Post Merger Strategy for Nakumatt-Tuskys

The recent announcement by major Kenyan retailer Nakumatt to merge with its arch rival Tuskys due to its continued struggles has raised a lot of dust in the sector. If the deal goes through subject to approval by the competition authority of Kenya; we are bound to witness some major realignment in the sector case and point being Naivas, Carrefour jostling to occupy retail space previously occupied by Nakumatt.

Nakumatt and Tuskys find themselves at a crossroad of failure or success depending on how fast they stabilize the new integrated entity and generate the critical revenue to change their fortunes for the better.

It’s crucial that Nakuamtt-Tuskys deal capture synergy value associated with merging else they risk destroying both their brand values. Stakeholders such as shareholders, suppliers, customers and employees may be greatly affected by issues such as skyrocketing merger costs such as transaction, aggregation of supply chain network, management concentration on merger and not day to day activities among other reasons which could lead to brand value erosion.

In order to acquire the merger synergy Nakuamtt-Tuskys need to walk a tight rope in mastering the following post merger practices right after the conclusion of due diligence and approval by the completive authority of Kenya.

They both must be on the same page in terms of strategic direction of the merger deal. Questions of what is the end goal of the deal must the properly and thoroughly addressed.  The combined entity must set up a steering committee to oversee the merger and ensuring there is a proper mix of staff fully and partly dedicated to ensuring the merger works on one hand and business continuity on the other.

The steering committee must set high yet achievable synergy targets for each business unit or profit centre, such as specific percentage cost savings and revenue gains. To set such targets, company can draw on internal and external experts and benchmark against other similar mergers globally.

The company must strive for a seamless business continuity from the get go. The steering committee must ensure the various organizational functions of finance, Procurement, Human resource, legal, marketing, corporate communication, Information Technology among others interact and chart their own integration goals in line with the overall synergy targets.

The combined entity must work fast to capture synergies associated with cost immediately after deal closure. Cost savings can come about by reducing reduction of fixed overheads such as rent, employees, IT infrastructure, supply chain integration among other cost that would lead to improved cash flow and profit position.

The new entity must carefully plan how they want to integrate the two corporate cultures to avoid major fallout with employees or goodwill erosion by employees.  The merger steering committee must conduct a culture survey to find out significant corporate culture differences from which they can propose a shared corporate culture.

Some cultural considerations include; centralization or decentralized decision making, attitude towards risk among others. In instances where there are capacity gaps, training programs must be developed in those areas so as to ensure all employees practice the new culture.

Finally the new entity must decide how they are going to manage interdependencies. An example of interdependencies could be the decision on whether to combine the two brands to one or to continue with the separate brands is going to have major ripple effect on functions such as marketing, procurement, operations among other functions. The steering committee must thoroughly and carefully examine issues such as Key performance indicators, location and type IT infrastructure, supply chain management, Headquarters among other key issues.

To extract full value Nakumtt-Tuskys immediately after deal closing must invest time and resources carefully else they deal may fail before the ink dries.