Strategy – Practical Lessons Regarding Mergers and Integration


inavit iQ has been using the Business Value Model (BVM) as one of the frameworks for engaging with client systems, for many years. The BVM utilises the following logic:

    • The realisation of specific business benefits (such as operating profit, top-line revenue and market share);
    • is dependent on the creation of customer delight (loyal and satisfied customers) which is a direct result of the delivery of value-adding products/services;
    • by high performing people;
    • who work in a fit-for-purpose work environment (organisation capacity with respect to business process, organisation structure, human capital, information flow and technology);
    • who are led and managed by capable, competent and credible leaders;
    • towards a common goal and strategy; and
    • that addresses the dynamics of the competitive landscape in an innovative manner that allows the business to compete in its external environment.

The Idea in Brief

Post-merger integration is a complex process. Having a clear and structured approach ensures that the inherent “messiness” of such endeavours will support the achievement of the strategic intent.

Although implied by the BVM, the latest version of the model explicitly includes two aspects, namely:

  • Corporate Brand and Reputation; as well as
  • Organisation Identity.

The reasons for highlighting these two aspects of the organisation are probably obvious to most if not all, and include:

  • The significant global focus placed on the degree to which business, government and other institutions succeed in building, maintaining and enhancing their public image; and
  • The attention is given to the changing dynamic of the workforce of the future.

These two factors, which are clearly interlinked, encourage (forces) all organisations to be mindful of not only what they do, but also HOW and for what PURPOSE. What may perhaps be less obvious, is that leadership at all levels of the organisation will also have to build different mindsets, headsets and skillsets to play their role within this changing external and internal context.

  • Strategic Monitoring (and adjustment), which informs not only progress, but also where we need to adjust the desired end state and / or journey.

Strategy in context

As the focus of this article is primarily on the Strategy component of the BVM, it is appropriate to also very briefly share our perspective on strategy as a process. As is shown in the diagram, our approach is that Strategy is a dynamic and iterative journey:

  • Beginning with Strategic Thinking, requiring a significant degree of insight into the external competitive landscape as well as internal context and capacity;
  • Which informs the Strategic Planning process, essentially aimed at defining the desired end-state (the Business Benefits to be realised) and the journey to get us there;
  • Strategic Alignment (often the least mindfully considered the aspect of Strategy) aimed at engaging the minds and hearts of all key stakeholders;
  • Strategic Execution (often the key weakness of Strategy, particularly if it is treated as an event rather than a process;

An Approach to Mergers and Acquisitions

The current business landscape characterised by economic pressure and internationalisation, challenges many organisations to develop and maintain a sustainable competitive advantage. Within this context, executive teams often explore a merger or an acquisition to gain this advantage. In the case of mergers and acquisitions, the strategic thinking is usually informed by issues such as market penetration, forwards or backwards integration, product offering expansion and so forth.

Statistics show that 73% of Mergers and Acquisitions (M&A’s) fail due to ineffective integration and poor due diligence. Traditionally the central focus in an M&A is the financial key indicators. Very little time is spent on the non-financial risks and integration actions, which have been proven to be the key success factors of an M&A. People, culture and change navigation has been noted as the top reasons for integration failure. However, these aspects often receive limited attention during due diligence and integration processes.

The challenge clearly is to circumvent the risks associated with M&A’s and to leverage the benefits they should provide in terms of sustainable competitive advantage. For the purposes of strategic planning, alignment, execution and monitoring, we typically adopt the following framework with client organisations to ensure that the post-merger integration journey supports the actual strategic intent.

The project being reviewed and documented essentially applied two frameworks, namely:

  • A generic process flow for merger and acquisition (M&A) journeys developed by Prof. Theo Veldsman and later refined by Dr Anton Verwey; and
  • The inavit iQ Business Value Model.

Given that the primary focus of this particular case was on Phase 3: Physical Integration, the following are some of the key activities:

  • Set up support structures / processes;
  • Constitute a consultative forum of key stakeholders;
  •  Design, appoint and mandate senior management teams (i.e. immediate reports to top management team) (=Integration teams)
  • Take detailed stock of status quo:
  •  focused, in depth audits of organisations as functional entities,
  •  strategies, philosophies, policies,
  • customers, markets, products / services,
  • systems, resources, culture, people,
  • best practices, key agreements, legal obligations;
  • Generate and prioritise critical 90-120 days integration issues relative to strategic leverage and critical success factors;
  • Identify issues to direct and guide roll out of integration process;
  • Reshape and resize the organisation:
    – Build detailed organisational (delivery logic) design,
    – Assess and match employees,
    – Make appointments,
    – Deal with mismatches;
  • Create new organisational design with newly appointed staff, using natural work teams as point of intervention, e.g.
    – role clarification,
    – get to know one another,
    – mandate and mode of working of team,
    – focused /accelerated training to address key / competency gaps;
  • Harmonise key organisational processes such as:
    – authorisation levels, meeting structures/processes,
    – decision-making / control processes,
    – conflict resolution processes,
    – communication processes,
    – management information flows;
  • Integrate critical policies systems, procedures, practices, agreements;
  • Affirm identity, profile and basic strategic direction of the new organisation;
  • Mobilise / realign resources around this direction; and
  • Commence building new culture and climate.Although the impression may be that a post-merger integration journey is a linear process, the reality is that it is an iterative and somewhat “messy” journey. It would seem that, despite every effort to obtain as many facts during the due diligence phase as possible, it is inevitable that “technical” and “social” issues will arise. The value of a very structured approach to a merger and acquisition journey is therefore not that a “recipe” can be followed, but that there is great clarity from the start on what the key issues and their interdependencies are. This allows for a flexible and agile approach, always focused on key issues related to the desired end state.

