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mergers & acquisitions   the hr perspective   by karl icelli
Presentation Content <ul><li>Key focus areas   </li></ul><ul><li>Understanding the critical success factors for successful...
M&A process overview Devil is in the detail! Contract Signed Confidentiality Agreement Letter of Intent Closing Business &...
M&A  Key facts <ul><li>M&As are emotional events which affect everybody. </li></ul><ul><li>M&As create an expectancy of ch...
Why do a Merger or an Acquisition? Human capital factor is critical * Adapted from Mercer Delta Rationale Critical Success...
Defining the end state is a must What is the anticipated degree of change? BEST  OF   ALL Absorption Reverse Merger Preser...
Operational reality during M&A  Building the plane in the air  Mergers & the operations <ul><li>Grow the business </li></u...
HR’s role in today’s economy A true business partnership model Transformation emphasizes strategic partnering on revenue g...
HR’s role in M&As The people dimension <ul><li>Deal Synergy </li></ul><ul><li>Due Diligence </li></ul><ul><li>Sale & Purch...
HR for M&A  The 4 key stages.. <ul><li>Work with the Business & Corporate Development to : </li></ul><ul><li>Identify busi...
Pre acquisition dialogue It’s the questions!   The key:  The role of HR is to force the dialogue no one wants to have!   I...
Deal negotiation Key recommendations for HR items.. <ul><li>From the HR Playbook … </li></ul><ul><li>Understand deal syner...
Integration strategy To what degree do we integrate? Business strategy dictates the decision..   * Source Mercer Delta Int...
Transition challenges Significant change comes with acquisition Transition State HR  Organizational  Restructuring HRIS  T...
Transition infrastructure It’s a balancing act Transition Management Balance Time and urgency is our friend! Under Planned...
Change management dimension Paradigm shift “ Communication” “ Struggle” The “what & how” 5.  Obtain the support of key pow...
Leadership issues; “C” players are costly Determining the right leadership early on is key Fewer “A” players attracted to ...
A strong team is needed to manage Transition  Leadership and accountability is everything CEO Transition Exec BU1 Transiti...
Integration leader Essential profile.. 10 Most Important Qualities of an Integration Leader * 1999 GE survey of BD leaders...
Integration leader Core competencies.. People & Leadership Process & Change Mastery Functional &  Technical Strategy &  Bu...
Critical success factors Leadership and transition management 1.  Select the  best   leaders 2.  Staff the transition team...
How to ensure the right Leadership? Key principles <ul><li>Purpose </li></ul><ul><li>Implement a simple process that assis...
Leadership assessment Best practice <ul><li>Performance rules …high performance (results  and  leadership behaviors/values...
Assessment strategy Solidity of 1 st  floor HR is critical   <ul><li>Target’s Performance Evaluations </li></ul><ul><li>In...
Alignment of leaders will be required  Institutionalizing culture is a pre-requisite <ul><li>Extensive  new leader on-boar...
The cultural dimension Why we need to focus on it?   <ul><li>More autocratic behavior </li></ul><ul><li>Over-dependency on...
Post M&A Emotional states THE READY Overly aggressive. Acting superior. What to Watch for: Energy and excitement. Charged ...
Post M&A Emotional states.. THE WANTING Depression. Anger and vindictiveness. What to Watch for: Working through loss. Adj...
Post M&A Emotional states… THE WRUNG OUT Have the same job, but things have changed… … more distant from leadership … more...
Objective and subjective realities Must be balanced <ul><li>Mechanics of integration </li></ul><ul><li>Financial targets a...
Cultural integration Lots of choices…what fits your strategy? <ul><li>What does the business case require or dictate? </li...
Cultural change Key steps <ul><ul><li>Senior management must:  </li></ul></ul><ul><ul><ul><li>Understand gap between where...
Cultural assessment tools Examples.. <ul><li>Surveys; </li></ul><ul><ul><li>Energy Culture Survey </li></ul></ul>Structure...
Communication Critical success factor for cultural change <ul><li>Emotional state of people needs to be managed carefully!...
Global success rate of M&As Consultant’s benchmark Mercer Coopers BCG Bain Mitchell Madison CFO Survey McKinsey KPMG 37% 3...
Why do M&As fail Scenarios.. <ul><li>Operational hubris </li></ul><ul><li>Avoidance of “deal breaker” issues or emerging c...
