How Real-Time Transparency Makes PMI Meetings Effective

How Real-Time Transparency Makes PMI Meetings Effective

Your Integration framework is in place. Functional leads are fully armed, and at their battle stations. Ready… Set… DAY 1!

As soon as the clock starts ticking, every second in a PMI project matters. As Kaija Katariina Erkkilä outlines in her article on PMI speed, “speed in M&A integration execution does bring value and it correlates to the success of M&A.” With the ever-decreasing timeframe in which integration leads are expected to realize synergy targets, there are few things more important than a structured and diligent integration plan. But when day one hits and Pandora’s box is open, being able to track the success of your plan in real time is crucial to hitting your targets.

Weekly meetings are the lifeblood of most integrations, and have been the best practice until recently. Whether it is program meetings, project meetings, or ESC meetings, there are a few data points that need to be tracked consistently at a high-level.

  • Issues
  • Task Status/Milestones
  • Timeline
  • Responsibility

Classically, the integration leaders ask for updates from each functional lead/project manager, and get a verbal play-by-play of the past week’s happenings. In our current, tech-driven world, there are now digital tools that can increase meeting productivity and give M&A teams instant transparency into their processes. Integration team members can see what’s happening prior to meetings, ensuring focus on how to address issues, decisions needed, cross-stream dependencies, etc. This means that meetings’ action items are clearer, and time is spent proactively working towards targets, rather than retroactively getting updates on who did what, when.

Each of the integration performance items above are affected by the PMI teams ability to have “real-time” visibility:

Issues

Having instant visibility into the status of any potential issue enables corporate development teams to address risks before they damage the deal. Any PMI project will run up against unforeseen challenges, but proactively resolving issues leads to an increase in deal speed and value realization.

Task Status/Milestones

Many teams have thousands of tasks per integration, but there are always key milestones against which success is measured. Having the opportunity to check on the mission-critical items at a moment’s notice shortens the feedback loop within teams and empowers integration leads with the information they need to benchmark their teams against their schedules in real time.

Timeline

Let’s face it. Integrations very rarely hit timeline expectations. But, knowing where you are in relation to your goal is crucial. Having that 1-week gap in status update between team meetings might just be the difference between being on time and falling far behind.

Responsibility

PMI projects have many moving pieces in play. Governance is complex. The PMI leads manage the functional leads, who in turn must allocate resources from within their teams. Having a central platform that acts as a single source of truth is invaluable. Immediately, it becomes clear who is responsible for a task, who has signed off on what action item, etc. When there are multiple chains of command, being able to see changes in real time gives Integration leads the bird’s eye view that is needed to execute.

To quote Mark Herndon of M&A Partners, "The time has come to upgrade M&A integration management processes with simple, secure and state-of-the-art software solutions." This real-time transparency gives cutting-edge PMI teams full visibility and control in the perfect storm that is integration.

What is merger integration? What do i have to do?

What is merger integration? What do i have to do?

The task of post merger integration

An important ingredient in acquisition strategy is how you integrate the acquired company. Let us describe the task of post merger integration with goals and objectives. You have to think well about goals and objectives, since these will define what is being done through merger integration.

Goal of the merger integration task

The goal of post merger integration is to plan and execute the integration of two businesses. WIthin each business, there is an organization and there are many processes, which are to be aligned and/or integrated.

Objectives of the merger integration task

  • Maximize likelihood of integration success: each merger integration tries to reach successful completion meaning that there is no failure of the integration.
  • Continue target operations: in most cases, it is important to not interrupt the target operations with merger integration activities.
  • Fit integration type: there are different ways to integrate two companies, which are determined in the integration strategy. more information about merger integration types can be found here: Merger Integration Types
  • Fulfill synergy objectives: every merger has synergy expectations and objectives. Merger integration is targeted at creating such synergies.

Decomposition of the merger integration task

There are three subtasks: designing the new entity, planning merger integration (project) and executing merger integration project.
The first two should be started during due diligence to ensure merger integration success.

Learn more at the European workshop on merger integration

(C) Dr. Karl Popp 2017

Skills of integration managers

Skills of integration managers

The success of a merger integration program highly depends on the skills of integration managers and the integration team´s skills. So, what are these skills?

