Risk Management Through
The M&A Process

•7/10/2013

•1
Agenda
 Introduction
 The M&A process
 Target Identification and Evaluation
 DD & Negotiation
 Post Integration

 Th...
Introduction
 Identification of major risks,
red flags and examples of
how they can be addressed
in due time and what can...
Introduction
 A workshop around Do’s and Don’ts and red flags for
efficient risk management during the mergers,
acquisiti...
Introduction
 How can the risk manager support the business and its
objective during the mergers, acquisitions and joint
...
The M&A Process
Target Identification and Evaluation

Due Diligence and Negotiation

Post Closing Integration

- Screening...
Target
Identification
and Evaluation

DD and
Negotiation

Post
Integration

 Strategic fit

 Culture crash
 Market risk...
7/10/2013

8
Corruption issues

7/10/2013

9
Corruption issues

7/10/2013

10
Target
Identification
and Evaluation

DD and
Negotiation

Post
Integration

 Do the negotiators understand the benchmarks...
Target
Identification
and Evaluation

DD and
Negotiation

Post
Integration

 DD and Negotiation Phase
 Operational risks...
Insurance
 Insure risk you do not
want to take

Traditional P&C
• Property
• Product Liability
• Public Liability

 Make...
Target
Identification
and Evaluation

DD and
Negotiation



Alignment of expectations



Post
Integration

Setup integra...
Target
Identification
and Evaluation

DD and
Negotiation

Post
Integration

 Don’t let the DD teams go and let others man...
100 Day Review
 Do’s
 On track and if not
 Root cause analysis
 Gap closing plan
 Update risk assessment per integrat...
Risk Managers Role
 Insurance only?
 Enterprise approach to M&A
 Help other stakeholders to build the
M&A process make ...
Questions

7/10/2013

18
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FORUM 2013 The Risk Manager's role in mergers, acquisitions & joint ventures in emerging countries

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FORUM 2013 The Risk Manager's role in mergers, acquisitions & joint ventures in emerging countries

  1. 1. Risk Management Through The M&A Process •7/10/2013 •1
  2. 2. Agenda  Introduction  The M&A process  Target Identification and Evaluation  DD & Negotiation  Post Integration  The Risk Managers role 7/10/2013 2
  3. 3. Introduction  Identification of major risks, red flags and examples of how they can be addressed in due time and what can happen if not managed 7/10/2013 3
  4. 4. Introduction  A workshop around Do’s and Don’ts and red flags for efficient risk management during the mergers, acquisitions and joint ventures process 7/10/2013 4
  5. 5. Introduction  How can the risk manager support the business and its objective during the mergers, acquisitions and joint venture process as in the post integration process 7/10/2013 5
  6. 6. The M&A Process Target Identification and Evaluation Due Diligence and Negotiation Post Closing Integration - Screening of candidates - Pre-closing-integration-plan - Organizational/legal integration - Leadership structure - Rough evaluation PREPATORY • Involves corporate strategic objectives • Combine analytical abilities • Internal coordination • Short communication channels • Top management decisions 7/10/2013 - Detailed evaluation - Internal decision TRANSACTION • High coordination requirements (int./ext.). Flexibility • High volume of communication • Combination of professional know how • Interface to target company - Human Resources integration - Cultural change INTEGRATION • Integration of units/people from target company • Knowledge management • Efficiency, time frame • Handling over to new entity management team • Controlling of activities 6
  7. 7. Target Identification and Evaluation DD and Negotiation Post Integration  Strategic fit  Culture crash  Market risk analysis – culture, history, HR, Country blue print  Are there environmental risks hidden in the selected target?  Corruption 7/10/2013 7
  8. 8. 7/10/2013 8
  9. 9. Corruption issues 7/10/2013 9
  10. 10. Corruption issues 7/10/2013 10
  11. 11. Target Identification and Evaluation DD and Negotiation Post Integration  Do the negotiators understand the benchmarks and company risk appetite?  Are the deal-makers more concerned with closing the deal than whether the target is a good fit with acceptable risk? 7/10/2013 11
  12. 12. Target Identification and Evaluation DD and Negotiation Post Integration  DD and Negotiation Phase  Operational risks        Property Process risks Contracts Pension liabilities Employee matters Supply chain risks IP rights – trust – transfer  Within existing country – check cost/implication of alignment  Use insurance as tool 7/10/2013 12
  13. 13. Insurance  Insure risk you do not want to take Traditional P&C • Property • Product Liability • Public Liability  Make sure your insurance policies are prepared for aquisition growth • Employers Liability • Motor Financial Lines • Directors and Officers Liability • Employment Practices Liability • Pension Trustee Liability • Commercial Crime  Red flag – do you know understand the exposure and do the targets team? 7/10/2013 • Professional Indemnity / Errors & Omission Transactional Lines • Warranty and Indemnity • Tax Liability 13
  14. 14. Target Identification and Evaluation DD and Negotiation  Alignment of expectations  Post Integration Setup integration workstreams  Operational  Finance  Insurance  IT  HR  Procurement  100 days review and follow-up 7/10/2013 14
  15. 15. Target Identification and Evaluation DD and Negotiation Post Integration  Don’t let the DD teams go and let others manage the integration without supervision.  Difficuelt to manage the integration through a phone  Dont let HR and culture wait until second wave integration after first integration wave (100 days) 7/10/2013 15
  16. 16. 100 Day Review  Do’s  On track and if not  Root cause analysis  Gap closing plan  Update risk assessment per integration work stream  Learning's into M&A polices and manual  Learning's to be used in second wave integration process  Don’t  Pretend it didn't happen and let the acquired entity ”alone”  Forget to have lessons learned to support continues improvement  Forget second wave integration 7/10/2013 16
  17. 17. Risk Managers Role  Insurance only?  Enterprise approach to M&A  Help other stakeholders to build the M&A process make sure that risk is in focus where relevant 7/10/2013 17
  18. 18. Questions 7/10/2013 18

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