Lessons learned Some do’s and don’ts.. 1.  Speed is our friend. 2.  Leaders must demonstrate courage…and create clarity   ...
Lessons learned Continued.. 8.  Invest heavily in leader on-boarding processes 9.  Move key talent… quickly! 7.  Changing ...
Wrap up Its all about acquisition.. <ul><li>Is there a difference between a merger, a merger of equals and an acquisition?...
thank you..
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M&amp;A For Hr Summary

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Based on my learnings over the years herewith some Do\'s and Don\'ts before, during and after a corporate transaction; most of it is common sense but it\'s amazing how many companies got it wrong and are continuing on the wrong path..

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  1. 1. mergers & acquisitions the hr perspective by karl icelli
  2. 2. Presentation Content <ul><li>Key focus areas </li></ul><ul><li>Understanding the critical success factors for successful integration of cultures and employees </li></ul><ul><li>Analyzing important impact areas and roles for HR especially at the early stages </li></ul><ul><li>Using best practices to select and rapidly assimilate combined company leadership </li></ul><ul><li>Selecting and inducting integration leaders </li></ul><ul><li>Preparing employees to deal with the realities of a major M&A change </li></ul><ul><li>Desirable platform </li></ul><ul><li>Workshop environment or a project team meeting prior to m&a activity </li></ul><ul><li>Cross table discussions with CXOs and human resource executives </li></ul><ul><li>Use of a case study to apply best fit concepts and best practices; to stimulate group discussion and learning </li></ul><ul><li>Application of learning in an ongoing dialog with presenters and peers, led by facilitators </li></ul>
  3. 3. M&A process overview Devil is in the detail! Contract Signed Confidentiality Agreement Letter of Intent Closing Business & Legal Due Diligence (Pre-Signing) Confirming DD/Audit (Pre-Closing) Deal Hand-Off (Post-Closing) Preliminary Due Diligence (Pre-LOI) DD INTENSITY LEVEL Deal Valuation <ul><li>Due Diligence helps ensure: </li></ul><ul><ul><ul><ul><li>Right Decision </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Right Price </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Right Structure </li></ul></ul></ul></ul>Integration
  4. 4. M&A Key facts <ul><li>M&As are emotional events which affect everybody. </li></ul><ul><li>M&As create an expectancy of change and increase territorial concerns. </li></ul><ul><li>Merger or acquiring management is invariably over-confident in their estimation of the speed of integration. </li></ul><ul><li>M&As result in unplanned personnel losses. </li></ul><ul><li>M&As are stressful. </li></ul><ul><li>Managing M&As is as much about managing people as it is managing results. </li></ul>So where do we start?
  5. 5. Why do a Merger or an Acquisition? Human capital factor is critical * Adapted from Mercer Delta Rationale Critical Success Factor Acquisition of critical technical talent Retention of key individuals Access to new customers for existing offerings Maintenance of positive customer relationships during combination Access to new markets & products Retention of key individuals Access to new products, technology, or processes Retention of key individuals Economies of scale from combined operations Effective combination of operations and removal of redundant resources
  6. 6. Defining the end state is a must What is the anticipated degree of change? BEST OF ALL Absorption Reverse Merger Preservation Transformation ACQUIRER ACQUIRED (Q) Technical Strategy X (A) Cultural Acceptance = (E) Effectiveness Change Effectiveness Formula 1. (A) is equally critical as Q 2. Get (Q) right! Cultural Acceptance is tough with a poor Technical Strategy CHANGE