Skills of Integration Managers:
Managers that assign responsible for managing an integration project on a day-to-day basis require various personal skills, such as listening, communication, stakeholder management and people skills. However, in addition to these “soft skills” Integration Manager require also more “harder skills” such as project management, business know how and organizational know how. The entire skill-set that is required for successfully managing a post merger integration can typically be acquired only through first hand experience on-the-job. Therefore a valid question in many cases is, if one single individual should manage an integration project alone. A team of people with complementary skills that is led by a senior executive might be a more appropriate solution for integration management in many cases. However, taking into consideration that corporate top performer are typically not sitting on the bench waiting to be assigned to any post merger integration project (but are rather already busy with other important tasks) staffing of Integration Management is a often marked by compromises.

 

Skills of integration team members:
Skills that are required on the level of integration teams might include among others leadership, operative know-howand team management. Different to Integration Management where only few peoplemight get involved (often located within one corporate center) 100 and more operationalmanagers across various geographic regions are easily tight up as team members in a post merger integration. This includes typically not only managers and staff from the buying company but also managers and staff from the target company. Therefore PMI training with regard to team members is often more complex than with regard to Integration Management. Due to confidentiality aspects, time constraints and geographic spread in many cases pure digital courses that are accessible across multiple technical devices and teaching environments are the only way to train 100 and more operational manager from both the buyer and target being.

Come to the European workshop on merger integration and learn more

Best practices for managing the integration project

Best practices for managing the integration project

Best practices for managing the integration project 1

Best practices in merger integration have to include many aspects like timing, project management, handling exceptional situations and decisions and when to end the integration project.

In merger integration activities timing is essential. So when is the right point in time e.g. to merge teams of acquirer and target that do similar things? When is the knowledge of the acquirer complete to integrate HR functions of the acquired company? When is the right time to end the integration project?

Merger integrations are also high-risk, high effort topics that have to manage numerous exceptional situations. Project management practices are made for such projects. But there is the risk of keeping project members hostage in reporting activities instead of focusing on resolving issues and completing tasks. So a key aspect is to find the right dose of project management for keeping project control by providing appropriate follow-up and execution of critical tasks and minimizing the project management workload on project members.

Let us quickly look at the topics:  “When to mix up teams working on the same topics?” and “When to declare the end of the integration project?”

When to mix up teams working on the same topics?

So when is the right point in time e.g. to merge teams that are working on the same tasks, selling to the same customers, producing similar work results? We discussed different aspects.

The first one is that the acquirer has to have sufficient knowledge about all departments or teams that have to be integrated. Without that knowledge it is impossible to plan and execute change management needed for the transition into a merged team.

The second aspect is if the time is right to integrate if the immediate value of integration is maximized or the confusion and trouble is minimized. One example is the immediate integration of finance activities for maximizing the value for the acquirer to be in control of finance. Another one is integration of sales teams to avoid having two different, competing sales teams as “one” face to the customer.

When to declare the end of the integration project?

Ending the integration project makes sense when at least one or more of the following goals have been reached:

·         integration plan has been fully executed,

·         benefits of the acquisition have been reached or

·         organizational performance (fully functioning and stable merged organization) is ensured.

The selection of one or more of these goals depends very much on attributes of the merger, specifically on the department (or corporate function) to be integrated, on the culture of the target and the acquirer and on the integration strategy, like e.g. if the target should stay separate or should be fully integrated into the acquirer.

Change management in post merger integration and the role of the change manager

Change management in post merger integration and the role of the change manager

Change management in PMI is the process and methods (tools) to manage the people side of the integration to achieve the declared PMI goals. Therefore, it is important to link the change management to the PMI strategy and the project management in the PMI project. (integrated change management approach). Both change management and project management support the PMI transformation – moving from the actual organization of the Target through a change period (managed via the PMI project) to the future state (successful integration of the Target organization). Integrating the newly acquired company into your own organization, you are ultimately going to be impacting the following aspects: PMI Strategy, Structure (process organization and structural organization), People (like job roles) and Culture. Whenever you adjust those elements in your own organization or at the Target level you need to manage the technical side as well as the people side.

