The Evolving Role of theIntegration Managerby Sanjiv Mehta and Ryan McManus
IntroductionOver the past decade, the                            Their key observations are         Furthermore, while Acc...
Because deals are increasingly       How you shape the IM rolemore complex and the pressure        in your company can hav...
Challenge 1Working Across GeographiesMore and more deals are cross-border and involve multiplegeographies and cultures. A ...
Challenge 2Vendor and Outsourcing ComplexityThe last 10 years have witnessed an explosion in outsourcingacross geographies...
Challenge 3Multiplatform and Social Media IntegrationFrom a purely IT perspective, there has also been a shift from acentr...
Challenge 4Driving Transformational ChangeFor many companies, gone are the days of putting allin-flight and strategic proj...
Challenge 5Heightened Market ExpectationsJust as deal complexity has grown, many market analystshave become more adept at ...
Filling the IM RoleFor the reasons just discussed, the role of the integrationmanager is becoming increasingly more import...
ConclusionAs businesses have become more complex, so too has M&Aand the expectations of the IM. While traditional programm...
About Accenture                              About AccentureManagement Consulting                        Accenture is a gl...
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Accenture Evolving Role Integration Manager Report - Jan 2013


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Accenture Evolving Role Integration Manager Report - Jan 2013

  1. 1. The Evolving Role of theIntegration Managerby Sanjiv Mehta and Ryan McManus
  2. 2. IntroductionOver the past decade, the Their key observations are Furthermore, while Accenturenature and scope of mergers that deals are increasingly has demonstrated that theand acquisitions have changed global in nature, often require previously held belief that M&Adramatically, and the role of preservation of multiple destroys value may no longerthe integration manager (IM) is customer channels, involve hold2, global stock marketsevolving to keep pace. Accenture more extensive outsourcing and and many analysts continueasked several senior M&A multiplatform IT architectures, to monitor M&A delivery andpractitioners who have worked and include value drivers tied can either reward or punish aon some of the biggest deals in to the acquisition of innovation company’s share price basedthe world the past several years capabilities and niche products. on the visible milestones ofto describe both the considerable integration delivery.changes in M&A managementand the consequences for IMs1.1 See the list of acknowledgments at the end of this article2 “Who Says M&A Doesn’t Create Value?” Accenture Outlook, February 20121
  3. 3. Because deals are increasingly How you shape the IM rolemore complex and the pressure in your company can have ato deliver results even greater, big impact on your company’smany IMs no longer have the strategic ability to rapidly deliverluxury of focusing primarily on value. Here we look at how thethe details of an integration. changing nature of M&A isThey now often stand on the affecting the IM role and somefront line for their organizations potential ways to respond.and are required to providestrategic leadership—not justfunctional competence—to drivetheir organization’s agility. Themessage is clear: 2
  4. 4. Challenge 1Working Across GeographiesMore and more deals are cross-border and involve multiplegeographies and cultures. A challenge for the IM is to understand,anticipate and manage cultural, market and regulatory differencesacross geographies and market segments.Ideally, the IM has some direct, on-the- new geographic markets and management normalization of virtual collaborationground experience in the relevant regions. and regulatory norms. When developed tools (like video conferencing and virtualFor example, when HP acquired Compaq market companies buy into emerging deal rooms) can make cross-geographyit adjusted the plans developed at its markets, they may be unprepared for planning and subsequent execution easier.California headquarters to accommodate the localization and unique customer The IM must become a master of theserequirements across countries. It held requirements of that region. Similarly, tools, but the tools themselves may alsoglobal road shows and staff interviews they may lack knowledge of local present their own hurdles. While Web-internationally, and assigned country- infrastructure and political nuances based collaborative tools can allow thespecific IM leads. that could make them more successful.3 IM to more easily connect across Should companies, then, shy away from countries and time zones, they canInternational complexity can be further emerging markets? Absolutely not! also slow down relationship and trustintensified in deals involving emerging- Accenture research4 has demonstrated development between target and acquirermarket companies. These types of that established companies buying teams (versus in-person meetings),transactions may bring additional into emerging markets can actually which can make cultural assimilationchallenges, no matter whether an outperform other merger types. more difficult. In simple terms, a typicalemerging market company is the acquirer company’s culture is harder to experienceor the target. As acquirers, emerging One key is to recognize the additional via online chats and videoconferencesmarket companies may have a relative challenges inherent in an international than in person.lack of international management deal during both pre-deal and integrationexperience, resulting in unfamiliarity with planning. The broad availability and3 “Emerging Markets Entry – Keys to Success,” Accenture, July 20114 “Who Says M&A Doesn’t Create Value?” Accenture Outlook, February 20123
