Over the last several years, we have seen numerous mergers of hotel organizations in what was widely touted as a period of significant consolidation in the U.S. hotel industry. Driven by inexpensive acquisition capital frequently the result of the frothy pricing of hotel stocks on Wall Street - the urge to merge" was close to a fever pitch in late 1997 and early 1998. Since then, Wall Street has adjusted its view of the hotel sector and our industry's leaders have since focused on getting their enterprises to produce the results their shareholders have come to expect. This year   the run-up to the new millennium - could be the year when M&A deal-makers finally defer to their hotel operating brethren to "get it together" and figure out ways of putting the requisite results on the table   or in the beds as it were. And probably none too soon.

Big companies have become bigger, but have they become better? This is a question of some relevance to the various stakeholders with an interest in what happens at some of our leading companies. Post-merger integration is one area of particular importance in ensuring that the synergies promised by the deal-makers are in fact delivered after the closing. There is some evidence to suggest, however, that the benefits of merging companies can be quite elusive. One recent study of post-merger results suggested that approximately one-half of merged entities under-performed their industry rivals following the merger.

Having witnessed a flurry of mergers in the hotel industry' in recent years, there are a number of lessons that we might note. To simplify that message, the issues are summarized in the listing that follows. It forms a road map of sorts for ensuring you can beat the odds on post-merger integration success.

Strategies for Merger Success 
 

For those already in post-merger mode, it will be too late to deal with the pre-merger issues outlined above. But for the here-and-now, there are clearly a number of post-merger challenges that require a great deal of attention. Those operators who take the time to deal with them proactively will probably be able to mitigate any mistakes made in the pre-merger deal-making phase. They might then be able to move on to ensure that their new and improved company succeeds in beating the challenging odds on post-merger integration success.

(Roger Cline is Director of Hospitality Consulting Services and is a Partner in the New York office of Arthur Andersen.) 

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