The role of the Change Manager

Experience has shown that it is supportive to inform the top and middle management upfront and to use them as multipliers. In that regard the preparation of Q&As is helpful and enables to speak the same language and to deliver equal key messages.
Who might be the adequate change agent? This depends on your own as well as on the Target organizations. Supervisors and Managers are Change Agents. Change Management is a leadership topic. Enable managers in their role as change agents through empowerment and awareness-raising workshops. However the concrete involvement and role depends on your specific PMI project. Undertake a stakeholder analysis as early as possible to identify the sponsors and other important multipliers.
The key element in change management is to set up a good communication from the start of the PMI process onwards. There is a need to effectively communicate the change to the employees – communication cannot be overdone. Set up a communication plan already during the due diligence phase. The main questions in that regard are:
• What is my PMI vision and mission? Is my message clear?
• Who is my audience, who is the right sender? (strategy issues should be communicated by the
Top Management level, personal topics (WIIFM=what is in it for me) as new job role by the
direct lead)
• What are the key messages? When is the right time to deliver the message? What is the right
delivery method and frequency?

if you liked this post, please come to the European workshop on merger integration

Hacking post merger integration

Hacking post merger integration

This page gives you the hacking rules to survive without damages in post merger integration of technology companies. No Insults, but crisp rules that help you enjoy your day today integration work.

Post merger integration Rule 1: Plan ahead.

get a detail post merger integration plan in place early. PRE CLOSE.

 

Post merger integration Rule 2: Minimize process risk.

document all steps for post merger integration, assign, monitor. done.

 

Post merger integration rule 3: Kindergarten time.

make sure a nanny is there. engage post merger integration process coaches with the new team AND your managers working on the post merger integration.

 

Post merger integration rule 4: Executives LISTEN!

outsource monitoring, ENGAGE in speedy problem resolution during post merger integration.

Post merger integration rule 5: Be there or be square.

there is no remote control for companies. go and see.

 

Post merger integration rule 6: It´s a people game: managers.

carefully select your own managers working in the post merger integration project. if they are morons, they screw up the post merger integration. This one courtesy of Johannes Gerds.

 

Post merger integration rule 7: the right energy rules.

In post merger integration, positive people with energy are rockstars. negative people with energy are jerks. get rid of jerks.

 

Post merger integration rule 8: If you´re not accountable, nobody is!

That one is stolen from project management, but it is even more true in post merger integration. With two organizations merging, enforce clear responsibilities and accountabilities, otherwise your are bust!

If you like this, come and learn more at the European workshop on merger integration .....

 

(C) Dr. Karl Popp 2017

A manifesto for next generation M&A processes

A manifesto for next generation M&A processes

Many M&A practitioners have worked on improving their processes for years. Numerous improvements have been created for the professional practice for mergers and acquisitions. Success rate of post merger integration projects have never been higher. Yet, increasing the automated or semi-automated part of these processes has not been in the focus.

Now is the time to reach the next level for these processes. We have to embrace technology to leapfrog today´s processes!

Thoughts on merger synergies

Thoughts on merger synergies

A (positive) synergy is the increase in shareholder value coming from mergers and acquisitions activity. Below is a list of potential synergies that are usually considered for mergers and acquisitions. If a synergy applies for a deal and how big the synergy is has to be analysed and planned for each deal.

Keep in mind that synergies are not self-fulfilling prophecies. You need careful planning, execution and tracking of synergy related work to realize synergies.

Synergies seen from outside of the companies

Looking at a company from the outside, the synergies of a merger can come from the following sources:

Relationship to Suppliers

  • increased negotiation and purchasing power

  • consolidation of existing suppliers and contracts

  • leveraging better existing conditions for a supplier contract from target or acquirer

Supplied goods and services

  • increase in purchasing volume and potentially a decrease in price

Relationship to financial institutions

  • increased negotiation and purchasing power

Relationship to customers

  • increased negotiation and purchasing power
  • increased revenue from upselling and cross-selling opportunities
  • increase in portfolio assets to be sold to customers
  • increase in the number of customers and/or markets covered

Sold goods and services

  • revenue effects from broadened portfolio
  • faster time to market since acquired goods and services are available immediately for selling by the acquirer

Relationship to partners

  • increased number of partners

Relationship to government and states

  • potential synergies for corporate tax

 

Synergies seen from the inside of companies

Synergies for all corporate functions

  • Centralization of tasks and elimination of organizational and functional redundancies is often cited as a main source of synergies

 

Cost synergies

Looking at cost synergies, two main sources of cost synergies are often cited: elimination of redundancies and reduction of inefficiencies.

Learn more at the European workshop on merger integration.....

 

(C) Dr. Karl Popp 2017

Reverse integration

Reverse integration

Reverse merger integration

What is reverse merger integration?

While the term Reverse Merger is exactly defined in the finance literature, Reverse Merger Integration is not well defined.

We will use a very generic definition here:

Reverse integration is defined as a merger integration, where the buyer adapts to the target.

