Executives too often overlook the vital question of identity when seeking synergies from mergers and acquisitions.
Planning for post-merger integration typically focuses on operational issues, such as harmonizing product lines and financial and human resource information systems, and determining which employees are retained and which ones are let go. Attention is also paid to the identity of the merged enterprise in a superficial sense. The name of the acquirer may be retained, or a new logo may be created or a new name found.
But for organizations to achieve the psychological synergies required to realize economic synergies from mergers and acquisitions, the authors argue that executives need to attend to a more complex, deeper set of identity issues. These issues define the essence of the entity and give employees a clear answer to the question “Who are we?” and external stakeholders a clear answer to the question “Who are they?” The first question refers to an organization’s members’ view of what makes it unique among all other organizations. The second question captures what external audiences believe is the essence of the organization. Left unattended, these deeper identity issues will diminish engagement and will inevitably affect the performance of the merged entity.
Operational integration post-merger is a necessary but not sufficient condition for successful performance. Careful attention to identity integration is also essential for success. The authors argue that there is no “one best way” and that in fact there are four distinct paths that can be followed to achieve identity integration: assimilation, federation, confederation and metamorphosis. Each of these paths represents a particular combination of the answers to two questions that managers must confront in anticipation of a merger or acquisition: What should be done with the identities that the parties to the merger bring with them (in other words, their historical identities)? And how should a common identity for the future be built?