SOURCE: The Boston Consulting Group

The Boston Consulting Group

July 05, 2012 00:01 ET

How Better Integration Capabilities Can Make Acquisitions Pay Off

The Boston Consulting Group Explains Options for Enabling Effective Postmerger Integration

BOSTON, MA--(Marketwire - Jul 5, 2012) - Acquisitions are a key part of many companies' strategies, yet too many deals fail to generate the gains that seemed so promising at their close. Inadequate postmerger integration is often to blame. A new report by The Boston Consulting Group (BCG) suggests that the trouble is rarely in companies' understanding of how to integrate their acquisitions. The report, "Enabling PMI: Building Capabilities for Effective Integration," is being released today.

"We've found most leaders have a good sense of what generally needs to be done to realize the synergies," said Peter Goldsbrough, a senior partner in BCG's London office and a coauthor of the report. "But their integration efforts can fall short because of time pressures and complexity. People get caught up in dealing with urgent matters and lose track of priorities." Companies can improve their execution, say the authors, by investing in the underlying capabilities that drive effective integrations.

Two Approaches to Capability Building

Building those capabilities, however, is not a simple matter. Goldsbrough and his colleagues analyzed the two main approaches. One involves training and tool development in tandem with the integration of an actual acquisition. That approach has the merit of people learning by doing. If not done carefully, though, people can make too much of the specifics of the current integration and treat the next one too rigidly.

The other main approach, capability building as a standalone process, has the opposite tradeoffs. People get a broader sense of how integrations work, freed from the pressures of an actual deal. Yet the knowledge can remain abstract without an opportunity to bring it to life.

"We've found most companies opting for the tandem approach," said Niamh Dawson, a principal in BCG's London office and a coauthor of the report. "The standalone model works best for frequent acquirers looking to raise their game."

Expanded Options

Investing in integration capabilities, the authors point out, yields double benefits. Companies will manage integrations with more focus and discipline and will be more likely to achieve the gains expected from a deal. But that confidence in integrations also boosts their willingness to go after deals in the first place. Acquisitions that earlier would have seemed too difficult are now on the table and ready to help move the company forward.

To download a copy of the report, please go to www.bcgperspectives.com. To arrange an interview with one of the authors, please contact Dave Fondiller at +1 212 446 3257 or fondiller.david@bcg.com.

About The Boston Consulting Group
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