So some aspects of the target are seen as a role model for the buyer and the buyer has to adapt to that . Adaptations can happen in e.g. organizational structure, processes, leadership or culture.

Merger integration and change intensity

What is the impact of mergerintegration on the buyer and target organization? The literature proposes a view on the number of changes in both organizations, which results in the following diagram.

Since we use a very wide definition of reverse integration, all of the boxes apply to reverse integration. Only in the case that the buyer massively adapts to the target and the target does not change a lot, a simple reverse integration is achieved.

Paths of reverse integrations in the change intensity diagram

Reverse integrations often start with a phase of preservation. The target company is owned by the buyer, the financial systems are integrated, everything else is not being impacted a lot.

Why is the preservation phase important? There are at least two reasons.

The buyer usually plans to continue the business of the target. Massive changes of the target organization can negatively impact the target business. This impact should be avoided.

The buyer has to learn what it means to adapt to the target business. A successful merger integration can only be executed with full knowledge about the target and the targets´business models. Preservation buys time to learn.

Path 1:  from preservation to reverse integration

Here, starting with preservation, the transition of the buyer organization into the target organization is being prepared.

Changes to the buyer organization are planned and executed. This results in the full or partial reverse integration

Path 2: making change happen in the buyer with transformation

From preservation, the path now leads to transformation. The buyer and the target adapt a lot to the other, creating a new organization or way of doing business. 

A new organization can be created e.g. if a target manager takes responsibility for target and buyer organizations. A new way of doing business can be created e.g. if the target brings business models that are new business models to the buyer. In this case, if the buyer wants to continue the business model, the buyer will learn how to run this new business model from the target and thus incur many changes to the buyer organization. Path 3: the open, learning organization absorbs the target During a short preservation phase, the buyer plans some few key adaptions. Then the absorption of the target business is being executed.

A new organization can be created e.g. if a target manager takes responsibility for target and buyer organizations.

A new way of doing business can be created e.g. if the target brings business models that are new business models to the buyer. In this case, if the buyer wants to continue the business model, the buyer will learn how to run this new business model from the target and thus incur many changes to the buyer organization.

Path 3: the open, learning organization absorbs the target

During a short preservation phase, the buyer plans some few key adaptions. Then the absorption of the target business is being executed.

These and similar topics will be discussed at the workshop! Looking forward to seeing you there.

These and similar topics will be discussed at the workshop!

Looking forward to seeing you there.

Results of the vote on merger integration hot topics 2017

Results of the vote on merger integration hot topics 2017

Dear readers,

the voting period is over. Here are the results

Communication in merger integration is the most popular topic. This is a change compared to last year´s #1, which was "Best practices for managing the integration project "

The topic "Talking to Martians: Cultural integration issues and resolutions" is second. Business model integration finished third place.

Here is the results overview:

What will happen next? The top ten topics from the vote will be covered at the European workshop on merger integration. So we keep our promise that the workshop is made for you.

We will select a renowned expert to be the workshop lead for each topic.

Each topic workshop will be in teams of ten and will start with collection of your questions. Questions collected will be discussed in the team. 

We have limited seats, so SIGN UP NOW to make sure you can join the workshop and learn from the best!

Key questions regarding  software tools for merger integration

Key questions regarding software tools for merger integration

Key questions regarding software tools for merger integration

Let us discuss tools for successful integration. We are not not referring to system integration, but tools for managing and supporting the Merger integration process from pre-deal through due diligence, up to and including post merger integration.

Today, Excel and Power Point are currently the most used tools in the M&A transaction/integration world. There are also several Virtual Data Room providers that offer solutions at a high cost.

For managing the end-to-end process, Excel, Power Point, and Share Point on their own do not really work. Every project is different and one needs to be aware of the complexity that tools bring with them. So do tools really work? Do they add value and justify the cost and time to introduce & maintain? Does email communication from a tool work?

We can at least specify a list of requirements that a tool should address:

  • Project / Deal based
  • Document repository capabilities
  • Project Management capabilities
  • Communication/collaboration capabilities (email/messaging/collaboration)
  • End-to-End process management (i.e. transition of Due diligence /Data Room info to integration team)
  • Reporting capabilities (i.e. on a project basis, and or for the entire deal pipeline/project portfolio)
  • KPI tracking capabilities
  • Knowledge bank capabilities
  • Highly performant and highly secure (especially with cloud based solutions)
  • Stable (i.e. updates must have no impact)
  • Highly configurable
  • Easy to deploy & configure
  • Easy to use with little/no training

 

A workshop to remember

A workshop to remember

52 professionals in the merger integration business met in Frankfurt to discuss topics based on  design thinking at Villa Kennedy in Frankfurt. The ballroom was equipped with three workshop spaces to ensure maximum interaction and productive discussions. Participants were equipped with personalized agendas that were based on their interests and wishes.

