Challenges in Post Merger Integration (PMI): An Operational Perspective in the EU
To many observers, M&A advisors are seen as pure deal makers who happily run away once the transaction they arranged is closed. No statement could be more distant from our mission, experience and core values at CDI Global. Our numerous success stories indeed all point to the paramount importance of pre and post transaction support to our clients in achieving the expected value creation. Delivering such services in an optimal way often means entrusting carefully selected partners who offer specific additional expertise with a mindset that aligns perfectly with ours. We at CDI France are thus proud to share the expert insights from Julia Kouchnirenko-Descottes, Partner, Harbour Avocats, on Post-Merger Integration challenges.
Preface by Thierry Gibert, Managing Partner of CDI France and member of the Board of Directors at CDI Global
A successful merger is one where integration is seamlessly executed, ensuring that the anticipated synergies and value creation are fully realized. However, many mergers fail or fall short of expectations due to insufficient focus on the Post-Merger Integration (PMI) phase. Despite careful deal structuring and strategic planning, neglecting the complexities of integration—whether cultural alignment, operational synchronization, or regulatory compliance—can lead to disrupted or distressed operations, talent attrition, and diminished stakeholder confidence. PMI is not merely an afterthought but a critical component of the merger process, demanding as much attention and resources as the transaction itself to achieve long-term success.
1. Anticipation of operational integration
1.1 Due diligence, carve-outs, restructuring, waivers
Mergers and acquisitions (M&A) are typically preceded by a rigorous due diligence process, designed to uncover potential challenges and key areas of focus for the post-merger phase, in addition to being a critical foundation for drafting and negotiating the Guarantee and Indemnity Provisions. This preparatory phase allows parties to address certain identified issues proactively, such as through carve-outs, corporate restructuring, contract renegotiations, or obtaining waivers.
1.2 Post acquisition audit
However, despite these anticipatory measures, the post-acquisition phase often presents persistent—and occasionally unforeseen—challenges, particularly when the deal arises from an opportunistic context or limited negotiation capacity. This is especially true when the target is undergoing insolvency proceedings, where urgency and regulatory constraints can hinder comprehensive pre-closing remedies, leaving critical integration issues to be resolved post-closing. In such cases, buyers are well-advised to conduct a post-acquisition due diligence to identify key areas of concern before proceeding with operational integration.
2. Identification of the specificities of local regulatory constraints
Cross-border PMI under EU law requires compliance with strict regulations concerning, inter alia, competition, data privacy, employee rights and CSR.
2.1 Antitrust Scrutiny
The European Union’s Directorate-General for Competition rigorously examines mergers to prevent anti-competitive behavior. For example, the Siemens-Alstom merger failed to receive EU clearance in 2019 due to concerns that it would stifle competition in the high-speed rail and railway signalling systems market. EU regulatory demands should be prepared early by engaging with the Directorate-General for Competition and being prepared to offer acceptable remedies, such as asset divestitures.
2.2 GDPR and Data Privacy Compliance
Under the General Data Protection Regulation (GDPR), the handling of personal data during PMI is subject to strict oversight. In the Telefónica-Deutsche Telekom merger, both companies faced the challenge of harmonizing customer databases without violating GDPR. When facing processing a large volume of data, it may be relevant to advise clients to use AI-powered tools to support legal assess of GDPR risks in customer and/or employee databases.
2.3. Employment Law and Worker Rights
Cross-border M&A in the EU must adhere to labor protections under the EU Acquired Rights Directive (ARD), which safeguards employees’ contracts during transfers of undertakings. For example, during the Fiat-Chrysler and Peugeot (PSA Group) merger, the ARD required careful planning to ensure compliance with French and Italian labor laws, particularly regarding employee consultation and job security. Transparent engagement with EU labor representatives, regulators, and customers fosters trust and reduces opposition during PMI. Stakeholder engagement should be advocated to help resolve concerns about environmental compliance and labor protections, ensuring a smoother integration process.