  7. 7. Operational reality during M&A Building the plane in the air Mergers & the operations <ul><li>Grow the business </li></ul><ul><li>generating the anticipated cost savings </li></ul>while <ul><li>Execute successful consolidation of operations </li></ul>while <ul><li>providing uninterrupted, superior level of customer service </li></ul><ul><li>winning the hearts and minds of customers and associates </li></ul>while <ul><li>Accelerate the change </li></ul><ul><li>Ensure retention of our best customers and associates </li></ul>while <ul><li>introducing a succession of changes in products, processes and responsibilities </li></ul><ul><li>Quickly institutionalize the culture and get all leaders on the same page </li></ul>while <ul><li>honoring the past of the merged companies </li></ul><ul><li>lowering delivery costs </li></ul>while <ul><li>Improve quality and service </li></ul>Deliver day-to-day <ul><li>Maintaining sharp business line focus </li></ul>while <ul><li>becoming more integrated across businesses </li></ul><ul><li>Increasing flexibility / responsiveness </li></ul>while <ul><li>doing more with less </li></ul><ul><li>Reducing cycle time </li></ul>while <ul><li>improving accuracy and lowering costs </li></ul><ul><li>Building efficiencies through scale </li></ul>while <ul><li>focusing on individual customers </li></ul>Evolve the business model <ul><li>Building organizational capability to deliver the future </li></ul><ul><li>making tough business and people decisions </li></ul><ul><li>Acquiring new customers through an aggressive sales focus </li></ul><ul><li>expanding and deepening current customer relationships through an aggressive service focus </li></ul>while while <ul><li>Building integrated sales and service processes across the company </li></ul>while <ul><li>maximizing processes within mono-line business units </li></ul><ul><li>Reducing complexity for customers </li></ul>while <ul><li>increasing product and channel options </li></ul><ul><li>Expanding every leader’s global / national perspective </li></ul>while <ul><li>losing their understanding of regional / local needs </li></ul>
  8. 8. HR’s role in today’s economy A true business partnership model Transformation emphasizes strategic partnering on revenue generating and customer–facing priorities.. TRANSACTIONS INFLUENCE/COMMUNICATE DESIGN SUPPORT PARTNERING STRATEGIC FROM TO STRATEGIC PARTNERING DESIGN SUPPORT INFLUENCE/COMMUNICATE TRANSACTIONS
  9. 9. HR’s role in M&As The people dimension <ul><li>Deal Synergy </li></ul><ul><li>Due Diligence </li></ul><ul><li>Sale & Purchase Agreement </li></ul><ul><li>Staffing </li></ul><ul><li>Integration Planning (100 days & beyond) </li></ul><ul><li>Corporate HR Review </li></ul>To develop a comprehensive integration plan that optimizes business financial and HR objectives HR manages the people impacts on deals, and the deal impact on people..
  10. 10. HR for M&A The 4 key stages.. <ul><li>Work with the Business & Corporate Development to : </li></ul><ul><li>Identify business/ talent needs and appropriate targets </li></ul><ul><li>Create understanding and recognition of people issues </li></ul><ul><li>Identify: </li></ul><ul><li>Deal breakers </li></ul><ul><li>Cost implications </li></ul><ul><li>Integration obstacles </li></ul><ul><ul><li>Talent </li></ul></ul><ul><ul><li>Culture </li></ul></ul><ul><li>Implement retention strategy (employment agreements, retention plans) </li></ul><ul><li>Develop HR Integration Strategy </li></ul><ul><li>Execute Communication Plan </li></ul><ul><li>For Asset Deals, Onboard employees (offer letters, background checks, screenings) </li></ul><ul><li>HRIS </li></ul><ul><li>Payroll </li></ul><ul><li>Benefits </li></ul><ul><li>Policy Alignment </li></ul><ul><li>Compensation Alignment </li></ul><ul><li>Qualified & Non-qualified plans </li></ul><ul><li>Talent Integration </li></ul><ul><li>Cultural Integration </li></ul><ul><li>Communication Integration </li></ul>Due Diligence Do By Close <ul><li>Integration Plan </li></ul><ul><li>100 days </li></ul><ul><li>Extended </li></ul>Strategy & Planning
  11. 11. Pre acquisition dialogue It’s the questions! The key: The role of HR is to force the dialogue no one wants to have! If you spend extra time early in the process determining the right questions, the answers later in the process are much easier to answer. Some questions to ask: 1. Why do we want to do this? What is our primary strategic intent? 2. What type of acquisition is this? 3. What is our integration strategy? 4. How will we begin to work together . . . take swimming lessons or jump in? 5. What are the real power dynamics, i.e., who is in control? 6. What is our governance model for the transaction? 7. To what extent is this an intellectual capital acquisition? 8. How will we run the transition? 9. How will we select leaders? 10. How will we institutionalize the desired business model & culture?
