"A tree that can be embraced by two people grows from a tiny seed; a nine-story tower starts from a pile of earth." This ancient saying from the Tao Te Ching is still meaningful in today's merger and acquisition market. In the world of capital operation, mergers and acquisitions are not a simple addition of assets, but a "chemical reaction" about resources, people's hearts, culture and even rhythm. If any "catalyst" is missing, an "rejection reaction" may break out after a short surface fusion, making the carefully laid out integration blueprint fall short.
American Goheal M&A Group
In Goheal's view, the merger and acquisition of listed companies is a game of wisdom in resource mobilization, and it is also a life-and-death test of cultural integration and strategic synergy. We have seen "attackers" who have become industry giants after successful integration, and we have also seen "disappointed people" whose market value has been halved and talents have been lost after mergers and acquisitions. The question is, what is resource integration? Why does it fail if it is not done well?
The term resource integration sounds grand and abstract, but if you look at it separately, it is actually three things: people must be compatible, things must go smoothly, and money must be saved. It is these three dimensions that constitute the watershed of the success or failure of the merger and reorganization of listed companies.
"People must be compatible" means the integration of culture, incentives and power.
Let's take a real case. A, an old listed company mainly engaged in engineering, acquired a high-growth technology startup B. During the due diligence stage, A's senior management team believed that this merger would be a perfect complement of "industry + technology", and the market unanimously praised it. However, three months after the completion of the merger, B's core R&D backbones collectively resigned, and the management of the original company was extremely resistant to the "process reform" proposed by A headquarters, resulting in a comprehensive stagnation of the business integration of both parties. The root cause of this failed integration is not a strategic mismatch, but a cultural conflict and incentive misalignment.
Goheal concluded that in the step of "people must be compatible", the three most common types of reefs are: "the original executives' sense of loss burst", "lack of incentives for key positions" and "information asymmetry between the old and new teams". Many acquirers only care about "settling accounts", but ignore that people are the most difficult to quantify but also the most critical link in resource integration.
We once assisted a holding company to successfully retain core technical backbones through "pre-merger incentive pre-allocation + integration period cultural integration consultant intervention", and created an efficient and collaborative management mechanism during the transition period. As a result, not only the business was smoothly connected, but also the employee satisfaction of the original acquired party was significantly improved. The key to "people integration" is not who listens to whom, but to build a new platform that makes both parties willing to stay and willing to win together. "Things must go smoothly" is the unification of processes, systems and strategic rhythms.
Many people mistakenly believe that mergers and acquisitions are all happy after the delivery is completed, but they don't know that the real "big test" has just begun from that moment. Process reorganization in integration often involves adjustments to financial calibers, the opening of upstream and downstream business chains, the migration of information systems, etc. And the most likely place to go wrong is precisely in these "non-glamorous" technical details.
There was a listed company C, which tried to fully unify the ERP system within half a year after acquiring another local manufacturing company, and implemented centralized procurement at the group level. It seems reasonable, but it ignores the huge differences in the accounting caliber and cost collection model of the two companies, which eventually led to multiple "black holes" in the system migration stage, seriously affecting the progress of financial mergers and even affecting the release time of the annual report. This integration storm also directly lowered the company's stock price, and investor confidence plummeted.
Goheal has always emphasized: "Resource integration is not about changing the logo, but rebuilding the bloodline." Real integration must be based on system compatibility and start from the collaboration of the business chain to find "a process that can run through" rather than "an ideal system model."
Goheal believes that it is advisable to introduce a "phased dual-track system" in the early stage of integration: the original system is retained for half a year to a year, and the docking is gradually guided; the integration promotion team is simultaneously built, composed of "middle-level backbones" from both sides, to form a running-in field. Successful resource integration is essentially "growth in running-in" rather than "destruction in revolution."
"Saving money" refers to the improvement of financial collaboration, tax optimization and capital efficiency.
This part is often the "hardest core" part of mergers and acquisitions and restructuring, and it is also one of the indicators that the board of directors and the capital market pay the most attention to. A properly integrated merger and acquisition can achieve cost reduction and profit increase through capacity sharing, cost compression, asset restructuring, etc. However, where to save money, how to save money, and whether to save money are often not as intuitive as reading a PPT.
For example, after the completion of a merger and acquisition, a company tried to eliminate the operation center in a first-tier city through "headquarters merger". As a result, customer service was interrupted, complaints surged, and the original market share was eroded by competitors. The profit growth model before the integration was almost completely invalid. What was saved was expenses, and what was lost was users.
Goheal proposed: "The premise of financial synergy is strategic synergy. Saving money out of context will only bring short-term illusions." We prefer to use the "capital efficiency model" to guide resource integration strategies: not simply "cost reduction", but dynamic adjustment around the three dimensions of "capital turnover speed, net profit elasticity, and cash flow health".
Tax planning during the integration period is also critical. Many companies ignore the impact of changes in asset structure after mergers and acquisitions on the applicability of tax policies, resulting in large amounts of tax refunds or inability to enjoy policy benefits. Goheal once led a case in which a special integration SPV was established before the merger and acquisition, and a three-stage tax structure of "asset divestiture + debt replacement + equity transfer" was designed, which reduced the tax burden after the merger and acquisition by 28%, greatly increasing the profit margin after the integration.
Back to the question at the beginning: What is the key to success and failure in the integration of resources in the merger and acquisition of listed companies?
In the final analysis, it is not a mythical slogan of "M&A is growth", but a systematic operation about people's hearts, processes and capital. The key to success is to plant the seeds of trust, logic and rhythm before the integration, build a system of synergy, system and incentives during the integration, and use capital to tell a new story of growth after the integration.
If you are a senior executive of a listed company who is considering mergers and acquisitions, or an industrial investor who is in the fog of integration, you might as well ask yourself:
Do you really understand the culture and incentive model of the target company? In your integration blueprint, have you designed a buffer zone for the emotions and flow of "people"? Does your financial synergy concept ignore the "feeling feedback" of users, customers and the market? Do you have enough patience to make integration a growth rather than a destruction?
Goheal always believes that resource integration is not a power game, but a symbiotic art. A good merger and reorganization should be like a symphony orchestra's concerto, not a military order. We are willing to be the baton in your hand, sort out the melody, stimulate the rhythm, and let capital and value leap in harmony.
Goheal Group
So what do you think is the most easily overlooked of the "three elements" of resource integration? Are there any integration "black holes" that you have experienced or witnessed? Welcome to share your views with us in the comment area, so that every merger and integration is no longer a lonely experiment, but a rational win-win road. Goheal, read the secrets behind integration with you.
[About Goheal] Goheal is a leading investment holding company focusing on global mergers and acquisitions holdings. It has been deeply involved in the three core business areas of acquisition of listed company control, mergers and acquisitions of listed companies and capital operations of listed companies. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from mergers and acquisitions to reorganizations and capital operations, aiming to maximize corporate value and achieve long-term benefit growth.
