Integration Diagnostics: Unlocking Hidden Values in Acquisition Integrations

Mikael Kruhsberg 

Integrating two companies after an acquisition is a complex endeavor that demands careful planning and execution. While the primary objective is to capture synergies and create value, organizations often miss out on the full potential of opportunities or face challenges that leave value untapped. Integration diagnostics is a powerful tool that analyzes completed acquisition integrations to uncover hidden value and can be applied several years after the last integration. 

This article explores the prevalence of untapped value after integration projects, points to some crucial areas for analysis during integration diagnostics and discusses available tools and methodologies for a comprehensive evaluation. Addressing ongoing underperforming integration projects is covered in other articles by Global PMI Partners. 

The Issue of Untapped Value 

The issue of value left on the table after the completion of an acquisition integration is more prevalent than one might expect. Numerous studies and industry reports highlight that a significant number of integrations fail to fully realize their anticipated value. Some key factors, including both planning and execution, that contribute to this include: 

• Incomplete Integration Planning and Resourcing: Insufficient pre-integration planning and securing enough resources often results in missed opportunities and overlooked synergies. Neglecting to invest in the development of a future operating model or pressing through the integration process without conducting thorough assessments and planning may fail to identify areas where value could be enhanced, or new growth avenues explored. 

• Cultural Misalignment: Were there differences in the importance of consensus building or how direct you can be in feedback?  One of the reasons for value erosion is the failure to effectively address cultural differences between the acquiring and target companies. When cultural integration is overlooked or the effort to address it is underestimated, it can lead to clashes, loss of key talent, and a decline in productivity, ultimately hampering the achievement of synergy. 

• Communication and Change Management Challenges: How effective was the change management during the project? It is well known that effective communication and robust change management efforts improve the realization of values post-integration. Well-informed employees tend to embrace changes and promote alignment and collaboration, leading to enhanced efficiency and performance.  

Key Areas for Integration Diagnostics 

• Synergy Capture: Evaluate whether anticipated synergies have been successfully realized, including cross-selling opportunities, revenue enhancements, cost savings, and operational efficiencies. Assess post-integration performance improvements using operational metrics and key performance indicators (KPIs) related to productivity, efficiency, quality, and customer satisfaction. Comparing revenue related KPI:s across different geographies can help identify gaps and missed opportunities for unlocking further value. Specific cost synergies can be identified by analyzing core processes such as lead-to-cash to find discrepancies in implementation. 

• Customer Satisfaction, Revenue Growth, and Market Share: Analyze customer retention rates, market share, and customer satisfaction levels post-integration. Determine if the combined entity has effectively leveraged the customer base and market presence of both companies. Identify opportunities for expanding market share and improving customer relationships based on combined capabilities. 

• Cultural Integration: Evaluate differences in employee satisfaction, retention rates (especially for key talents), collaboration, and overall alignment with the organization’s mission and values post-integration. Employee surveys and interviews provide valuable insights into cultural alignment and areas for improvement. 

• Leadership Engagement: Leaders, including middle management, play a pivotal role in securing successful integration projects that deliver anticipated value. Foster two-way communication to ensure understanding and engagement with the changes. 

In conclusion, incomplete planning, cultural misalignment, and communication and change management challenges often hinder organizations from fully realizing the anticipated value of acquisition integrations. By conducting a thorough analysis, organizations can identify areas for value enhancement and explore untapped potentials for growth 

Mikael is a Managing Partner and co-lead our practice in Nordics, DACH, Baltics and Poland. He has extensive management experience in high-tech industries from firms such as Ericsson, IBM Global Services and PortWise. Mikael holds an MBA from INSEAD, a Master of Science in Engineering from Royal Institute of Technology, Stockholm and a Bachelor from Thayer School of Engineering, Dartmouth College. Mikael is a native Swedish speaker and speak fluent English and basic French.