After the first keynote, "Dancing the integration tango" (video here), the design thinking coach fired up the crowd with a warmup game. Now everybody knew each other and was ready to start working. Three parallel workshops were focused on the topics of leveraging wisdom from a recent study, Integration planning during due diligence and after signing, and Integration of new business models.

Then, a second keynote presented by Jochen Schultze from Nokia focused on "Digitizing M&A - Nokia’s innovative approach to running complex global deals" (video here). After a short break, workshop interaction continued on the topics of Leveraging tools for successful integration, Best practices for managing the integration project and Change management. After lunch, there were two additional workshop slots covering, besides other topics, Synergy development across the M&A lifecycle,  Skills, education and organization of merger integration topics and Mastering IT Integration.

The workshop ended with an award ceremony, where three impactful Master Theses were presented a cash award.

What is the impact after the event? The community continues to interact in the Gesellschaft für PMI, all participants will receive writeups of the workshop to ensure conservation of the results, wisdom from the workshop will be shared in parts in the Free Knowhow section.

Feedback for the workshop was overwhelmingly positive.

A practitioner´s view on risk, risk perception and risk handling in merger integrations

A practitioner´s view on risk, risk perception and risk handling in merger integrations

Every acquisition and merger integration carries numerous risks. Actually, acquisitions and merger integrations have a bad reputation due to risk. Many integrations fail or do not reach objectives in a sufficient manner. This is why it is important to detect, evaluate and to manage risk in M&A transactions and in merger integration.

Risks can e.g. originate from the target company, from the acquiring company and from the integration of the two companies. In the best case, these risks are determined in due diligence, mitigations are planned and all is being handed over to the integration team as soon as possible.

Risk discovery in due diligence

While the target related risks are analyzed in detail in due diligence, the risks related to the acquiring company and the risks related to the integration itself are often neglected. In addition, not all risks can be determined in due diligence alone, new undiscovered risks might come up during the integration.

What you see is all there is

We learn from Kahneman that the risks that are being found depends very much on the experience of the people looking for risk. He says that you will only find the risks that you have experienced, heard about or read about.

This is why it is very important to use risk catalogues, experienced integration managers and risk managers. Walk through the risk catalogue to see if there are applicable risks, use your own or somebody elses experience to determine additional risks and run a risk workshop with an experienced risk manager.

Key risks in merger integration

Experience shows there are risks in merger integration that occur in each acquisition. While there are many risks outside of companies, let us focus here on risks inside the involved organizations. From my point of view, these reoccurring risks are:

  1. Brain drain/Attrition: key employees or a large share of employees from the target are leaving.
  2. Cultural integration problems: people don´t feel at home, feel lost or frustrated and thus attrition increases and people are leaving.
  3. Wrong perception and estimation of integration complexity and effort: acquisitions can get complex on many dimensions like size of the target and acquirer business, number of companies, countries and locations involved. With the complexity, the effort may skyrocket.
  4. Bad management of the integration scope and integration project: these are generic project management problems revisited. They also occur in merger integration projects.

How to deal with risk

In my view, there are four ways to deal with risk: Ignore, monitor, mitigate and sell.

Ignoring risk is dangerous alternative. If at all, you should use ignoring only for a risk that you think has very limited impact on the success of the merger integration and very small likelihood. And you have to be aware oft he difference between probability and likelihood. Likelihood means you only have a guess about the chance of a risk to become true and impact the merger integration.

Monitoring risks is a slightly better approach to risks. In this case you simply watch the risks to see if the likelihood or the impact has changed. If a likelihood or impact increases, you might switch to one of the following alternatives.

Mitigating risk is the preferred approach. This means you are trying to establish counter measures to be able to avoid the risk or reduce the likelihood or the impact of the risk. Be aware that mitigations needs people, time and budget to work.

If certain risks are perceived to have a massive financial impact and cannot be properly mitigated you might want to sell these risks to insurance companies. One example might be environmental risks of manufacturing plants.

