You only get one ‘Day One’: The importance of post-merger integration

The aftermath of the Autumn Budget prolonged this quiet patch, particularly for mid-market deals, with some businesses extending their sale timelines due to the uncertainty on how the announced changes would impact valuations. 

However, signs of increased activity are already emerging in the first quarter of 2025. In January, GSK announced it would pay up to $1.15 billion to buy IDRx, a privately held biotechnology firm, specialising in treatments for a rare type of gastrointestinal stromal tumour.

This is just the beginning, with more firms expected to explore potential partnerships or acquisitions as they evaluate whether this year is the right time to strike a deal. 

Firms all have their individual acquisition strategies – whether it’s targeting a specific drug, technology, product, or intellectual property (IP). Others may seek access to new laboratories or markets. Regardless of the approach, the industry is poised for an uptick in M&A activity throughout the year 

Post-merger integration: The building blocks for success 

Once an acquisition is agreed, the focus must quickly shift to making it a success. Given the substantial time and effort invested in closing a deal, it’s critical that the output and recommendations from all workstreams and specialist diligence reports dovetail into post-merger integration.

The integration process should be a top priority to ensure the company is fully prepared for ‘Day One’ operations.  

A successful post-merger integration programme relies on several key building blocks for navigating the complexities of combining two organisations into a cohesive entity.

These building blocks are necessary for a smooth and successful integration journey, enabling businesses to unlock synergies, minimise disruptions, operate through Transition Services Agreements (TSAs) and realise the full potential of the acquisition: 

• Early mobilisation: This helps identify potential integration challenges and opportunities at an early stage. By analysing the operational, cultural, and strategic aspects of both organisations, firms can make more informed decisions and mitigate risks.  
• Integration vision and strategy: Every acquisition strategy is different, and this flows through to the integration strategy. It’s essential to understand the key value drivers of the deal and ensure that the integration plans are developed to preserve and protect areas of value. As part of this, business leaders need to agree the governance structure, and supporting roles & responsibilities, to enable quick mobilisation and effective decision-making. 
• Identify impacts and develop plans: Understanding any ‘Day One’ business continuity risks is crucial. Comprehensive plans should be put in place to ensure operations can continue smoothly as the merger or acquisition takes effect. Key elements to consider include maintaining financial operations (receiving and paying money), updating required signatories, setting up necessary systems, and communicating with stakeholders. Preparing front-line staff with the answers they need for client or customer queries is also vital.  
• Implement plans and manage change: Once plans are agreed, they must be executed across the whole business from ‘Day One.’ Regular monitoring and reporting on performance is necessary to ensure the integration progresses smoothly and any issues are addressed promptly  

Beware of cyber risks 

The complexity and intensity of a merger or acquisition can leave businesses vulnerable to cyberattacks, as leadership and critical functions may be distracted.

Cybercriminals often exploit these periods of transition, knowing that firms may be focused on internal changes rather than monitoring external threats. Businesses must be vigilant and proactive in safeguarding against these risks during the integration process.

Impact of ESG considerations 

With the life sciences sector’s focus on reducing its environmental impact, many companies are evaluating their manufacturing processes and implementing green technology to reduce waste, energy and water consumption and using renewable energy where possible.

There is also increased regulatory pressure with The Corporate Sustainability Due Diligence Directive (CSDDD) obliging large companies to identify, mitigate, and where necessary remedy human rights and environmental impacts in their operations and ‘chain of activities. In addition, the Corporate Sustainability Reporting Directive (CSRD) applies to firms across the EU, with the first sustainability statements set to be published in the coming years.  

All these factors play an important part in any transition as part of a merger or acquisition. If all parties display a similar focus on compliance with ESG regulation, efficient production processes and demonstrating their ESG principles, it often makes the post-merger integration easier due to common shared values. 

Preparation is key 

As M&A activity increases among the pharma and life sciences sector, businesses must remain focused on the importance of the post-merger integration journey.

A successful integration hinges on careful planning, strong leadership, and effective communication. With the right approach, companies can maximise the benefits of the deal, minimise disruption, and position themselves for future growth.

This article was first published on Accountancy Age on 12 March. Visit the original article.

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