Achieve Success in Mergers and Acquisitions through the Coordination of Operations and Technology
Transforming Businesses: A Survival Guide for Mergers and Acquisitions
Mergers and acquisitions (M&As) are powerful tools for businesses, opening doors to growth, competition, and transformation. But with great power comes great risk, and it's crucial to navigate the post-merger integration minefield successfully.
So, what are the top obstacles businesses face when merging in 2025? To find out, we surveyed over 800 risk and insurance professionals for our 2025 M&A Risk Study. Here's what we discovered.
Waving the Red Flag: Top Challenges Revealed
Every year, thousands of M&A deals close, showcasing the importance of managing risk amid the excitement. In the first three quarters of 2024 alone, over 9,000 M&A deals sealed, totaling an impressive $1.2 trillion with an average deal size of $792 million [PitchBook].
Private companies backed by private equity (PE) firms have grown significantly over the past two decades, resulting in over 12 million Americans now working for PE-owned organizations [The Private Equity Stakeholder Project]. PE firms are also holding on to portfolio companies longer, with the average holding period for buyouts reaching 6.1 years in 2024, compared to 5.8 years between 2018 and 2022 [S&P Global].
A successful M&A can unleash operational synergies, enhancing productivity and efficiency. But fail to prepare for operational and technological perils in advance, and you're courting chaos! The top concerns plaguing M&As revolve around:
The Top Terrors:
- Cultural Differences (24%): Simmering tensions born from contrasting workplace cultures sabotaging team cohesion.
- Operational Disruptions (18%): Loss of productivity, efficiency, and delays in business processes.
- Technology Integration Challenges (14%): Merging software, databases, IT platforms, and legacy systems is no walk in the park.
- Talent Retention Concerns (10%): Losing key employees, talent, and institutional knowledge can cripple a company.
By anticipating these challenges and implementing risk mitigation plans, risk professionals can limit the potential impacts of operational and technological hazards, ultimately leading to a smoother transition and business success.
Marrying Operations: Aligning Processes and Procedures
Blending operations effectively after a merger translates into enhanced productivity, but neglecting risk management can generate costly disturbances, talent loss, and diminished institutional knowledge. Given the high stakes of M&A deals, risk management plays a vital role in navigating these challenges, ensuring a friction-free transition that paves the way for business triumph.
Key Obstacles to Overcome:
- Standardizing Business Processes: Achieving operational harmony through streamlined business processes, streamlined supply chains, and customer service models is a tall order.
- Navigating Compliance and Regulatory Challenges: Differences in compliance, reporting structure, and regulatory environments can choke on operational flows.
- Avoiding Inefficiencies and Disruptions: Misaligned workflows and decision-making processes can bog down daily operations.
Paving the Path to Success:
- Setting Clear Objectives: Establishing precise goals, timelines, and responsibilities for both merging entities helps minimize confusion and boost operational efficiency.
- Tracking Progress: Measuring integration success by tracking retention, productivity, employee satisfaction, and regularly monitoring progress provides a clear picture of the situation.
- Speak Clearly: Maintaining open and effective communication simplifies the transition, reduces uncertainty, and improves employee comprehension of the company's vision.
Combining Technologies: Aligning Platforms and Security
Driving growth and achieving economies of scale through technology relies on seamless business systems integration. Our study found that one in five respondents cited the ability to share digital platforms and acquire or access new technology as a top motivator for pursuing a merger or acquisition, while 31% identified operational disruptions and difficulty merging technology as the biggest challenge post-M&A [our website study].
Key Challenges to Conquer:
- Battling Compatibility Issues: Merging incompatible software programs, IT infrastructure, and technology stacks can be a daunting task.
- Data Security Threats: Mishaps during the integration of IT systems can expose systems to potential security threats, putting your company at risk.
Paths to Triumph:
- Identify the Experts: Recognize the individuals possessing the skills and knowledge to lead the integration charge within both companies.
- Partner Up: Engage key vendors early and enlist the help of third-party technology experts to support the integration process.
- Stay Cyber-Vigilant: Cybersecurity should never take a backseat during the integration of IT systems. Investing in employees' training to maintain a secure transition and enhance cybersecurity awareness can go a long way.
- Embrace Smart Data Governance: Implementing effective data governance frameworks helps manage vast volumes of information obtained from diverse sources, protect sensitive information, and enable informed decision-making.
- Invest in Diligent Planning: A comprehensive plan addressing compatibility issues, potential cybersecurity threats, and outlining the integration process is essential for a successful technology combination.
Key Takeaways for Business and Risk Leaders
Mastering the M&A gauntlet demands business and risk leaders to recognize potential pitfalls and take the lead in developing strategies to circumvent complications before, during, and after the M&A closing. Employing the insights from our 2025 M&A Risk Study can empower businesses to identify and tackle potential risks more effectively, thereby increasing their chances of M&A success.
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Sources*2025 M&A Risk Study: A [our website] Special ReportPitchBook Data, Inc., [pitchbook.com]The Private Equity Stakeholder ProjectS&P Global
- To tackle the technological perils that may arise from mergers and acquisitions (M&As) in 2025, businesses might consider implementing business insurance solutions designed to support risk management during the M&A process.
- Implementing effective risk management, including addressing challenges such as technology integration and cultural differences, can enable a smoother transition, leading to franchise success and ensuring the business is M&A-ready.