Books i think are worth reading on risks and perception of risks

In addition you should expand your knowledge about merger integration failures, perceptions of risk and handling risks using the following books:

Learn more at the workshop...

Thinking, Fast and Slow
By Daniel Kahneman

I know the following book is in German, but it is the best book on risks in merger integration and how the better acquirers are acting compared to mediocre acquirers.

(C) Dr. Karl Popp 2016

Country specific factors in merger integration

Country specific factors in merger integration

What is the impact of countries on merger integration activities? If you work on a transnational merger integration, you should have knowledge on such factors.

 

Multinational target companies span several different countries with subsidiaries in each of the countries. There are many factors in a specific country that influence merger integration activities that are on a supra national, on a national, and on a local level. In addition, there are social and cultural factors that differ by country or region like work days within a week, national holiday calendars, the political environment and the presence and influence of trade unions.

Those factors are:

  • Legal framework
  • Sociological framework
  • Cultural framework
  • Political environment
  • Technological environment
  • Ecological environment
  • Local environment of the company

Here is more background on some of the factors:

 

Legal framework

Each country has a specific set of laws and regulations which apply to merger integration activities. These affect e.g. the transfer of physical and intellectual property, corporate compliance and reporting requirements, the behaviour in competitive situations, regulations and procedures regarding employment and business transfers as well as calculation and payment of taxes.

For merger integration, the legal framework sets boundaries and regulates integration activities such as integration of companies into a single legal entity and restructuring. Merger integration managers have to have knowledge of such legal frameworks to determine the impact.

Cultural framework

National cultures might differ when talking about religion, ethnicity and class structures. But according to Hofstede, national cultures also define the equality/inequality within society, the individual and collective aspects, the gender roles as well as uncertainty avoidance and anxiety in a society. For merger integration, you have to be aware of such cultural aspects.

Political environment

How does the political environment affect merger integration? In an active view, politicians drive legislation and budget decisions. They will engage with the acquirer if the expected positive effects of the merger integration are high and serve the politician well.

In a passive view, politicians have to react on possible negative perceptions and outcomes or side effects of merger integration activities like strikes by the workforce in the case of restructuring. For merger integration you have to be aware of the political environment in each country that is affected by the integration.

Technological environment

Different industries have different needs for the existence or the availability of technology in a certain country. This might relate to national technological infrastructure like availability of power, cooling, heating, transportation as well as local suppliers having the right technology, skills and supplies.

Ecological environment

A company is always embedded in its local ecological environment. Natural resources,  ecology as well as environmental protection requirements are examples of the ecological environment. Results from due diligence might create work items for the merger integration like environmental recovery activities.

Local company environment

Besides macro-economic factors discussed above, each local company is embedded in a microeconomic context with local competitors and suppliers and employees and has to deal with local conditions for financing and local laws and regulations.

For merger integration, you should consider and respect the local company environment and determine the impact of changes, mostly with the help of local employees.


Learn more at the workshop....and read this book:

 

(C) Dr. Karl Popp 2016

 

What can i do for merger integration during due diligence?

What can i do for merger integration during due diligence?

Merger integration due diligence

We introduce merger integration due diligence as a new type of due diligence that arises from the objective “Maximize likelihood of integration success”.

Definition of merger integration due diligence

Merger integration due diligence has the goal to review the merger integration project and plans. 

All aspects of merger integration are being reviewed for viability and for likelihood of success. Viability relates to the work breakdown structure for the integration to be consistent and complete. It also relates to resources (employees and budgets) that have to be sufficient and available. The objective of the task is to maximize the likelihood of merger integration success.

Based on the decomposition of the merger integration task we can define the corresponding decomposition of the merger integration due diligence task.

Review of the design of the new entity

The design of the new entity has to be reviewed for consistency and completeness. We start with the business strategy and plan layer and review the defined business strategy for the new entity. Then we enter the second layer and ask questions like: will the business processes work? Are the business processes compliant with compliance rules? Is governance of the business ensured?
In parallel, we have a look at the business resources and at the questions: Are enough qualified resources planned and available? Are the assignments of resources to tasks sufficient? Are sufficient resources planned and available?

Review merger integration plans

Next we review merger integration plans. Keeping in mind the design of the new entity and the resource situation, we review the schedules and the steps of the merger integration plans. We ask questions like: Can the merger integration plan be executed the way it is defined? Will sufficient resources and budgets be available at the right time to execute the merger integration plan successfully? What happens if we run late or we have resource shortages?