  12. 12. Deal negotiation Key recommendations for HR items.. <ul><li>From the HR Playbook … </li></ul><ul><li>Understand deal synergies up-front and identify potential integration options early … first step in framing an HR negotiations strategy </li></ul><ul><li>Don’t accept seller’s proposed HR terms at face value </li></ul><ul><li>Present proposals with supporting rationale – anticipate the seller’s issues and reactions … argue through the seller’s perspective </li></ul><ul><li>Explore alternatives and related people & financial implications </li></ul><ul><li>Escalate “big financial issues” to deal leader for resolution in the context of broader business valuation </li></ul><ul><li>Where feasible, leave retirement & other liabilities with seller </li></ul><ul><li>Use an “HR terms” sheet to summarize negotiations – then transition to contract language </li></ul>Early involvement of HR is critical to making an impact
  13. 13. Integration strategy To what degree do we integrate? Business strategy dictates the decision.. * Source Mercer Delta Integration Strategy Identify Critical Success Factors Context Context and History Dynamics of the Deal Define Business Case for Combination Fully Integrated Operationally Integrated Coupled Loosely Coupled Separate Holding Integration Process Achieve Value- Added Integration Design & Implement Integration <ul><li>Strategy </li></ul><ul><li>Work Process </li></ul><ul><li>Org’n. Design </li></ul><ul><li>Operating Env. </li></ul><ul><li>People </li></ul><ul><li>Leadership </li></ul><ul><li>Governance </li></ul><ul><li>Change Mgmt. </li></ul>Determine Degree & Scope of Integration
  14. 14. Transition challenges Significant change comes with acquisition Transition State HR Organizational Restructuring HRIS Technology Backbone Business Processes Reengineering Future State New Company <ul><li>Strategy </li></ul><ul><li>Customers </li></ul><ul><li>Products </li></ul><ul><li>Work Processes </li></ul><ul><li>People </li></ul><ul><li>Formal Organization </li></ul><ul><li>Informal Organization </li></ul>INPUTS OUTPUTS Think of merging two football teams…an NFL team & an Australian team – NFL vs. Australian rules – Different rules – Different playbook – Different positions – Different fans – Different coaches etc. Current State Acquiring Company <ul><li>Strategy </li></ul><ul><li>Customers </li></ul><ul><li>Products </li></ul><ul><li>Work Processes </li></ul><ul><li>People </li></ul><ul><li>Formal Organization </li></ul><ul><li>Informal Organization </li></ul>INPUTS OUTPUTS <ul><li>Strategy </li></ul><ul><li>Customers </li></ul><ul><li>Products </li></ul><ul><li>Work Processes </li></ul><ul><li>People </li></ul><ul><li>Formal Organization </li></ul><ul><li>Informal Organization </li></ul>INPUTS OUTPUTS Acquired Company
  15. 15. Transition infrastructure It’s a balancing act Transition Management Balance Time and urgency is our friend! Under Planned Change <ul><li>Lack of goals, milestones, and measures. </li></ul><ul><li>Lack of fact-based decision processes. </li></ul><ul><li>Little integration or synergy among planned initiatives. </li></ul><ul><li>Lack of application of change management fundamentals. </li></ul>Overly Rigid Change <ul><li>Creation of overly complex plans which cannot be executed. </li></ul><ul><li>Rigid adherence to plan targets and goals as ends in and of themselves. </li></ul>Too Much Direction <ul><li>Over-definition of how to accomplish the goals. </li></ul><ul><li>Failure to involve affected parties and key stakeholders in the process. </li></ul><ul><li>Autocratic approach. </li></ul><ul><li>Premature elimination of dissent. </li></ul>Too Little Direction <ul><li>No unifying strategic theme or direction. </li></ul><ul><li>Focus on events and activities, not the customer or results. </li></ul><ul><li>Unclear or conflicting priorities. </li></ul><ul><li>Weak or non-existent sponsorship. </li></ul>Too Hardware Focused <ul><li>Changes overemphasize “hardware” (structure, formal systems) and neglect “software” (relationships, informal processes, culture, etc.). </li></ul><ul><li>New programs are introduced without the proper context and don’t achieve desired behavior change. </li></ul><ul><li>Assuming structural change equates with behavior change. </li></ul>Too Software Focused <ul><li>Change effort focused on training and slogans, with little change in the way work is done. </li></ul><ul><li>Behavior/skills training or intervention with no follow-up. </li></ul><ul><li>Focus is excessively long-term, with little focus on short- term or practical issues. </li></ul>
