Mand a toolkit pmi theory


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Mand a toolkit pmi theory

  1. 1. M&A TOOLKIT Post Merger Integration: PMI Theory© 2007-2013 IESIES Development Ltd. All Ltd. Reserved © 2007-2013 Development Rights All Rights Reserved
  2. 2. Best Practice requires a focus on deal-specific priorities, whilefollowing general “motherhood” advice DEAL SPECIFIC PRIORITIES • What was the strategic rationale? What are the “crown jewels” we have to protect in this deal? • What is the Value Hypothesis? What do we have to do to realise the value? GENERAL “MOTHERHOOD” ADVICE • Create a plan before the deal closes • Plan communications to all stakeholders • Ringfence integration team and resources • Form combined team from both companies • Identify and retain key people • Retain customers © 2007-2013 IES Development Ltd. All Rights Reserved
  3. 3. Integration tends to be complete and fast when resources are bought; partial and careful when values are importantRESOURCE-PROCESSES-VALUES FRAMEWORK Resources Processes ValuesRelatively easy to Hard to assess Almost impossibleassess value value to assess valueEasy to change, Hard to change, Almost impossibletransfer and reorganise and to change, transferrationalise rationalise and rationalise FULLY INTEGRATE LEAVE STAND-ALONE Fast Careful © 2007-2013 IES Development Ltd. All Rights Reserved
  4. 4. Your first priority in merger integration is to do no harmPROTECTING VALUE IS THE FIRST PRIORITY IN PMI • Identify the “crown jewels” that represent the value you bought the business for  Resources – e.g. customers, top salespeople  Processes – e.g. brand mgt  Values – e.g. low-cost, entrepreneurial • Make sure they are  Monitored at senior levels  Retention/Incentives put in place  Not risked in the name of short term cost savings © 2007-2013 IES Development Ltd. All Rights Reserved
  5. 5. Different types of M&A will have different M&A approaches What is bought? (R/P/V?) Integration Approach?OVERCAPACITY Mainly Resources Fast, bloody, high potential for culture clashGEOGRAPHIC Resources/Values Can take time, be win/win; keep localROLL-UP company intact; install key value- adding processes (that don’t mess with values)PRODUCT OR MARKET Infill Product: R Infill: Immediate & fullEXPANSION New Product Platform: P/V New Market: P/V Platform and Market: Careful; cross- selling onlyR&D Often only Resources As product, depending on Infill or PlatformINDUSTRY Resources/Processes/Val Complex; existing companies usuallyCONVERGENCE ues best left alone; leverage Resources to create Newco © 2007-2013 IES Development Ltd. All Rights Reserved
  6. 6. The key risk in merger integration is to destroy the Processes and Values of the target in the pursuit of cost savingsBALANCE IN MERGER INTEGRATION Pressure to Patience deliver cost needed to savings and understand synergies fast acquisition © 2007-2013 IES Development Ltd. All Rights Reserved
  7. 7. Use analysis to determine the risk of culture clashASSESSING THE RISK OF CULTURE CLASH How far apartare the cultures? Position: •IBM-Lenovo? •Framedia-Focus Media? •Snapple-Quaker Oats? How great a •Gome China Paradise? change is required? How many people need to change? © 2007-2013 IES Development Ltd. All Rights Reserved
  8. 8. The acquirer will have to make key trade-offs in deciding their integration approachKEY INTEGRATION DECISIONSStrategy First Integration FirstFast and “good Slow and carefulenough”Acquirer driven Acquiree drivenTransfer best Transformpractice “best of both”Integration Integration Process“CEO” ManagerFully staffed Lean Integration“Integration Office” © 2007-2013 IES Development Ltd. All Rights Reserved team
  9. 9. Post Merger Integration issues can be prioritised by Importance and Urgency CLASSIFYING PMI ISSUESRelativeImportance Mission Critical Important Low First 100 days First Year 3 Years Urgency © 2007-2013 IES Development Ltd. All Rights Reserved
  10. 10. One of the most important integration decisions is leadershipMANAGEMENT CHOICES FOR ACQUIRED COMPANY Existing management Don’t do anWho is going to acquisition if Hire new Pros and cons you don’trun the acquired management of each? know whocompany? will run it afterwards Parachute in your own management Which is the easiest choice? Why is the acquisition of a company that has to be turned round so difficult? © 2007-2013 IES Development Ltd. All Rights Reserved
  11. 11. Identify what the post-merger integration model will look like EXAMPLE: AIA/PRUDENTIAL DEAL Post-integration organisation Integrated: •One Country CEO •All Middle Office functions •All Back Office functions Left separate: •Agency salesforce •Bankassurance relationships Why did they select this structure?Source: Prudential Investor presentation IES Development Ltd. All Rights Reserved © 2007-2013