Review merger integration project

This is the part of the review that is often neglected in practice. We review the structure and behavior of the merger integration project.
It is important to keep in mind that the word “project” implies that we have a professional management of the integration leveraging professional project managers, experienced with complex projects and equipped with skills of a certified project manager. We should also have a project steering committee in place that has wide competencies and can drive and take decisions quickly.
We also focus on getting answers to questions like: Do we have the right assignments of resources to merger integration tasks? Are the resources capable of executing their assigned tasks? Do the resources have appropriate social competences to lead people and convince them the integration is the right thing to do?

With the results of the merger integration due diligence, you are well prepared to have the right budget, business plan and integration approach.

Learn more at the workshop......

(C) Dr. Karl Popp 2016

Different types of post merger integrations

Different types of post merger integrations

Defining types of merger integration

Here, we talk about merger integration type for results of the task for designing the new entity. Designing the new entity has to support or fulfill goals of the merger integration strategy. So let us look at dimensions of merger integration strategy.

Dimensions of merger integration strategy

The model of Haspeslagh/Jemison* offers two dimensions for determining the integration type: Strategic interdependence and Need for organizational autonomy.

Strategic interdependence relates to value creation from sharing of resources, from transfer of functional skills or management skills and from combination benefits.

The need for organizational autonomy describes the reasoning behind leaving the targets or parts of the target organization autonomous. So you have to answer questions like

  • "Is autonomy preservation essential to reach acquisition goals and objectives?"

  • "How much autonomy should the target still have post integration?"

  • "What are the specific areas of autonomy of the target?"

 

The four Merger integration Types

In the high level model above, you end up with four generic types of post merger integration:

  1. Preservation: The target company is preserved meaning that you leave the target company autonomous. Nevertheless, integration of financial reporting and financial processes might make sense.
  2. Holding: The acquiring company just keeps the ownership of the target company, but does not integrate the target company.
  3. Symbiosis: In this merger type, you decide where integration is needed to reach the objectives of the merger integration.
  4. Absorption: the acquiring company fully absorbs the target company. All organizations and processes of the target company are to be fully integrated into the acquiring company.

Choosing the right merger integration type

Based on the literature, the following heuristics help to choose the right integration type.

Learn more at the workshop.....

 

* Source: Haspeslagh, P.C., Jemison, D.B., Managing Acquisitions: Creating Value through Corporate Renewal, New York, 1991.

 

(C) Dr. Karl Popp 2016

Speed of merger integration

Speed of merger integration

There has been a lot of literature on speed of merger integration. Some say high speed is key, some say high speed is not always the solution. As usual, it is not easy to give general statements. I would like to propose a new view on integration speed that will help you to best select the speed for certain integration activities.

My key points on merger integration speed

Merger integration Complexity impacts speed

Speed is one thing, workload is the other. Even if you compromise on results quality for speed by targeting a "good enough" integration, you still have to cope with the workload of the integration. Higher complexity might force lower speed, lower complexity enables higher speed.

See my effort and complexity considerations for help.

Merger integration ability impacts speed

The acquirer´s ability to execute merger integration impacts speed. Abilitycan be measured by organizational maturity, which is measured in three dimensions: M&A experience, number of corporate functions existing and number of dedicated M&A personnel. See my book for more information. Less maturity forces lower speed, higher maturity enables higher speed.

 

A differentiated view on speed for different activities

Let us have a a look at speed in different integration activities and see the impact

  • Financial integration and speed

usually a high speed activity for a good reason: the acquirer wants to take control of financials. This can be done via organizational measures, like appointing a new CFO for the target,  change of financial processes and application systems and via legal entity integration.

Dependencies between actitivies and speed

Here are some dependencies between different merger integration activities and their impact on merger integration speed:

  • Legal entity integration schedule impacts speed.

You cannot integration what you cannot integrate. In many companies the schedule of legal entity integration determines the takt of other integration activities. Slow legal entity integration speed means slower overall integration speed.

See my book for more information.

  • Compliance considerations impact speed.

Compliance to bookkeeping and other standards needs preparation. Going from few to many compliance requirements takes time. The more difference in compliance requirements between target and acquirer, the more time might be needed.

  • Resistance of people impacts speed.

Now this is tricky. Resistance to change can exist. Resistance might increase over time and get harder to overcome. High speed of integration reduces the risk. Slow speed increases the risk of additional resistance.

