Knowledge Transfer in Mergers and Acquisitions: The Benefits, Challenges, and How to Ensure Success

At a high level, mergers and acquisitions (M&As) are motivated by a desire to drive growth. Two companies may merge–or one may acquire another–to capitalize on one another’s strengths, grow their market share, or gain new knowledge related to one another’s products, services, or customer bases. However, as anyone who has gone through M&A before knows, the integration process can be challenging–especially when it comes to transferring knowledge across newly-merged business units. 

Below, we’ll take a closer look at why it’s important to have a knowledge transfer plan in M&As, where businesses may encounter challenges, and what they can do to overcome those obstacles.

What Is Knowledge Transfer in Mergers and Acquisitions?

During any kind of merger or acquisition, two companies join together to become one business entity. What this looks like in practice will depend on the specific type of M&A transaction, but one thing is consistent in all cases: each business brings its unique collective knowledge to the table. These companies need processes in place to transfer knowledge so that there is one centralized, collective view of company knowledge for the newly-formed business entity.

Why Is Knowledge Transfer Important in M&A?

In many cases, knowledge–whether related to products, services, or employee talent–is one of the driving factors of mergers and acquisitions. When two businesses combine, they must have an effective way to transfer knowledge so they can drive growth and gain (or maintain) an advantage over their competitors. Reasons for businesses to focus on knowledge transfer during M&A include:

• Maximizing available resources. In the event of an acquisition, the acquiring company must be sure they can effectively use the resources and assets of the company they acquired. 
• Retaining knowledge. Whether due to employee turnover or restructuring, valuable knowledge and expertise can easily slip through the cracks during M&A–unless there are processes in place to preserve it. 
• Minimizing disruption. M&A can feel like a big shakeup, but successfully transferring knowledge can help limit disruptions–to operations and employees–during the transition period. Transferring knowledge can also help employees get familiar with any new processes and systems so productivity doesn’t take a hit.
• Driving collaboration. When knowledge flows smoothly across teams, everyone gains a better understanding of what their colleagues are working on and where there are opportunities for collaboration. In the case of mergers and acquisitions, this shared understanding can also foster a sense of connectivity between employees at the two combining companies.
• Improving the employee experience. Clear communication and easy access to company knowledge help employees feel valued and supported during the integration process. This can help improve morale and employee retention rates.
• Improving the customer experience. When both companies in an M&A transaction share their knowledge of their customers and their markets, they gain insights that allow them to better serve their existing customer base (and potentially expand into new markets). 

Challenges With Knowledge Transfer in M&A

Of course, merging the knowledge of two companies is often easier said than done, especially when each company has thousands (or tens of thousands) of employees and a complicated web of knowledge management systems. Here are a few of the most common barriers to successful knowledge transfer:

• Lack of clear communication and planning. If the leadership team of the newly formed business doesn’t assign clear ownership of knowledge management, there’s a high likelihood that any meaningful knowledge transfer efforts will just remain “good ideas” that no one drives forward.

• Employee resistance. Going through M&A can feel tumultuous for employees, and some people may be reluctant to openly share their knowledge or expertise–either because they don’t see the value or they think hoarding information will provide greater job security.

• Limited time and resources. Building and implementing a knowledge transfer plan takes time and effort–especially when a newly integrated business needs to conduct an audit of all the knowledge that exists across various systems and content repositories. If the business isn’t able to dedicate appropriate time and resources to the project, it won’t be successful.

• Inadequate training. An essential part of any knowledge transfer plan is making sure all employees understand where–and how–to search for the knowledge they need to do their jobs. If they don’t receive adequate training, they won’t benefit from the organization’s collective knowledge.

• Difficulty in transferring tacit knowledge. While some knowledge (such as process documents and technical manuals) are easily documented and shared, the experiential knowledge that employees bring to their jobs–sometimes referred to as tacit knowledge–isn’t as easy to communicate. However, businesses still need strategies to preserve and transfer this tacit knowledge, as it can be incredibly valuable in helping everyone work efficiently and driving innovation.

Impacts of Poor Knowledge Transfer in M&A

If two businesses fail to effectively transfer knowledge when they integrate, they may fail to meet many of the goals of the M&A transaction. Possible outcomes may include:

• Loss of valuable knowledge. If businesses don’t proactively encourage their people to document their knowledge (and make it easy to do so), they risk losing valuable knowledge during the M&A process–especially if key people leave the organization.