  16. 16. Change management dimension Paradigm shift “ Communication” “ Struggle” The “what & how” 5. Obtain the support of key power groups. 6. Use leader behavior to generate energy in support of change. 7. Use symbols and language. 8. Build cohesion through consistency. Control Need to Manage the Transition PROBLEM IMPLICATION Anxiety & Resistance Need to Motivate Change 9. Develop and communicate a clear image of the future. 10. Build out the Transition Infrastructure. 11. Build in feedback mechanisms. ACTION STEPS 1. Surface dissatisfaction with the current state. 2. Promote participation in change. 3. Build in rewards for desired behavior. 4. Minimize ambiguity…especially around who is in charge. Power Need to Shape the Political Dynamics Of Change
  17. 17. Leadership issues; “C” players are costly Determining the right leadership early on is key Fewer “A” players attracted to join the customer group or company Development/ advancement opportunities blocked Subordinates not developed Productivity and morale of group is low Performance in job is low High performers leave the company <ul><li>At least 10% of your company contains “C” players </li></ul><ul><li>In 2008, “C” players will cost our company $XXmio (10% of overall personnel expense) </li></ul><ul><li>McKinsey’s “War for Talent” research indicates “A” players outperform “C” players by 3X </li></ul><ul><li>“ C” players create a vicious cycle </li></ul>Wrong Cs in critical jobs
  18. 18. A strong team is needed to manage Transition Leadership and accountability is everything CEO Transition Exec BU1 Transition Exec BU2 Transition Exec BU etc Transition Exec Function A Transition Exec Function B Transition Exec etc. TRANSITION TEAM <ul><li>Overstaff with Stars </li></ul><ul><li>Full time Jobs </li></ul>Direction Clarity Culture Accountability Momentum If transition derails; Fail now, avoid rush later!
  19. 19. Integration leader Essential profile.. 10 Most Important Qualities of an Integration Leader * 1999 GE survey of BD leaders, business leaders, and integration managers 19 17 15 9 9 7 6 3 16 11 Number of Survey Responses out of 20* Enormous Leadership Deep Grounding in Business Relentless Communication Aggressive Project Management High-Level Manager Early Involvement in the Deal Broad Functional Experience Strong Values Business Intelligence Sufficient Tenure Quality
  20. 20. Integration leader Core competencies.. People & Leadership Process & Change Mastery Functional & Technical Strategy & Business Values & Personal Attributes <ul><li>Global/Strategic Mindset </li></ul><ul><li>Develop & Share Vision </li></ul><ul><li>Champion Values </li></ul><ul><li>Bridge to Company </li></ul><ul><li>Customer & Market Centric </li></ul><ul><li>Integrity </li></ul><ul><li>Open-Mindedness </li></ul><ul><li>Accountability & Commitment </li></ul><ul><li>Cultural Sensitivity </li></ul><ul><li>Clear Communicator </li></ul><ul><li>Facilitator & Coach </li></ul><ul><li>Influencing W/O Authority </li></ul><ul><li>Rapid Assessment of Talent </li></ul><ul><li>Self Awareness and Learning </li></ul><ul><li>Assertive Not Arrogant </li></ul><ul><li>Focused Integration Driver </li></ul><ul><li>Team Builder & Player </li></ul><ul><li>Change Advocate </li></ul><ul><li>Process Oriented </li></ul><ul><li>Results Oriented </li></ul><ul><li>Innovator </li></ul><ul><li>Analytical Thinking </li></ul><ul><li>Project Management </li></ul><ul><li>Cross-Functional </li></ul><ul><ul><li>Coordination </li></ul></ul>
  21. 21. Critical success factors Leadership and transition management 1. Select the best leaders 2. Staff the transition team with stars 3. Create the rules of engagement & articulate the Transition office role 4. Decide the business model & organization structure 5. Staff the top few levels of the organization prior to legal day 1 6. Manage the transition; 100 days and beyond (6 – 12 months..) Clarity, Focus, Speed, Discipline quickly quickly thoughtfully & quickly