  5. 5. Challenge 2Vendor and Outsourcing ComplexityThe last 10 years have witnessed an explosion in outsourcingacross geographies, functions and business-critical elements.This requires the typical IM to have a clear understandingof the full scope of outsourced capacity and apply a riskmanagement perspective to vendor management.It is not unusual for vendors’ delivery alignment with the ultimate visionperformance to suffer once contracts and to avoid being influenced by theirare displaced or they no longer have competing agendas. Failure to properlyincentives tightly aligned with the manage this element of the integrationmerged company. could have resulted in significant business risks including customer overdraft issuesOne midsized banking merger, for and data center challenges, potentiallyexample, involved the rationalization and resulting in damage to the bank’sintegration of over a dozen outsourcing reputation. By being able to take theseproviders. The IM needed to understand factors into consideration in this instance,all the outsourcing agreements, lead the IM instead delivered cost savings bytimes, volume projections and systems removing inefficiencies and consolidatingchanges as well as determine if any of vendors where the opportunities existed.the outsourced capabilities should bebrought back in-house. The IM establishedfirm agreements with vendors to ensure 4
  6. 6. Challenge 3Multiplatform and Social Media IntegrationFrom a purely IT perspective, there has also been a shift from acentralized, integrated, single platform architecture—where oneof the two companies converts to the other’s platform—to aportfolio of different standards and applications, where a newlymerged organization may select and combine elements of bothcompanies’ platforms.As a result, the IM is often called upon customer impact. Given this shift toward At the same time, a company’s reputationto oversee the integration of many more multidirectional IT platform integration, can be at great risk if it fails to properlymoving parts. For example, one IM for a strong IMs must be able to drive effective manage across channels, given the sociallarge global financial institution sought change management within both the media outlets that customers can use toto understand how customer reference target and acquired organizations. voice their dissatisfaction. The IM needsdata was consumed, mapped and utilized to be customer focused and consider theacross customer-facing channels, banker IMs must also drive integration across an customer impact of material and analytic channels (including increasing number of customer channelsrisk/regulatory reporting, online banking, and IT architectures. Customers in manytellers, branch sales and the services industries now interact with companiesdesktop). In developing the proper across retail, social media, Internet,analytical models, the IM was able to phone and other channels; direct anddetermine which customers would be indirect, formal and informal. Integrationimpacted by which conversion events. This must often address multiple channelsallowed the IM’s company to implement simultaneously to prevent disruption ofmitigating actions that minimized any aspect of the customer experience.5
  7. 7. Challenge 4Driving Transformational ChangeFor many companies, gone are the days of putting allin-flight and strategic projects on hold until a merger isimplemented. Today, market forces often require companiesto respond quickly and to deliver needed enhancements evenduring a merger.That means IMs are increasingly required the IM needed to determine appropriateto drive transformational change while tradeoffs between cost savings withexecuting post-merger integration. speedy delivery of the merger andBecause many companies regularly creating the capacity to support large-have multiple, enterprise-wide projects scale customers. In this particular case,already in process—which in a previous Hancock succeeded in delivering theera might have been postponed but now merger within 100 days of the originaloften remain green-lighted—IMs are plan with a prioritized set of newoften called upon to manage their merger products and offerings.integration activities to accommodateand address ongoing transformational An emerging type of transformationalactivities. Many times this requires a change is the acquisition of smallerrelease management strategy where companies for their innovation andtransformation releases are intertwined entrepreneurial capabilities. Synergywith integration releases to reach an targets related to this type of deal canultimate future state target. Similarly, represent a different dynamic than buyingthe acquisition of distressed assets in companies to simply extend geographicaltoday’s economic environment may reach or to realize cost synergies. Anrequire several stabilization activities acquired product set may fill a discreteto be implemented in tandem with niche in the acquirers’ overall portfolio—integration activities. Cisco regularly employs this strategy, for example—or it may be integrated broadlyA good example of