Over the past few decades, mergers and acquisitions (M&As) have become increasingly important for organizations competing in a global marketplace and they are considered as one of firms’ key strategic decisions. Yet, most M&As fail and often greatly. In our study, we focus on the post-acquisition integration process as a crucial phase explaining the success or failure of an M&A.

Post-Acquisition Integration – A Complex and Dynamic Process

Post-acquisition integration processes are extremely complex and depend on many factors. One of the most notable sources of the complexity of integration pertains to the need to create value and realize synergies, while at the same time employee commitment and motivation must be secured. Although both the “hard” and “soft” approach are needed simultaneously, the literature so far has mostly treated them separately, as mutually exclusive, or as opposite poles of a continuum. In our study, published in the Journal of Management Studies, we argue that it is important to know how both approaches can be combined in a dynamic way.

The Importance of Intergroup Interactions – Intuitively Clear but often Neglected

Through a longitudinal, qualitative study of the acquisition of KLM by Air France, in which we conducted over 300 interviews in the acquired company, we zoomed in on the post-acquisition integration process of eight integrated units at KLM to examine the effects of combinations of particular modalities of hard and soft integration approaches over time. A defining characteristic in the outcomes of our study is the role of intergroup interactions. Hard and soft integration decisions do not immediately lead to integration outcomes but set in motion intergroup interaction processes that influence both the realization of synergies and collaborative intentions among organization members. Although decisions by top management may be intended to target integration outcomes directly, if the influence of these decisions on intergroup processes is not recognized, the outcomes may be very different from what were envisaged.

Based on our study, we illustrate that the intended level of integration, the use and restraint of power, and social integration efforts interactively shape intergroup interactions. Particularly important is the combination of use and restraint of power if a high level of integration is pursued. In this situation, it is important to promote positive intergroup interactions; this can be done by being decisive in using power to set the goals regarding full integration, in combination with restraint of power, to allow for constructive bottom-up decision-making. Hence, our analysis implies that if top management needs to apply power (and this will nearly always be the case if significant integration is sought), it is best to first use power, and subsequently restrain the use of power. This is valid both for decisions taken by top management as well as for behaviors lower in the merged organization, where perceptions of dominance by either of the parties need to be avoided. Investment in social and human integration can support this process.

Hard and Soft Integration Management – A Dynamic Perspective

When making hard and soft integration decisions, management needs to consider the possibility of positive (inter-group interaction) and negative (inter-group competition) consequences. In terms of hard integration management, this requires a well-considered combination of top-down allocation of separate tasks, as well as room for bottom-up fleshing out of joint tasks, while practicing a balance between use and restraint of power. As far as soft integration is concerned, managers should realize that human integration efforts, while important, cannot fundamentally change the dynamics of intergroup interaction processes when units from the acquired and acquiring firm are pitted against one another. Soft integration management is no catch-all solution for problems caused by an ill-designed hard integration process. Finally, when designing the post-acquisition integration approach managers need to take into account not only the direct effects of hard and soft integration decisions, but also the indirect, long-term consequences through the recursive relationship between intergroup interaction processes and post-acquisition outcomes. This requires a degree of foresight from managers that often seems to be absent.

If you are interested to learn more about the dynamic nature of post-acquisition integration and how hard and soft integration can be effectively combined, please take a look at our full study here: https://doi.org/10.1111/joms.12766

Keywords: hard integration, integration dynamics, intergroup interaction, quality of collaboration, soft integration, synergy realization