Mergers and acquisitions can run into trouble when the acquiring company grapples with the degree of integration required for the newly acquired firm. Toronto-based consultant Eamon Hoey, in his newsletter the Strategist, says you should assess the value-creating proposition behind the acquisition to determine how much interdependence, and also how much organizational autonomy, is required for the target firm to remain successful. That results in four situations:
Absorb: If the target firm needs a high degree of interdependence and has a low need for organizational autonomy, then you should absorb the new entity into your operation.
Preserve: If there is a low need for strategic interdependence between the combined businesses and a high need for the target firm to remain autonomous, then it should be established as a standalone autonomous subsidiary.
Symbiotic: If interdependence between the two businesses should be high while the newly acquired entity not lose its organizational autonomy, the goal should be to give each firm access to the other's strategic capabilities. That means retaining the target firm's senior leadership to protect its culture and capabilities.
Hold: The final option occurs when the target firm requires a turnaround. There is no great pressure for organizational autonomy or interdependence. The firm needs cultural change, implementation of tight financial controls, limited autonomy and knowledge transfer.