  22. 22. How to ensure the right Leadership? Key principles <ul><li>Purpose </li></ul><ul><li>Implement a simple process that assists Senior Executives in quickly defining their organization structure and selecting the right people to fill business critical roles in the “new” company </li></ul><ul><li>Objectives </li></ul><ul><li>1. Finalize the target environment organization structure </li></ul><ul><li>2. Select the right people for the right jobs; </li></ul><ul><ul><li>Factor in history, cultural, local and legal dimensions </li></ul></ul><ul><ul><li>Avoid dealing with emotional issues inherited from the acquired company/management </li></ul></ul><ul><li>3. Keep the best as long as you can, and the rest as long as you need! </li></ul><ul><li>Transparent process </li></ul><ul><li>Level the playing field </li></ul><ul><li>Ensure the best people get placed in key positions </li></ul>
  23. 23. Leadership assessment Best practice <ul><li>Performance rules …high performance (results and leadership behaviors/values) . </li></ul><ul><li>Inclusive meritocracy will be criteria to ensure the best person is placed in each role. </li></ul><ul><li>Full transparency in how selection decisions are made. </li></ul><ul><li>Balance the speed of completion with the quality of the leadership assessment. </li></ul><ul><li>Consistency of the process and tools for reviewing and talking about talent. </li></ul><ul><li>HR facilitates and help prepare senior executives for discussing talent….. senior line of business executive is accountable for all final decisions. </li></ul><ul><li>Diversity of customers and communities served must be factored into decisions. </li></ul>The going in bias will be to structure most businesses with the XYZ (i.e. the acquiring company) business model when that makes sense. People Decisions Target Organization Structure
  24. 24. Assessment strategy Solidity of 1 st floor HR is critical <ul><li>Target’s Performance Evaluations </li></ul><ul><li>Individual Resumes </li></ul><ul><li>Due Diligence Impressions </li></ul><ul><li>Target’s CEO & HRM Talent Overview </li></ul><ul><li>Functional Leader Assessments </li></ul><ul><li>Executive Assessments </li></ul><ul><li>Leadership Meet & Greet </li></ul><ul><li>Evaluation Interview Process </li></ul><ul><li>Integrity </li></ul><ul><li>Values/Fit </li></ul><ul><li>Leadership </li></ul><ul><li>Technical Skills </li></ul><ul><li>Key Talent? </li></ul><ul><li>Key Job? </li></ul><ul><li>Retention Risk? </li></ul><ul><li>Mobile? </li></ul><ul><li>Leadership Determination: </li></ul><ul><ul><li>Who stays/Who goes </li></ul></ul><ul><ul><li>Retention Risk & Plan </li></ul></ul><ul><ul><li>Compensation </li></ul></ul><ul><ul><li>Recognition/Promotion </li></ul></ul><ul><li>Broader Based Retention Plan: </li></ul><ul><ul><li>Who’s in/Who’s out </li></ul></ul><ul><ul><li>$/Dollars allotted </li></ul></ul><ul><ul><li>Stock Options </li></ul></ul><ul><li>Talent Infusion: </li></ul><ul><ul><li>What talent moved in? </li></ul></ul><ul><ul><li>Who can move to another opco/job? </li></ul></ul>INPUT PROCESS OUTPUT Cross pollinate as soon as possible
  25. 25. Alignment of leaders will be required Institutionalizing culture is a pre-requisite <ul><li>Extensive new leader on-boarding process </li></ul><ul><li>Leadership model & 360 </li></ul><ul><li>Performance management objectives & feedback </li></ul><ul><li>Talent management process </li></ul><ul><li>Executive leadership programs </li></ul><ul><li>Reward and recognition practices </li></ul><ul><li>Employee engagement programs…”Spirit” </li></ul>CULTURAL INTEGRATION TOOLS
  26. 26. The cultural dimension Why we need to focus on it? <ul><li>More autocratic behavior </li></ul><ul><li>Over-dependency on rules </li></ul><ul><li>Looking for quick fix; focus on short term </li></ul><ul><li>Return to old and proven ways; risk-avoidance </li></ul><ul><li>More “turfism” </li></ul><ul><li>Communication becomes constricted; rumors are rampant </li></ul><ul><li>Periods of uncertainty and ambiguity </li></ul><ul><li>Questions of trust </li></ul><ul><li>Everyone is expected to do more </li></ul><ul><li>Self-preservation becomes critical focus </li></ul><ul><li>Less teaming </li></ul><ul><li>Power struggles more visible </li></ul><ul><li>Productivity suffers </li></ul>Typical Organizational Response to Change during the M&A process TIMES of STRESS
