Takeover and merger integration: lessons from the experts (GE Capital)

GE Capital (of former CEO Jack Welch fame) is a global conglomerate that has grown through hundreds of acquisitions. I’ve just read through a detailed but fascinating article in the Harvard Business Review which outlines GE’s approach to successful takeover integration. Some great insights here for AQA BUSS4 students who need an overview of the factors that affect the success or failure of a takeover. I have summarised them below:

Lesson 1: The integration process starts with due diligence and then continues throughout the period of new ownership. It doesnt stop a short period after the deal is done. Likely post-takeover issues are considered during due diligence (eg potential for cultural conflicts, need for systems changes)

Lesson 2: Integration is a full time job - a distinct business function that requires peope with specialist skills. GE now employs specialist integration managers who do nothing other than working to ensure that acquisitons are properly integrated into the GE structure.

Lesson 3; Decisions about management structure, key roles, job losses and other significant HRM issues have to be made and communicated within days of the takeover being completed. Creeping changes, uncertainty and anxiety that is allowed to last has a significant adverse effect on the value that is created from a takeover.

Lesson 4; Restructure with respect: crucial to creating long-term trust. The buying business needs to be straightforward and honest about what is happening and what is planned - even of the news is bad (eg major job losses; closed production units or locations etc). It is crucial to ta those individuals who will ne negatively affected with respect and support.

Lesson 5; Successful integration needs to go beyond the different technical aspects of putting two businesses together; it also needs to address the different cultures. The best way to do so is to get people from both businesses working together quickly to solve business problems. The GE mantra is “meet, greet and plan”. Key to this is a well thought-through communcation plan.