Integration Lessons from 2024: Overcoming M&A Challenges to Drive Success

Every year seems to bring a unique blend of challenges for the M&A market, and 2024 was no different. Although 2024 deal volume was slightly above 2023 levels, it remained well below the decade average and most everyone will tell you that getting deals over the goal line was a heavier lift than prior years.

The E78 PMI (Post-merger integration) practice specializes in helping clients overcome the intricate people, process, and technology challenges that accompany mergers and acquisitions. By reflecting on lessons learned from our engagements in 2024, we’ve identified key themes and actionable strategies to help businesses achieve successful integrations and unlock long-term value.

1. Overcoming Deal Delays

The Challenge:

In 2024, M&A deal timelines extended by 2-3 months compared to historical norms. These delays risked disrupting planning momentum, increasing stakeholder fatigue, and impacting the target company’s performance.

Solutions:

• Recalibrate Resource Allocation: Ensure target company resources focus on completing diligence requirements without distractions from PMI planning. Remove any distractions that may adversely affect the target company’s performance during the delay.
• Communicate Regularly: Maintain transparency about delays to preserve stakeholder trust and confidence.
• Prioritize Critical Workstreams: focus pre-close planning activities, such as cultural alignment, change management preparation, and technology integration planning.
• Adjust Timelines Strategically: Update master PMI timetables to reflect new closing dates while minimizing additional disruptions. Take advantage of any delays as an opportunity to deepen understanding of the target company and its operations if possible.
• Optimize Budget Use: Conserve resources to extend support through prolonged timelines without exceeding budgets.

2. Underestimating Culture and Change Management Impacts

The Challenge:

2024 was an extremely difficult year for M&A. Leadership teams often deprioritized the “people” side of M&A, leading to cultural misalignment and resistance to change.

Solutions:

• Educate and Quantify: Highlight potential culture and change management risks and their measurable impacts if left unaddressed. Prioritize areas where possible via the integration process.
• Conduct Culture Assessments: Pre-close, assess cultural similarities, differences, and potential flashpoints through executive interviews and data analysis.
• Translate Insights into Action: Align Day 1 and post-close communication strategies with cultural findings to address stakeholder concerns effectively.
• Incorporate Change Management Plans: Integrate change management into functional workplans, addressing training, communication, and performance expectations.
• Monitor and Measure: Use tangible KPIs like employee engagement surveys to track progress and regularly report on culture and change management initiatives.

3. Addressing Transformation Opportunities

The Challenge:

Integration is the best aperture to assess and address transformation opportunities. With an IMO office in place, smart leaders are engaged from both companies and observe all aspects of people, process and technology that help optimize “comboco”. Unfortunately, executives often push these opportunities down the road because they view the integration itself is the hardest lift and want to avoid distractions.

Transformation opportunities include things like: the combined company’s strategic direction and business focus, corporate leadership and governance structures, policies, processes, business practices, product and service portfolios, IT and operating infrastructures, mission, vision & values.

The reality is it’s actually easier and less time-consuming to tackle or at minimum start transformation opportunities while the integration window is open. That’s when you have most of the leaders and influencers engaged.   

Solutions:

• Scope Strategic Workstreams Early: Incorporate transformation initiatives, such as redefining strategic focus, updating governance structures, and optimizing business processes, into early integration planning.
• Design the Target Operating Model: Combining executive teams and organizations is difficult work, and can be complicated by earn-outs, departures and other performance dynamics that need to be carefully thought through. Make solving the target operating model a key strategic workstream and work it hard and early so you can cascade direction into the IMO and functional integration teams. 
• Pursue Performance Improvements: Identify opportunities to optimize revenue cycles, streamline strategic FP&A, enhance enterprise resource planning (ERP), and more.
• Optimize Technology and Costs: Assess and implement technology consolidations and procurement savings via strategic sourcing as part of the integration process.
• Elevate Communication Competencies: Some companies have poor or immature communication processes. Examples of “poor” communication practices include infrequent and sporadic (often reactive) communication efforts, underdeveloped or inadequate formal communication channels, no dedicated internal and/or external communication lead, and no champion in the C-suite. Use Day 1 communication planning as a foundation to build robust, scalable communication practices for the growing organization.

Key Takeaways

• The integration process is an opportunity to address the toughest challenges of combining companies.
• Leverage the integration window to tackle cultural, operational, and transformational opportunities that will yield significant business improvements.
• Proactive planning and prioritization are essential to ensuring successful outcomes that drive growth and scalability for the combined organization.