Types of Post Merger Integration (PMI)
Types of post merger integration
The world of post merger & acquisition integration is a murky one. There are four main types of post M&A integration recognized by experts. They are categorized as:
Absorption
The target company and all its operations are completely absorbed by the acquiring company.
Preservation
The target company is left to act autonomously— apart from financials, which are integrated.
Holding
The target company isn’t integrated in any way but is simply ‘held’.
Symbiosis
The target company is partially integrated in whatever way is most beneficial.
The Absorption integration type is sometimes called a tuck-in, as the acquired company is “tucked into” the acquiring company. Similarly, the Preservation integration type is sometimes referred to as a bolt-on, as the company remains more or less independent but is added-on to the acquiring company’s portfolio.
However, it has been noted by some researchers that post-acquisition strategy typologies are not always consistent.
The above model, for example, does not take into consideration another type of post-acquisition integration, which some refer to as a Transformation integration. This is essentially a merger in which the companies are fully integrated, but rather than being simply absorbed by the acquiring company, as in an Absorption integration, the resulting company is transformed into a new entity.
There is also the Consolidation type of integration, in which a company is absorbed but retains a level of independence operationally, as in a conglomerate or group of companies.
Which type of integration is best?
Acquiring companies might come to wonder then, which of these types is going to be best in our situation?
According to M&A expert Dr. Karl Michael Popp, the answer is a balancing act between ‘strategic interdependence’ and a need for ‘organizational autonomy’.
Experts agree that the type of M&A deal you’re doing (i.e. heterogeneous, horizontal, vertical) will determine the type of integration necessary.
It may also be necessary to implement a hybrid of integration approaches if your deal has more than one primary driver.
Learn more: Types of Mergers and Acquisitions
Deciding on which type of post M&A integration is relevant in your case will help to inform which components of the target organization are to be integrated.
Post acquisition integration checklist
Components of post merger integration
As briefly mentioned, in an ‘absorption integration’, all of the following parts of the target company will need to be integrated with the acquiring company. For the remaining types of M&A integration, it will be some and not necessarily all of the following that are integrated:
HR integration
Human Resources plays a critical role in the post-acquisition integration process itself, as the people implications of an M&A transaction are substantial, often determining whether a deal realizes its strategic, financial, and operational goals.
Finance integration
The finance function also plays a fundamental part in post-acquisition integration planning and indeed the deal process itself. It’s important to consider how much change a finance function can deal with before the risk becomes untenable.
Culture integration
According to McKinsey, approximately 95% of executives say cultural fit is vital to an integration’s success. Due to the human element of corporate culture, this can be one of the more complex aspects of integration to get right.
Technology & systems integration
IT integration challenges, like data security during transition and knowing which systems to keep, can impact the value of the deal and the planned synergies.
Brand integration
The marketing function is expected to lead the way in terms of developing new value propositions and coordinating the newly integrated organization’s brand strategy.
Sales integration
In M&S integration, the seamless blending of and collaboration between sales forces is central to ensuring revenue growth.
Post merger integration examples
Facebook and Instagram
Facebook’s acquisition of Instagram is a good example of a bolt-on or preservation integration. While Instagram is part of Facebook, Inc’s portfolio, it still maintains its own identity.
Apple and multiple targets
Apple uses the tuck-in, or absorption, type of acquisition integration frequently. In fact, there’s an entire Wikipedia page for their acquisitions.
Streamline your post acquisition integration with Ansarada
FAQ
What are the four types of mergers?
The four types of mergers most commonly talked about are horizontal, vertical, concentric, and conglomerate.
What are some post-merger integration challenges?
Common integration challenges include sustaining momentum and growth, employee resistance or dissent, and customer or shareholder churn.
What is the post-merger integration process?
The post-merger integration process is the activities required after an M&A deal to integrate two or more companies together as part of a merger.