• Decreased productivity. Merging two companies can mean that employees on both sides need to get up to speed on new processes, technologies, and product or service knowledge. If they aren’t able to access the information they need easily, their productivity will suffer.

• Increased disruption to business operations. Not only does a lack of knowledge access harm employee productivity, but it can also lead to delays and bottlenecks in different business processes.

• Low employee morale. Wasting time searching for information is frustrating. If employees feel like the newly formed organization isn’t setting them up with the tools and resources they need to be successful, morale will drop (which in turn increases the risk of high employee turnover).

• Decreased customer satisfaction. Employee experience has a direct impact on customer experience. If employees aren’t able to access the knowledge they need to be successful, the impact will trickle down to customers–whether it’s through delays in service, muddled marketing messaging, or even inaccurate customer-facing information.

• Increased costs due to errors or duplicated efforts. If different teams are working in silos–or accessing incorrect or outdated information due to a failure in knowledge transfer–there’s an increased risk that people will make costly errors or waste time duplicating work that has already been done somewhere else in the organization. 

• Reputational damage. When errors impact the customer experience–or when employees accidentally share inaccurate or outdated information–the newly-integrated company risks losing customers and earning bad press that can have a long-lasting impact on their reputation.

How to Successfully Transfer Knowledge in Mergers and Acquisitions

To avoid negative outcomes like knowledge loss and operational disruptions, businesses going through M&A must prioritize knowledge transfer during the integration process. Here are five best practices to ensure the knowledge transfer goes smoothly.

Create a steering committee for your knowledge transfer plan.

As previously mentioned, a lack of clear ownership can kill any knowledge transfer efforts. During M&A, it’s critical for leadership to identify the right stakeholders to create and drive a knowledge transfer plan. These stakeholders should form a steering committee that establishes the goals and requirements of the plan, brings in the right people to complete action items, and communicates progress to the larger organization as needed.

Conduct a knowledge audit to determine what assets need to be transferred.

Your organization can’t successfully transfer knowledge if you don’t know what assets exist, where they are stored, and who currently has access to them. That’s why any knowledge transfer plan should start with a knowledge audit: a thorough inventory of available knowledge assets and their strengths and weaknesses. Conducting a knowledge audit will help you determine where there may be duplicate or outdated information, what content needs to be migrated to new systems so the right people can access it, and where there are current knowledge gaps.  

Identify effective transfer methods for tacit knowledge.

The knowledge that lives in employees’ heads may be more challenging to transfer than standardized institutional knowledge, but that doesn’t mean it’s impossible. Explore creative methods for transferring tacit knowledge, such as training sessions, informational interviews, and mentorship programs. Record any live sessions to preserve the information in your knowledge management platform.

Foster a culture of knowledge sharing within the merged organization.

Employees from both integrating organizations need to feel comfortable sharing what they know. Leadership can encourage a culture of knowledge sharing by actively sharing their own knowledge, rewarding top knowledge contributors, and making it as easy as possible for people to document information.

Establish a centralized source of truth for company knowledge.

Last but certainly not least, your newly-integrated business needs one central source of truth for all shared company knowledge. If the two merging organizations each had their own knowledge management system (or multiple repositories), it’s important to identify one platform to use going forward and migrate all knowledge assets to this location. Creating a single, easily accessible source for company knowledge will help employees feel confident that the information they’re accessing is current and accurate–and it will reduce the time it takes employees to track down the information they need to do their jobs.

How Knowledge Management Can Help

Transferring knowledge during M&A is just one part of a larger knowledge management strategy. Your knowledge management strategy must include ongoing efforts to capture, organize, and share your organization’s collective intelligence, ultimately turning knowledge into a sustainable resource.

Business leaders recognize the value of having a knowledge management strategy, but many still feel unprepared to execute one. A 2021 Deloitte survey ranked knowledge management as one of the top three issues impacting company success, but only 9% of surveyed organizations said they felt ready to address this issue.

Those organizations that are able to successfully implement a knowledge management strategy have a distinct advantage over their less advanced peers–especially when combining the knowledge of two business units during a merger and acquisition. By centralizing the newly-formed organization’s collective knowledge and making it easily searchable in a knowledge management platform, they enable their employees to work more efficiently, ensure everyone has the same view of company information, and maximize the use of their available knowledge in business decision-making.

About the Author

Ben Little

Ben remains focused on the future of knowledge management and guides the company centered on the intersection of humans, knowledge, and technology. Empowerment and accountability are essential to how Ben builds companies. He knows and values the compounding effect of incremental, continuous improvements.