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!

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.

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