  • Behavior of executives impacts speed.

Employees need orientation in times of fear, uncertainty, doubt. There may be up to thousands of integration-related decisions to be taken. Executive engagement and drive is paramount for speed. The more engaged executives are, the more speed the integration can have.

See my book for more information.

Similarity of target and acquirer and speed

Similarity comes in three dimensions: organizational, business model and operations model similarity and has an impact on merger integration speed as follows:

  • Similarity of organizations enables higher speed

the more similar organizations are, the higher the speed of integration can be. but there is a caveat: more similarity might also mean more overlap and redundancy between organization, which creates more complexity and probably slower speed.

  • Similarity of business models enables higher speed

the more similar business models are, the better the operations of these business models can be integrated. This enables higher speed. The reverse is also true. If business models are significantly different, this might impose slower speed of integration.
  • Similarity of operations models enables higher speed

How a business operates is a key thing to understand and to integrate a business. the closer an operational model is, the higher the speed of integration can be.

See my book for more information.

Learn more at the workshop .....

 

(C) Dr. Karl Popp 2016

Success factors in merger integration PART II

Success factors in merger integration PART II

Factors within the acquired company (continued) 

  • Private company vs. public company

While integrating a public company carries some delays in planning and integrating, a private company does not have these restrictions.
  • Low need for restructuring during merger integration

Merger integration is a huge change management challenge. Why not add some more change like restructuring? maybe not a good idea.
  • Low need for EbIT improvement

Same as for restructuring.

Factors between acquiring and acquired company

  • Similarity of organizations

the more similar organizations are, the less change will be anticipated and employees tend to find a new home and comfort more quickly. but there is a caveat: more similarity might also mean more overlap and redundancy between organizations.
  • Similarity of business models

the more similar business models are, the better the operations of these business models can be integrated. For software companies, this means easier integration in development and support but also in administrative functions. Look for similiarities by listing/modeling the business models of target and acquirer.
  • Connectivity of operations, production, business models, customer base, partner base

If there is a direct connection possible between business models etc. a merger makes sense. An example is the connection between an ecosystem of limo drivers of Uber with the transportation ecosystem of another company, because they can easily leverage one another. A special case is a horizontal merger, where companies with a connection of production are merged.
  • Similarity of operations models

How a business operates is a key thing to understand and to integrate a business. the closer an operational model is, the easier it is to integrate. You may use operations maturity models to determine the current and desired state of target and acquirer operations.

  • horizontal or vertical merger (but not a heterogeneous merger)

tbd

Factors in the business case for the merger

  • realistic synergy expectations

In practice, synergies may not come true or may come late or may not come at all! So be realistic in your synergy expectations. Why not start with a likelihood of 50% to reach expectations? It gets you some comfort and buffer. You would still shoot for 100% of synergies, but realistically you will never reach it as planned.

Environmental factors

  • approvals from regulation authorities are available

This is a simple go/no go decision by authorities. But it is important to get the approvals before you get too much involved in post merger integration.

Learn more at the workshop ....

 

(C) Dr. Karl Popp 2016

Success factors in merger integration PART I

Success factors in merger integration PART I

What are success factors in general?

Success factors influence the success of a merger integration project. Success factors can be described by:

  • influenced object (employees, revenue stream, timeline)
  • effect (retention of employees, more revenue,faster completion)
  • measures to support (increase salaries, hire salespeople, provide more budget)
  • tracking, e.g. by Key performance indicators (employee number retained, revenue, progress of project)

What are the success factors in merger integration?

By looking at a large number of successful and non-successful merger integrations you can identify the following success factors for merger integrations. The success factors are classified to be:

  • within the acquiring company,
  • within the acquired company,
  • between the companies,
  • in the business case for the merger,
  • environmental factors.

So let us list some of the important factors.

Factors within the acquiring company

  • M&A capability maturity

how well can the acquiring company integrate a target? it goes in three dimensions: number of people in corporate functions, amount of M&A experience in the acquiring company, number of dedicated M&A resources. for more information click here.

  • Integration plans in place before close

semper preparatus. you cannot execute when you have no plan to execute, it is simple but true and holds for acquisition integration, too.

  • Blueprinting workshop in place before close

if possible, you should work with the target to check your integration plans and create a joint plan. the advantage is buy-in from the target and you save time to discuss and agree on plans post close.

Learn more in the workshop and in part 2 of this blog on success factors.....

(C) Dr. Karl Popp 2016