Review and agree on the:
- Role of the Integration Steering Committee
- Role of the Integration Manager
- Integration Team Structure
- Integration Value Drivers Integration
- Guiding Principles
- Integration Approach
- Program Management
- Detailed Integration Planning Deliverables
Integration teams need clear direction in 15 areas before they begin detailed planning.
When M&A integration teams begin planning without clarity from top management, they are more likely to make the wrong assumptions, draw different conclusions, and veer off on tangents.
- Integration Value Drivers
- Integration Complete
- Integration Guiding Principles
- Integration Priorities
- Key Questions by Area
- Revised Integration Team Structure
Prepared by Steering Committee and IMO
Integration Team Structure
Integration Team Mission
Improving Financial Performance
Growing the Business
The Integration Process
Manufacturing/Operations, Purchasing, Engineering, Sales and Marketing, Customer Support, Administration, Information Technology, HR/Communications
Implementation Challenges and Opportunities
- Integration Guiding Principles
- High-Level Integration Plan
- Integration Timeline
- Value Drivers
- Governance Structure
- Governance Teams
- Steering Committee Roles & Responsibilities
- IMO Roles & Responsibilities
- Integration Meeting Cadence
- Integration Deliverable Examples
Pre-Close M&A Integration Efforts
- Identify comprehensive list of projects within each work-stream
- Assess internal and external staffing requirements
- Establish calendar by functional area and for entire transition effort
- Identify what work will be done pre-close...
- Success Metrics
- Sales and Costs
- Retention and Company Image
- Internal Communications and Training
Understanding the Deal 4 S’s
- Strategy for the deal
- Synergy for the companies
- Structure of the deal
- Steps for the M&A integration …
We’ll start with a one-question quiz: What do you think is the single best predictor of M&A integration success?
And here’s the answer: The length of the transition period.
The longer you take to integrate, the closer you live to the edge. Disappointing deals correlate highly with slow consolidation.
Decades of merger experience prove this. The turtle may win the race in fairy tales, but not in the grinding, gut-wrenching, high-risk game of merger integration. We’ve been saying this for years, and it’s coming close to being accepted now as conventional wisdom. Here’s the problem—companies still demonstrate big differences of opinion regarding what “fast” really is ...
1. TRUST IN SPEED
In years past, the conventional wisdom on the integration process advocated a slow transition. The rationale went like this: This is important. We must move slowly, carefully, and minimize mistakes. We can’t afford to overwhelm people with change.
It all sounded so logical. It seemed like such a caring approach so far as the people were concerned. The problem is, the thinking was dead wrong. Basically, employees hate a slow integration process. The approach lets problems fester, and it fails to take advantage of the energy stirred up by a merger event.
Being careful during mergers and acquisitions means moving quickly. Speed is your ally. A rapid integration approach that reflects a strong sense of urgency holds far more promise than a strategy based on caution. The mistakes that come from going fast are nothing compared to the …
If you’re involved in a merger, some of your best people in the acquired company are job hunting. Count on it.
Maybe you don’t have many who are circulating their resumes yet, but you can bet the majority are considering their options. Mergers are good at getting people’s attention. Everybody wakes up, looks around, and wonders how his or her career will be affected.
Some people can’t stand all the uncertainty and ambiguity, so they start looking for opportunities somewhere else. Others have a pretty good idea of what’s coming, but don’t like the looks of what they see. So they, too, decide to check out other job possibilities. The most talented people, of course, typically have the best alternatives. Executive recruiters aggressively seek them out, knowing that mergers always loosen the ties that bind.
Research shows that acquired firms, on the average, lose four out of ten managers during the first twenty-four months of a merger. This turnover rate is three times the rate found in companies …
So the deal closes. It’s “Day 1.” Are you ready for one of management’s big moments?
First impressions tend to be lasting impressions, and this highlights the importance of opening moves. Your initial actions make a defining statement about the forthcoming integration process and management intent. Up until this point, people will have been carefully listening to what management has said about the deal, but they believe what they see. Talk is cheap . . . the reality lies in what actually begins to happen before people’s eyes.
So how can you seize the moment and use this pivotal opportunity for maximum effect? Follow these seven guidelines and your opening moves will serve as a launch pad for successful integration …
How you begin the integration process carries heavy influence over how you will finish.