  27. 27. Post M&A Emotional states THE READY Overly aggressive. Acting superior. What to Watch for: Energy and excitement. Charged up. What to Hope for: Have been promoted or retained the job they want. See greater opportunity to produce and advance. Their Situation:
  28. 28. Post M&A Emotional states.. THE WANTING Depression. Anger and vindictiveness. What to Watch for: Working through loss. Adjusting to new realities. What to Hope for: Did not receive the job they wanted or were demoted. Miss former mentors, projects, and status. Their Situation:
  29. 29. Post M&A Emotional states… THE WRUNG OUT Have the same job, but things have changed… … more distant from leadership … more competition for advancement … feel jerked around by the process Their Situation: Working through frustration. Regaining footing. What to Hope for: De-motivation. Lack of direction and purpose. What to Watch for:
  30. 30. Objective and subjective realities Must be balanced <ul><li>Mechanics of integration </li></ul><ul><li>Financial targets and cost synergies </li></ul><ul><li>Planned reductions in force </li></ul><ul><li>Implementation of new IT systems </li></ul><ul><li>New compensation plans </li></ul><ul><li>Feelings of power, anxiety, and control </li></ul><ul><li>Personal aspirations </li></ul><ul><li>Hidden agendas </li></ul><ul><li>Clashing egos </li></ul><ul><li>Shooting the messenger </li></ul><ul><li>Presence of mixed messages </li></ul><ul><li>Undiscussables ignored </li></ul>
  31. 31. Cultural integration Lots of choices…what fits your strategy? <ul><li>What does the business case require or dictate? </li></ul><ul><li>How socially integrated do you want or need to be? </li></ul><ul><li>Have the similarities and differences been identified? </li></ul>“ Blend” the best of both organization cultures and best practices Partnership Leave each organization culture relatively alone and separate Independence Less Integrated Reverse Integration Adapt your culture to their best practices and culture More Integrated Frontier Jointly create a new organization and culture The New Absorb “them” into your culture with some slight absorption to your culture based on their culture and best practices Absorption
  32. 32. Cultural change Key steps <ul><ul><li>Senior management must: </li></ul></ul><ul><ul><ul><li>Understand gap between where they really are, and where they want to be </li></ul></ul></ul><ul><ul><ul><li>Take actions that have real effect and symbolic significance </li></ul></ul></ul><ul><ul><li>Make conscious decisions about where, and where not to integrate </li></ul></ul><ul><ul><ul><li>Move quickly on the highest-value actions </li></ul></ul></ul><ul><ul><ul><li>Identify areas of commonality that can serve as “common ground” from which to build the new culture </li></ul></ul></ul><ul><ul><ul><li>Prioritize, provide constants…not just the changes </li></ul></ul></ul><ul><ul><ul><li>Minimize actions, decisions, and programs inconsistent with the vision </li></ul></ul></ul><ul><ul><ul><li>Performance plans and reward systems must be aligned </li></ul></ul></ul><ul><ul><li>Communicate consistently and often to sustain focus and achieve results </li></ul></ul><ul><ul><li>Be clear about where they are going, and why </li></ul></ul><ul><ul><li>Know thyself </li></ul></ul>
  33. 33. Cultural assessment tools Examples.. <ul><li>Surveys; </li></ul><ul><ul><li>Energy Culture Survey </li></ul></ul>Structured Interviews Archival Information Checklist Culture Observation Inventory/Anecdotal Canvassing Change Orientation Quality Competitive Emphasis Systems Leadership People Focus Focus Groups & Workshops
  34. 34. Communication Critical success factor for cultural change <ul><li>Emotional state of people needs to be managed carefully! </li></ul><ul><li>Minimize the feeling of uncertainty and facilitate cultural & behavioral integration … focus on three issues: </li></ul><ul><ul><li>Rewards </li></ul></ul><ul><ul><li>Performance </li></ul></ul><ul><ul><li>Restructuring </li></ul></ul><ul><li>Be open and honest … telling employees that nothing will change (to reduce worries and anxieties) will: </li></ul><ul><ul><li>Have opposite effects and foster distrust </li></ul></ul><ul><ul><li>May cause them to loose site of the fact that a strategic goal of the acquisition is to create value </li></ul></ul>“ It is not the Strongest of the Species that Survive, Nor the Most Intelligent, But the One Most Responsive to Change.” - Darwin.
