When a company buys or merges with another, it is usually the result of an arduous process to determine if the move makes financial sense and what hurdles or risks must be overcome. The same is true for a "carve-out," in which one company is carved or spun out of another.

But once a merger or carve-out is agreed upon, the real work begins: the even-more exhaustive, disruptive and unsettling process of reorganizing the people and operations of the companies involved.

Most companies fail miserably at post-merger integrations (PMI) and carve-outs, and for good reason – a typical executive might do one PMI or carve-out in his or her entire career. So most likely, it will be the first one. Typically, this results in bringing in busloads of outside consultants (usually 3-4  different firms) with experience in integrations and carve-outs to help plan and execute the initiative. Unfortunately, even this may bring only mixed results.

Companies typically struggle at the outset with the overall PMI strategy. For example:

• Should they focus on speed of the integration, maximizing the cost synergies, or maximizing the revenue synergies? 
• What are the risks of the integration? 
• Should they go fast now, or wait until later to start the integration? (Cisco, for example, waited five years before it started on the integration of Scientific Atlanta, and for good reason). 
  

The most recent trend is for businesses to spin off non-core businesses.  There are plenty of examples: GE spinning off its leasing business; HP splitting its enterprise and consumer businesses; Cisco closing or selling off its consumer businesses (Linksys, Flip).  Increasingly, we are seeing a retrenching of companies into their core businesses. 

Post-merger integrations and carve-outs vary in complexity and difficulty.  A relatively simple integration occurs, for example, when one company acquires the R&D group or intellectual property of another, such as the purchase of a developing technology from a startup engineering company. These are typically non-operational acquisitions. You buy the engineering capabilities as essentially a stand-alone unit, then give the people involved a new email address and put them on your health plan.

At the other end of the complexity spectrum is the integration that occurs when you acquire the actual operations of a company, including its R&D, engineering, supply chain and support operations.  Yet another layer of complexity exists if the two companies have overlapping products, functions, geographies, and IT systems – the Compaq-HP merger, for example. Most operational integrations require 2-3 years to complete, but if you merge two large companies with full stand-alone IT platforms, a full IT integration will more likely require 5-7 years.

Against this backdrop, companies who undertake an integration or carve-out must buckle down for the inevitable bumpy ride that comes with large-scale reorganization. The business case may promise financial rewards at the end, but revenues will drop at the outset as employees worry more about their jobs than their customers. Competitors will seize on the disruption. Talent will be lost. You can lose sight of the underlying business case for the initiative, resulting in decisions that may steer you in the wrong direction.

But success can be achieved, and there are Best Practices to help assure it:

• Pick a strong executive to run the program.  
• Use data to drive key decisions.
• Go fast. Going fast and getting it 80 percent right is better than going slow and getting it 100 percent right.
• Place extra focus on your customers; have a good story for them. Customers on the fence will leave.
• Retain key talent. But expect some of your best talent to leave during this process.
• Maintain a business case during the process. Unexpected things will come up; you will need to update the business case as you go.
• Keep a corporate strategy person involved who understands the original rationale behind the merger or carve-out, or it will get lost during the process.