Deploy career development initiatives and training for the new organization Deploy the previously identified changes in the processes (onboarding, recruitment, and learning and training) Manage the staff turnover |
| Technology | Migrate to the target infrastructure state Migrate to target tools and applications |
| Sales | Deploy the target Business Development and Sales processes Ensure training for new and acquired products Implement a unified bonus approach for the Sales department |
Post-merger integration challenges and best practices
Now, let’s take a look at the main challenges that take place on the way to successful integration and suggest their possible solutions.
Cultural integration issues
Challenge
Cultural clashes are the reason for the failed post-merger integration in 30% of cases. Indeed, combining two business processes and operations into one can be challenging if certain areas are contrasting. Realizing the importance of cultural integration, 60% of companies already included a culture assessment in the due diligence process in 2022.
Solution
Perform a cultural assessment of the target company before the deal, develop a detailed cultural integration plan, and ensure transparent and continuous communication among all employees during the transition.
Technical challenges
Challenge
Just like with cultural clashes, a merger of two companies can often be challenging in terms of integrating two IT systems. For example, technical clashes became one of the reasons why the eBay and Skype merger failed in 2009 since Skype’s technology wasn’t compatible with eBay systems.
Solution: Perform thorough IT due diligence, assemble a responsible IT team, define core IT leaders, and create a detailed IT implementation roadmap.
Failure to retain top talents
Challenge
The M&A process can also be quite challenging for employees who work in both companies. This is because the process of merging two different cultures and organizational structures can bring employees a feeling of uncertainty. As a result, some of them may lose motivation and even leave the company. And since people are the main factor for the deal’s success, it’s essential to retain key performers and talents during the post-merger integration process.
Solution: Consider retention bonuses, schedule regular meetings with key personnel to keep them updated, and ensure transparent and continuous communication through all channels.
Who is responsible for the PMI process?
Generally, 4 main types of roles are responsible for the successful merger integration: steering committee, integration management office, HR department, and other functional integration teams.
Let’s now briefly describe their key areas of responsibility.
Steering committee
Steering committee roles usually include key stakeholders, chief executive officers (CEOs), chief financial officers, board officers, chief operation officers, and chief HR officers.
Among the main responsibilities of the steering committee during the post-merger integration process are the following:
- Developing the post-merger integration plan
- Approving integration strategies
- Supervising integration process
- Ensuring stakeholders alignment
Integration management office
The integration management office is the main responsible authority during post-merger integrations. IMO usually consists of project managers, business analysts, integration managers, and team leads of other functional teams.
The responsibilities of IMO include:
- Developing integration strategies and objectives
- Drafting post-merger integration checklists
- Managing the whole integration process
- Tracking the progress of integration
- Ensuring stable and effective communication across all departments
HR department
During post-merger integration, HR managers of all levels are responsible for everything that’s related to human resources:
- Conducting town halls for employees
- Implementing benefits systems
- Ensuring smooth onboarding
- Establishing continuous communication among all channels
Other functional integration teams
Other functions integration teams can usually include financial analysts, marketers, procurement specialists, salesmen, and different technical experts.
They are typically responsible for:
- Following post-merger integration checklists
- Conducting planned daily activities
- Fulfilling planned tasks
- Reporting to IMO
How iDeals can help to improve post-merger integration
As a leader in the virtual data room market, iDeals offers a variety of M&A-dedicated features that help dealmakers undergo a post-merger integration process seamlessly. With iDeals, dealmakers can:
- Store and manage the corporate data of both companies in one place
iDeals offers a secure document repository where all the required parties can not only store large volumes of data but also effectively collaborate on it.
- Effectively collaborate
Thanks to the Q&A functionally, dealmakers can create different workflows and leave questions to certain files, assigning experts to answer, ensuring the questions and answers remain confidential and relevant.
- Track the integration progress
With reporting tools, administrators can monitor actions performed inside a virtual data room. For example, it helps to determine the level of interest of potential buyers and the engagement of key stakeholders with different files and folders.
- Manage a few projects simultaneously
This is especially helpful when there’s a need to distinguish areas of responsibility for each integration team or, for example, when a company undergoes a few transactions at once.
Synergies in post-merger integration can come in different forms. For example, improved operational efficiencies, revenue enhancements, cost savings, and strategic benefits.
A post-merger integration process involves the integration of an acquired company to the extent that expected benefits from the deal are realized.
When it comes to people involved in the post-merger integration process, the key teams include the steering committee, integration management office, HR department, and functions integration teams.
A successful post-merger integration process normally takes between 3 and 6 months, where 3 months stand for the initial stages of integration and half a year signals the final integration.
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