  35. 35. Global success rate of M&As Consultant’s benchmark Mercer Coopers BCG Bain Mitchell Madison CFO Survey McKinsey KPMG 37% 34% 33% 33% 30% 25% 23% 17% Avg. ~ 30%
  36. 36. Why do M&As fail Scenarios.. <ul><li>Operational hubris </li></ul><ul><li>Avoidance of “deal breaker” issues or emerging conflicts </li></ul><ul><li>Leader behavior that undercuts integration efforts </li></ul><ul><li>Clash of egos </li></ul><ul><li>Unclear succession planning </li></ul><ul><li>Wrong people making integration decisions </li></ul><ul><li>Over or under management of acquisition </li></ul><ul><li>Unresolved turf issues </li></ul><ul><li>Mismanagement of succession plan </li></ul><ul><li>Poor judgment fueled by “deal fever” </li></ul><ul><li>Low priority for organizational issues </li></ul><ul><li>Superficial due diligence on organizational gaps </li></ul><ul><li>Winner/loser syndrome </li></ul><ul><li>Unstated psychological and political bias </li></ul><ul><li>Sporadic and incomplete communication </li></ul><ul><li>Misallocation of integration resources </li></ul><ul><li>Excessive reliance on external advisors </li></ul><ul><li>Mismanagement of resources to sustain integration efforts </li></ul><ul><li>Playing exclusively “to the Street” </li></ul><ul><li>Overlooking acquiree’s resistance to change </li></ul><ul><li>Declaring victory too soon </li></ul><ul><li>Fuzzy strategic assumptions </li></ul><ul><li>Confusing the deal rationale with the strategy </li></ul><ul><li>Poorly defined sources of leverage </li></ul><ul><li>Disconnect between strategy and integration plans </li></ul><ul><li>Inadequate performance metrics </li></ul><ul><li>Inability to convert strategic plan into operational plan </li></ul><ul><li>Unclear organizational roles </li></ul><ul><li>Premature design decisions </li></ul><ul><li>Personal promises that limit design options </li></ul><ul><li>Ineffective transition and governance structures </li></ul><ul><li>No criteria for determining best practices </li></ul><ul><li>Unaddressed cultural gaps </li></ul><ul><li>Fumbling the “handoff” between transition and operational team </li></ul><ul><li>Ineffective information sharing </li></ul><ul><li>Lack of hiring/retention plan for key talent </li></ul>
  37. 37. Lessons learned Some do’s and don’ts.. 1. Speed is our friend. 2. Leaders must demonstrate courage…and create clarity & focus, which will add and maintain momentum. 3. The H.R. team must be superb & have real power/influence. 4. Required tools to quantify and solve HR issues are already in place. 5. The change management basics are not new…execution is key. The devil is in the detail. <ul><li>Let financial objectives and strategic imperatives of the “deal” drive </li></ul><ul><li>decision making. Transition process must be business focused. </li></ul>
  38. 38. Lessons learned Continued.. 8. Invest heavily in leader on-boarding processes 9. Move key talent… quickly! 7. Changing the culture is tough <ul><li>selection is key…address this first & start at the top </li></ul><ul><li>you can’t create what you can’t define…clarity is key </li></ul><ul><li>change occurs at the emotional level…not the intellectual level </li></ul><ul><li>burn the boats…culture change requires critical mass to overwhelm the “old way” </li></ul><ul><li>it’s not an event…multiple processes & programs over a 24 month time horizon </li></ul><ul><li>leverage “poster people” at all levels </li></ul>10. Watch the “HR Foo-Foo”…executives should expect HR to: <ul><li>create simple & relevant processes </li></ul><ul><li>execute flawlessly </li></ul><ul><li>be catalysts for change </li></ul>
  39. 39. Wrap up Its all about acquisition.. <ul><li>Is there a difference between a merger, a merger of equals and an acquisition? </li></ul><ul><li>Myths; </li></ul><ul><li>Merger of equals and Mergers </li></ul><ul><li>Lessons Learned; </li></ul><ul><li>Tell the truth </li></ul><ul><li>Early and fast </li></ul>Acquisition integration stuff may be common sense, but it isn’t common! Its all about speed of decision making, will and execution…
  40. 40. thank you..
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