Many guidelines in M&A only apply to certain situations. However, these seven integration best practices should almost always be followed:
Don’t Try to Build One Common Culture
Are we saying you should trash the popular concept of corporate culture? Not at all. It’s the word “common” that needs dumping.
A few shared values...a couple of operating principles common to all parts of the new merged organization...a small handful of company-wide standards. That’s okay. That makes sense. That much you can get across to everybody and try to uphold or enforce during an integration ...
Beware of the integration do-gooders.
Chances are you have a few of these people scattered across the management ranks. I’m talking about soft-hearted managers, those misguided souls who seem to think you can run an effective integration without upsetting anyone. These are the folks who would sacrifice integration success in order not to disturb the organizational peace. They’re nice people and generally well intentioned. But here’s the irony: Theirs is the cruelest approach.
Merging two companies works best when you show deep respect for certain ground rules. When I say “works best,” I mean these ground rules represent the most caring and benevolent way of dealing with employees, just as they offer the most promising route to merger success …
Executives agree on a set of principles that will help direct the actions of integration teams such as:
- Who makes the final call if and when any impasse is reached?
- Which, if any, integration methodology will be followed?
- How fast will the integration proceed?
- How open will communications be?
First 3 of 10 Guiding Principles
- The transaction will benefit customers and the community
- All stakeholders will contribute; Acquirer is accountable and responsible for all decisions
- Integration leadership is committed to providing:
- Transparency and predictability
- Clarity, direction, and decisions
- Consistency across the program
What the organization will look like at the conclusion of the integration.
End states involve big questions (usually initially defined by executives) to provide direction to the functional teams such as:
- What functions will you integrate now, later, or preserve indefinitely?
- What IT systems will you use in the short-term and what ones will use down the road?
- To what extent will compensation, benefits and performance management be harmonized between organizations?
- What will the product portfolio look like?
M&A Integration Books
Smart Moves, by Price Pritchett, lays down the ground rules and the guiding principles that will improve your odds for integration success.
- How to avoid the 50% drop-off in productivity that routinely occurs
- Techniques for retaining key talent
- Why you must cut the typical high-risk transition/integration period in half
- Ways to minimize employee resistance
- Why merger management should start before the deal is closed
- How to handle the crucial task of “soft due diligence”
- The true priorities that deserve your energy and attention
- Why the first word in merger is “me”
...plus more extremely valuable coaching points designed to help you protect the “3 P’s”—productivity, people, and profits.
The cost of mergers and acquisitions goes far beyond the financial aspects of swinging the deal. The impact on productivity, profits and personnel in both the acquiring and the target firms is often overlooked. Lack of attention to post-merger issues leads to communication difficulties, operating tangles, loss of team play, power struggles, low morale, and employee bailouts.
It seems impossible that everyone involved can remain completely satisfied when firms are being acquired and merged. But neither does it seem that job stress should measure a 10 on the Richter scale. Surely mergers can be achieved without bankrupting morale, destroying so many careers, or causing so much damage to corporate momentum. Some of the answer lies in knowing, and respecting, the outrageous costs associated with mergers that are poorly managed. Another part of the answer lies in knowing the problems that must be faced, and the most common management traps. Finally, the last part of the answer lies in knowing the things that do work, and the timing for making them work. This book is aimed at providing the answer.
Mergers represent unconventional growth, and that calls for some unconventional moves. Much of what’s needed now is counter-intuitive stuff. Status quo management just won’t cut it. Growth in the fast lane requires quicker reflexes. A keener sense of timing. More nerve. Mergers make things happen in a hurry—you have much more to manage all at once. If you put the company in this particular groove, plan to speed up. Fast growth calls for fast management. Of course, this is out of character for many managers and executives. Over the years our corporate world made people more security-oriented… inclined to minimize risks…fond of stability.
That’s a slow-growth management style, one that’s downright dangerous when you’re driving an organization in the fast lane. It does all sorts of damage to the company, and it can wreck careers. It also helps explain why far too many mergers end up in the failure statistics. For now, you need to manage more entrepreneurially, making the moves needed to grow a business rapidly. Become a scrambler. Accept a work situation with more ragged edges. Make friends with risk. And in spite of all the commotion, concentrate on the essentials: Think few. You’re managing in a less forgiving situation for now. You need focus. Concentration. Plus a good dose of determination. The fast lane is a high risk/high reward proposition. You win big, or you lose big. Just remember—growth has rules. This field manual gives you a powerful set of guidelines to go by as you manage growth through mergers.