2.4 Environmental and CSR Specificities
In the European Union, operational integration following a merger must account for stringent environmental regulations and corporate social responsibility (CSR) standards. Companies are required to align with the EU Green Deal objectives, which emphasize carbon neutrality, circular economy principles, and sustainability across supply chains. For example, when Veolia acquired Suez in early 2022, the integration process had to address compliance with EU waste management directives and water treatment regulations. Veolia leveraged this opportunity to enhance its environmental footprint by implementing circular economy strategies and reducing greenhouse gas emissions across the merged operations.
Additionally, CSR frameworks, such as the Corporate Sustainability Reporting Directive (CSRD), demand transparency on environmental and social impacts, requiring robust reporting mechanisms. Proactively addressing these requirements during integration, supported by tools for environmental impact assessments and sustainability tracking, ensures compliance while fostering a socially responsible and environmentally sustainable business strategy.
3. Synergy Realization and Operational Rationalisation
Achieving operational synchronization and unlocking synergies often hinge on a detailed analysis of combined databases, with a particular focus on management control systems. Leveraging AI-powered tools can significantly enhance this process, enabling the identification of cost discrepancies and inefficiencies across production processes. For instance, when the acquirer and the target company produce similar products or materials, discrepancies in production costs—such as variations in raw material sourcing, manufacturing efficiency, or energy usage—can signal opportunities for optimization. Such processes can highlight disproportionate costs and recommend best practices for harmonizing production workflows, ultimately reducing redundancies and standardizing operations. This data-driven approach not only ensures seamless integration but also generates meaningful cost savings, laying the foundation for long-term financial and operational success. Integrating data analysis into the management control framework allows acquirers to make informed decisions, streamline production, and realize the full potential of post-merger synergies.
4. Anticipating and Managing Cultural Integration
4.1 Country culture
Cultural integration is a critical yet often underestimated component of successful post-merger integration. It involves addressing not only the corporate cultures of the merging entities but also the broader cultural nuances of the countries involved. Differences in national culture, such as attitudes toward hierarchy, decision-making styles, or approaches to work-life balance, can create friction if not proactively managed. For instance, the more hierarchical and process-driven culture typical in many German corporations may clash with the more flexible and innovation-focused approach common in Nordic or Anglo-Saxon companies. Similarly, variations in workplace norms, such as communication styles and conflict resolution methods, must be understood and bridged during integration.
4.2 Corporate culture
Corporate culture adds another layer of complexity. Whether the target organization prioritizes customer-centric innovation or values operational efficiency, aligning these priorities with the acquirer’s ethos requires a careful strategy. If one entity fosters a start-up-like agility while the other is rooted in structured processes, integration efforts must focus on reconciling these differences without eroding the unique strengths of each.
Cultural misunderstandings often result in disorganization, delays, erosion of information and ultimately impact the success of the merged target. To anticipate and address these challenges, businesses can engage or develop services specializing in post-closing integration. The buyers often rely on Transition Service Agreements (TSAs), which ensure continuity and create a connection between the parties during the transition period.
Successfully navigating PMI in EU-regulated cross-border deals requires a proactive approach to both operational and legal-strategic challenges. Anticipating integration needs is paramount, as it allows businesses to address potential risks and align processes effectively from the outset. Compliance with EU regulations is crucial, but so is leveraging advanced tools, particularly data processing technologies, to ensure no detail is overlooked. By combining operational insight, advanced legal expertise, and cutting-edge digital solutions, companies can achieve a seamless integration and unlock the full value of cross-border M&A transactions.
At CDI Global, we are leveraging a unique combination of industry expertise, 51-year experience in cross-border mid-market transactions and local presence in more than 35 countries. This enables us to offer full support to our clients throughout any M&A process, including tailor-made preparation and post-transaction advisory services that are key and often critical to final and sustainable success.
By: Julia Kouchnirenko-Descottes, Partner, Harbour Avocats
Preface by Thierry Gibert, CDI Global