Practical Integration Journey Lessons

This specific case study describes the Post-Merger Integration Journey planned and implemented within an FMCG enterprise. The company is part of a private equity portfolio. In line with its investment thesis, accelerated growth and diversification became one of the key strategic focus areas. In this context, in 2017 the group under the guidance of the CEO and COO went through the process of acquiring two smaller entities. The aim of the investment, and therefore also of the integration, was to accelerate a substantial growth and diversification journey.

At the stage where the deal was formally concluded, inavit iQ was invited to assist the organisation with a post-merger integration process. In this context, we designed and implemented, in collaboration with the client system, such a journey over a period of nine

In addition to client feedback, our own review of the project suggests that the following are key learnings for what may be applied in post-merger integration projects.

  • The approach needs to align to the philosophy of integration, i.e. integrate versus merge versus acquire.
  • An initial, clearly defined approach and methodology is really helpful to not only define deliverables, but also the steps within the process.
  • The detailed planning done initially allowed for adjustments where necessary, knowing immediately what the impact of such adjustments could be.
  • The importance of understanding the strength and level of complexity that can be generated by the leadership community that has to lead the integration internally. This is a guiding factor to a number of the approaches that we have adopted so as to align our processes to the level of capability of the leadership community.
  • Having people on the team with the requisite level of capability and subject matter expertise created the ability to engage the client system at the appropriate level.
  • The openness and willingness to collaborate, also with third parties, is mission critical but also assumes that such parties have a complimentary profile.
  • Having a Project Manager that has the attention to detail and discipline to manage the entire team is mission critical.
  • Creating a visible roadmap that was used as basis for all reporting with key stakeholders to contextualise the journey, build a coherent narrative and showcase progress.
  • Setting up regular routines and rhythms with key stakeholders e.g. status meetings every second week, communication planning meetings weekly to create a project “drum beat” that managed expectations and created project visibility.
  • Being practical and realistic in terms of balancing business as usual and integration priorities.

Concluding Remarks

Mergers and Acquisitions are likely to remain key strategic initiatives implemented by business organisations to ensure sustainability and growth or to build competitive advantage. Not surprisingly, there is therefore a very well-developed process for due diligence, particularly from a financial, compliance and risk management perspective. Despite these rigorous processes, it is also true that many, if not most, mergers and acquisitions still fail to deliver on investor expectations.

As always, we invite all our readers to engage in conversation with us about this article. Questions, comments, challenges – all will be welcomed as input into also shaping and enriching our own thinking.

About the Author(s)

Dr Anton Verwey is the Executive Chairman of the inavit iQ group of companies. He has experience in a wide range of industries in the fields of Business Strategy, Organisation and Work Architecture, Leadership Talent Development and Human Capital processes and systems. For the past two decades his focus has been primarily on leadership capacity building strategies. In this context, he has worked with organisations ranging from SMEs to listed companies, as well as some state-owned enterprises. He is the author and co-author of numerous books and articles and has supervised a number of masters and doctoral level studies.

Dr Dieter Veldsman is a Principal Consultant with inavit IQ. He specialises in organisational and people effectiveness strategies and has completed cross-industry assignments in Africa, Europe, Asia and the United States. He has contributed to various academic articles, books as well as being a regular speaker at international and local conferences on the topics of organisational effectiveness, employee engagement and the new world of work.

Francois du Plessis studied and graduated in commerce (Human Resources and Industrial Psychology) and completed his Masters degree in Human Resources Management (Industrial Psychology). After 15 years of consulting in a wide variety of countries and across different industries in the broad organisation development and effectiveness space he entered the entrepreneurial world by co-finding the inavit iQ group of companies, and is currently the Group CEO. Francois has co-authored various published works (both nationally and internationally) of these most recently being the Handbook for Human Resources in Emerging Markets. His passion is business and in particular helping enterprises achieve and realize real business benefits for all its stakeholders.

About inavit iQ

inavit iQ (Pty) Ltd is a South African based international business consulting professional services firm. We have a formal presence in Gauteng, Western Cape, Mauritius and Europe.

We work in a range of industries and with companies of varying sizes and in various phases of their own growth cycle. Our collaboration with clients focuses on:

  • Developing insight into their external context and competitive landscape;
  • Strategy formulation and alignment;
  • Leadership excellence and leadership-led business transformation;
  • Organisation capacity including business and operating models, organisation, work, data and systems architecture;
  • People performance, engagement and commitment;
  • Customer delight and brand reputation; and
  • Decision-making dashboards and intelligence.