M&A in the LatAm’s power industry: Drivers and hurdles of successful post-merger integration = Fusiones y adquisiciones en la industria eléctrica Latinoamericana: facilitadores y obstáculos de procesos
LatAm’s political stability, vigorous growth, and the liberalisation of the electricity markets coupled with the privatisation of their main companies account for the region’s recent protagonism. As a result, deal activity in the LatAm’s power industry increased substantially in the last decade, and understanding of the main challenges faced during the post-merger integration stage of the M&A process became critical for firms using M&A as a tool to accomplish corporate objectives. However, M&A practitioners cannot resort to the literature, as studies pertinent to the LatAm’s power industry are still incipient. In view of the above, the value of this research lies in the insights gained by examining current practice in post-merger integration in the LatAm’s power industry with the aid of semi structure interviews with seasoned M&A executives. Furthermore, by comparing current practice and the literature on the matter, a novel comprehension of the topic in the LatAm’s power industry context is established, and future discussion via cross-pollination of experiences is facilitated and energized. Collectively, the research’s findings provide the following considerations for current and future M&A experts in the LatAm’s power industry, particularly those responsible of leading the post--merger integration process. Taking a conservative stance on synergy assessment, and concentrating the post-merger integration to deliver rather conservative results, and when possible to capitalise on new sources of value creation are determinants of successful deals in the LatAm’s power industry; the highly regulated nature of the business, and the latent risks related to the political and social views about the role of private investors in the provision of public services support this recommendation. Due diligence is not a ‘hygiene factor’ but a determinant of successful post--merger integration; due diligence should be carried out to match up the entire post-merger integration process, identify hurdles and levers to drive the transformation, estimate how long it would take to realise synergies, and understand how the target’s management practices, routines, idiosyncrasy, and beliefs need to be moulded to make the achievement of the deal objectives possible. LatAm’s power companies should rely on the best practices of post-merger integration outlined in the literature in topics such as planning, measurement and monitoring, human resources, and communication in order to enhance the predictability and reassessment of the process, facilitate employees’ buy-in and management of stakeholders’ expectations, and minimise disruption of day-to-day activities. However, as long as the integration is anchored to the deal’s value drivers, flexibility should be allowed to adapt the plan in the meantime. Standard views about leadership, culture, organisation, and speed of integration should be avoided, as these post-merger integration topics are conditional on the deal type, and the extent to which target and acquirer firms’ organisation, processes, and culture need to change after the transaction. Practices related to these topics should be designed and deployed according to an in-depth examination of the integration approach required by the deal. Practitioners should ensure that ‘buy teams’ and ‘integration teams’ are connected; in particular, senior professionals from technical and operational positions should be involved in the planning and design of the post-merger integration to estimate synergies and risks. Furthermore, people in the ‘buy teams’ should be held accountable also for the success of the post-merger integration. There is no cookie-cutter approach to post-merger integration in the LatAm’s power industry; considerably more contingent research, and in-depth case studies are required in order to avoid getting in standard views of post-merger integration.
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