Mergers: 5 strategic rationale and best practices for seamless integration
Carijn van Helvoirt-Franssen and Edward Hendrickx
by Carijn van Helvoirt-Franssen and Edward Hendrickx
Merging is a key strategy to unlock new opportunities, enhance competitiveness and foster growth. This article explores vital reasoning behind mergers and digs into best practices for a smooth and successful integration process.
The strategic rationale of mergers
1. Synergy
Mergers are often driven by the pursuit of synergy, whether in terms of cost reductions, revenue enhancement, or operational efficiency.
2. Market expansion
Companies merge to expand market presence by geographic expansion (access to untapped customer bases) and/or by broadening their range of offerings to provide a competitive advantage.
3. Consolidating market share
Merging with competitors can increase market share and lead to a more robust competitive position. Reducing redundancies and optimising resources creates a better position for sustained success.
4. Operational excellence
Efficiency gains are a key driver behind mergers. Optimising processes and supply chains, as well as integrating technology, contribute to operational excellence and lay the foundation for long-term success.
5. Strategic positioning through integration
Vertical and horizontal integrations strategically position companies. Vertical integration increases control over the supply chain, while horizontal integration eliminates competition, leading to a more dominant market presence.
Best practices
For each strategic rationale for a merger, the best practices below are relevant for seamless integration of the merging parties:
a. Due diligence
Comprehensive due diligence is essential. Understanding the target company from a financial, operational, and cultural point of view ensures a deliberate decision and mitigates risks.
b. Communication
Transparency is vital for trust between stakeholders. Clear communication of the objectives and benefits of the merger helps to manage expectations.
c. Cultural alignment
Integration of organisational cultures is key for a smooth transition. Address cultural differences at an early stage – this contributes to engagement and reduces resistance from within.
d. Talent retention
The success of the merged company depends on identifying key talent, retaining the right people, and ensuring a smooth transition for them.
e. Efficient technology integration
Ensuring that systems seamlessly collaborate prevents disruptions and leads to synergy benefits on shared resources.
f. Legal and regulatory compliance
Complying with legal and regulatory requirements is non-negotiable. To align the merger with industry standards and minimise legal risks, involvement of legal experts is recommended.
Conclusion
When executed strategically and with careful planning, mergers can unlock great value for companies. Focusing on synergy, market expansion, and operational excellence, as well as adhering to best practices during the integration process, allows companies to position themselves for sustained success in an ever-evolving business landscape.
GGI member firm EJP Financial Astronauts's-Hertogenbosch, The NetherlandsT: +31 73 850 72 80
Auditing & Accounting, Corporate Finance, Tax
EJP Financial Astronauts are auditors, advisers, and challengers. Their team of 55 consists of auditors, accountants and international tax lawyers that have a wide range of expertise. Their main fields of expertise are Dutch corporate and personal income tax, international taxation, Dutch royalty, interest and dividend withholding tax, estate planning, and wage tax. They have an AFM licence to perform audits for the larger mid-sized companies.
Edward Hendrickx is EJP's Founder, Partner & Tax Specialist. He specialised in international tax advice, mergers & acquisitions, and consultancy on entrepreneurship & for larger SME clients. Contact Edward.
Carijn van Helvoirt–Franssen completed a master’s degree in fiscal economics at Tilburg University in 2014 and has been part of the EJP team since 2020. As an all-round tax specialist, she focuses on providing tax advice to companies and their directors and major shareholders.Contact Carijn.