matching across the acquirer’s existing platformstransformation with integration can be and products.found in the Hancock-Whitney merger,where two healthy $10 billion banks When a company’s M&A strategyjoined to create a $20 billion bank with includes these smaller deals, the IM mayaspirations to be a $40 billion bank. need to run several smaller integrationsHancock was known for its strong retail simultaneously while at the same timebank and Whitney for its exceptional managing the additional challenge ofcommercial/corporate bank. The combined spreading entrepreneurial energy across acompany wanted to bring the best of large company.each to both sets of customers whilealso attracting larger clients who wouldbe expecting more services. In addition,shareholders expected Hancock to deliverboth cost and revenue synergies. Thisambitious plan called for a fundamentallydifferent strategy and operating model: 6
  8. 8. Challenge 5Heightened Market ExpectationsJust as deal complexity has grown, many market analystshave become more adept at understanding what drives M&Asuccess and are scrutinizing value delivery more closely thanever before. Analysts understand that appointing the right IM iscritical to delivering a successful deal, and are looking for quickwins in support of share price movements.IMs are now often expected to generate Mark Little, current executive vice Little was able to assess the synergysubstantial, newsworthy achievements of president, Oil Sands and In Situ, at Suncor and operating model potential withmajor revenue or cost synergies that can Energy is an excellent example. Little unique objectivity and outsidebe trumpeted to the analyst community in previously served as senior vice president, perspective. As a relatively newthe first post-close earnings cycle. More Strategic Growth and Energy Trading, with employee to Suncor, he and his co-seniorand more, we see “Strategic IMs” who the company and played a leadership role vice president of merger integration,concern themselves with generating quick in the company’s merger with Petro- Harry Roberts, a respected industrywins and realizing the overall business Canada and then led the integration veteran from Petro-Canada, were largelycase, leaving “checklist” integration tasks program. These positions leveraged his viewed as fair arbiters and drivers ofto functional integration leads. This trend extensive career experience; he had the merger integration process by bothmay be further fueled by the fact that previously held leadership roles in many legacy companies.more and more IMs are being rewarded mission-critical businesses and functionswith substantial options and share grants, such as oil sands and refining operations,and as such are behaving much more like government and regulatory relations,senior executives. strategic planning, environment, health and safety, and energy trading.Timing is a critical issue here. Our “InsideCorporate M&A” research5 shows that His role in the merger process includedacquirers typically achieve higher returns due diligence as well as valuation, andand synergies when they appoint IMs pre- during the integration process, leadingannouncement. That is, IMs are more and the effort to capture synergies and createmore beginning their role in the target an operationally efficient business model.screening and due diligence phases, which His end-to-end knowledge of the industrycan allow them to also understand how and the acquisition—its investmentspecific strategic targets were developed. thesis, its due diligence findings, and itsAlso, the company sends a positive detailed synergy estimates—allowed himmessage when it announces that its IM is to drive an effective and efficient mergergoing to be an experienced manager with and integration. This was reflected ina deep understanding of a deal’s strategic the results achieved: a window betweengoals and end-to-end business knowledge merger announcement and close of only(and, especially for bigger deals, some four months, the delivery of quick winsprior merger integration experience). and a seamless Day 1, and planning to deliver significant cost synergies within the first two quarters following close.5 “Inside Corporate M&A, The Formula of the Fittest,” Accenture, 20117
  9. 9. Filling the IM RoleFor the reasons just discussed, the role of the integrationmanager is becoming increasingly more important. IMs arenow expected to directly address the challenges and ownmore of the decisions stemming from the changing nature ofM&A, rather than passing them up the chain of command.Likewise, many chief executives are less Finding all of the skills in a single person In any case, it is clear that naming aapt to throw a merger at direct reports is for many an exceptionally difficult deep functional expert as IM can bewithout having a trusted leader at the challenge. Where such individuals exist, problematic: Such specialization, whilehelm. While it is of course important that they are typically among a company’s powerful within a function, may resultIMs have the support of and maintain a top performers and are already busy in the IM’s inability to understand theclose working relationship with the CEO with a broad portfolio of management big picture and is almost by definitionand other members of the executive responsibilities. It may be difficult to inconsistent with the end-to-endteam, it is also important that they be motivate them to serve as an IM for one business perspective desired