How to Integrate an Acquired Company: Lessons from IBM
These days, mergers and acquisitions are an increasingly important part of corporate strategy. But when one company acquires another, a lot of things have to happen to make the deal right. In fact, most mergers fail—and most of the time, it’s not because of the strategy behind the deal or the negotiation process. Instead, the key to making the deal right is successfully integrating a company after a merger.
That’s according to Moni Miyashita of IBM (NYSE: IBM). A few weeks ago, I had the pleasure of meeting Miyashita, the managing director of mergers and acquisitions integration at Big Blue. Heading into the new year, I figured Seattle-area companies—and tech companies in general—could use a fresh perspective on deal integration.
Miyashita, who is based in Armonk, NY, knows a thing or two about the topic, given that IBM has spent more than $15 billion on acquiring 70-plus companies while she’s been at her post. Miyashita says her team is currently supporting the leaders integrating some 17 companies into the IBM machine. “She has institutionalized the M&A capability within IBM,” says Eddie Pasatiempo, a partner at The Clarion Group based in Kirkland, WA (and an Xconomist).
Some quick background before I get to Miyashita’s M&A lessons. Mergers and acquisitions are at the core of the growth strategy of IBM, which in the past several years has divested some of its hardware portfolio and has made strategic acquisitions in software and services. Since 2004, IBM has bought more than 40 software companies while getting proceeds from divestments such as the $1.8 billion sale of its personal-computer division to Lenovo. (IBM hasn’t made many acquisitions in the Northwest, but it did buy Bellevue, WA-based Vallent in late 2006, and Beaverton, OR-based Sequent back in 1999.) “We’ve used acquisitions to help transform our company,” Miyashita says.
As I understand it, successful integration requires taking the time to align the acquired company and the leadership of the parent company on the goals of the acquisition. That clarifies roles, responsibilities, and priorities, so the team can execute the vision of the merger. Miyashita explains that the integration needs to be “focused on value,” rather than on check lists such as suppliers, IT, and office space. And to do it right, she says, you need strong leadership and performance management focus from the top.
To guide the process, IBM has dedicated “integration executives” whose full-time jobs are to lead the integration and make sure the activities and results of the merger stay on track. Miyashita says integration executives must have world-class project management skills, a deep understanding of the parent company, and enough clout to be effective and influential with all organizations.
It sounds obvious, but let’s delve a little deeper. What makes a strong leader in this case? Miyashita says, “You need savvy business people who know how to relate to all levels of people.” A leader needs to ensure continuity of the acquired business, work with all groups supporting the integration into the parent company, be able to drive change with both companies, and execute the business case expectations. What’s more, a leader must be ready to lead.
As for performance management, Miyashita emphasizes it’s important to have formal tracking on the acquisition’s performance, so there’s clear accountability and attention to lessons learned. At IBM, this includes monthly checkpoints and more extensive quarterly reviews. “It’s a very formal process,” Miyashita says. “It’s important to have the focus from the top. Having the CEO and CFO focused on our acquisition success ripples down to every deal.”
The bottom line, as I see it, is that acquisitions take a lot of hard work. You can’t expect to be successful if you don’t dedicate resources to making sure the acquired company stays on track and adheres to the original goals of doing the deal. In any case, it sounds like IBM has formalized the process in such a way that others can now learn from it.