for thisable to arbitrate difficult decisions and be to three years with a simple promise of a role. Interestingly, the same caveat oftenreasonably unafraid of ruffling feathers. good job afterward, especially for a role applies to experts within a company’s which is more difficult and 24/7/365. in-house Corporate Development team ifIt is typically more experienced senior it has been focused exclusively on pre-leaders who possess the necessary Despite this, we have observed Operations deal work because such teams typicallystrategic and financial acumen as well as emerging as a natural place to find concentrate more on getting the dealthe execution management capabilities executives with the right portfolio of closed than on planning and deliveringthat allow them to work on both pre- skills, due to their exposure to multiple integration activities or developingand post-deal aspects and manage the aspects of the business across strategy, transformation strategies.variety of internal and external teams process, products, teams and IT. Oneand specialists on both sides. This broader organization backfilled the Operationsvision can allow them to better prevent responsibilities of the COO it eventuallythe potential chaos that occurs during named as the integration lead. Financeintegration. With so many moving parts, has also produced some strong IMs,events and decisions to be made, the especially given their understanding ofIM needs to keep the team focused on the financial synergies. One midsizedthe ultimate outcome while being able brought back a senior executiveto execute quickly without panicking or from retirement to fill the IM role;creating additional churn. others companies have named chief administrative officers or heads of strategy. 8
  10. 10. ConclusionAs businesses have become more complex, so too has M&Aand the expectations of the IM. While traditional programmanagement skills and a willingness to roll up one’s sleeves anddive into detail are still important qualities, it is less importantthat these reside directly with the IM.Rather, IMs need to be the leaders IMs need to embody their company’swho can build a team that has the strategic agility—anticipating changesmore tactical skills while focusing their in their marketplace, as well as theown attention primarily on strategic opportunities and risks in their newlyobjectives, managing for the markets, and merged organization and how these willteam management. impact synergy realization and quick wins. They must anticipate customerSuccessful integration managers needs and competitor moves, and adaptin today’s fast-paced and complex their integration plans, processes andenvironment are often more senior and organizational structures to respond tostrategic than their predecessors, and these changes, all while continuing topossess more end-to-end business and execute the merger, manage the businessdeal knowledge. They typically have and motivate staff.had exposure to multiple aspects of thecompany and hold a deep understanding Today’s integration manager has evolvedof a deal’s value targets and how to to embrace the concurrency of initiativesdeliver the synergies. and rapid global change, and to operate as a senior leader driving successful deal outcome.About the AuthorsSanjiv Mehta is a Chicago-based senior New York-based Ryan McManus is a The authors would like to thank Brucemanager in Accenture’s North America senior manager in Accenture’s Global Kiene, Tom Herd, Kirk Coleman, JasonCorporate Strategy and M&A practice. Corporate Strategy and M&A practice Gandy, Kelly Good, Chad Jackson, KimHe has assisted with more than 30 and the Global Strategy Operations Kacal, Markus Rimner and Justin Ruckertransactions in a number of industries Leader. McManus has published a number for their contributions to this article.such as energy, insurance, technology, life of articles on global M&A, innovationsciences, pharmaceuticals and printing. and international market expansion andIn addition to management consulting, emerging market entry.Mehta has held positions in corporatedevelopment, corporate strategy and ryan.mcmanus@accenture.cominvestment banking.sanjiv.mehta@accenture.com9
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  12. 12. About Accenture About AccentureManagement Consulting Accenture is a global management consulting, technology services andAccenture is a leading provider of outsourcing company, with 257,000management consulting services worldwide. people serving clients in more thanDrawing on the extensive experience of its 120 countries. Combining unparalleled16,000 management consultants globally, experience, comprehensive capabilitiesAccenture Management Consulting works across all industries and business functions,with companies and governments to and extensive research on the world’sachieve high performance by combining most successful companies, Accenturebroad and deep industry knowledge collaborates with clients to help themwith functional capabilities to provide become high-performance businesses andservices in Strategy, Analytics, Customer governments. The company generated netRelationship Management, Finance & revenues of US$27.9 billion for the fiscalEnterprise Performance, Operations, Risk year ended Aug. 31, 2012. Its home page isManagement, Sustainability, and Talent Organization.Copyright © 2012 AccentureAll rights reserved. 12-3918 / 11-5515Accenture, its logo, andHigh Performance Deliveredare trademarks of Accenture.