Post AcquisitionIntegration Framework Approach and Implementation Tejas Oza April 2012
“There will be hunters and hunted, winners andlosers. What counts in global competition is the right strategy and success!” …….. Heinrich von Pierer
Post AcquisitionIntegration – the what• the phase, where the operations of the acquired entity are merged with the Buyer’s existing operations.• the phase where the results of the Buyers M&A strategy, and expectations for the closed deal, materialize.
Guiding principles foracquisition integration“Quick Win Synergies NOT captured in the first 12 months,usually evaporate and are overshadowed by day-todaybusiness”
Key Guiding principles for successfulpost acquisition integration Strategy • Get the Integration Strategy Right • Design the integration program around Program Design the benefit realisation Program • Provide focus via outstanding program Management management • Manage the Risk to the business as Risk Management well as the program People & • Rapidly engage the people in both Communication organisations
The IntegrationFramework“Companies spend their time pulling the deal off. Theyoften don’t put enough focus on the most important part,the integration. The integration is the key to value. If youdon’t get the companies integrated, you will have paid toomuch!”
Helicopter View – Integration Framework Structure, Resources, Process & Tools Integration of Corporate Functions Transition to Line Responsibility Review and Learning
Integration Implementation Structure 3 years • cultural change, • Optimum Benefit 12 to 18 months Realisation • changes are implemented First 100 days • Quick wins are realised • “Takeover Period” • decisions are madeDay 1 and priorities set• first day after Change • organizational of Ownership structure to be finalized
Day 1 The First Day after Change of Ownership Communication Operating Management Systems & Controls Continuation of Financial & Revenue Welcome letter of individual emails What continues a before Reporting New Managers What changes immediately Clear instructions, ready forms and templates and time-table What near-term changes are How to contact and FAQs Temporary Management Systems & expected and when Controls IF Operational Structures Where more information can be are not finalised found
Day 1 - Operating Structures, Systems & Controls • Early, should be part of the • Key Managers should not be • Top Level Structure is decided Acquisition Process or Day 1 lost before or after the by Acquirers Leadership Integration • If MD is from acquired entity, • Operating - Many times buyer should nominate their • If not met with all the key Operating Structure is Project own CFO/Controller for managers prior to Day 1, use Owner/Steering Group smooth Financial integration 100 days to decide • Statutory – if acquirer has an entity in the same country, legal merger to be considered Agree on Appointment of Decision on Key Operating & Managing Managers Statutory Director Structures • Similar type of Governance to • Who can approve documents • Consider possibility to the Acquirer‟s entity – (sales orders, purchase physically consolidate orders, employment contracts, locations • Do‟s and Don‟ts etc.) • New Hiring & Redundancies, • Estimate any renovations, Salaries & Benefits • Delegations and approval moving, selling, buying of old • Approval of Costs limits premises as part of the study and agree upon • Reports (Travels, Visits etc.) • Investments & Funding Agree on Governance & Agree on Office Authorising Guidelines and Locations Officers
First 100 Days - Integration Period Approach Typical Target Benefit Realisation - 20%-30% of Total Benefits. Realise Quick Wins Verify Due Diligence Data, Gather Additional Information, Prioritise, Change/create Plan, Implement Setup Integration Team/s to Target all Key Corporate Functions & Business Areas Integration “Invest in Integration” Having or not having key full time Integration Resources within Teams would mean success or failure of an Integration Project. It should not be „Business As Usual‟
Top Management Alignment – Joint Meeting/s Everyone in management of the acquirer and acquired entities is to be committed to the same goals and communicates the same message. Discuss and agree on issues in series of meetings including: • History • The Separate Companies‟ Pre-deal Strategies • Choices to be made • Markets • Technology Trends • Competition • Future Strategy • Company Values • Value Creation Potentials • Costs And Risks • Company Goals • Competences • Size And Structure Of Entity To Fulfil The Strategy • Integration Goals • Process and Resources
Integration Budget First estimates of integration costs should have been identified during the transaction / purchase phase. Integration Manager / team needs to review and refine these estimates Cover at least the following… 1. Basic ICT infrastructure changes 2. Changes in company identity / branding 3. Legal and other costs to ensure compliance with local laws and the buyer‟s standards 4. Costs to introduce buyer‟s risk management / insurance policies 5. Costs related to management changes (search fees, redundancy costs) 6. Integration Consultants/Advisor Costs (if applicable) 7. Travel/Accommodation for the Team during the integration period 8. Any other significant project-specific items need to be budgeted for.
Resources & Responsibilities Integration owner / Manager As in the transaction/purchase phase, the owner/sponsor is normally a member of the Buyers Management team. The owner of the integration phase can be the same individual as in the transaction/purchase phase.
Resources & Responsibilities Integration Manager Is the project manager. Should be appointed already during transaction /purchase phase. As the reality on the ground, at the local market level, may well differ from the global view, it should be decided whether a local Integration Manager (reporting to the global Integration Manager) needs to be appointed to work more closely with a particular market or country operation. Role • Main responsibility for day-to-day management of the integration effort • Integration management work is hard to perform as a part-time activity, so the Buyers management needs to carefully consider the importance of the task and allocate the time necessary • Always made a “project assignment” with limited duration (typically from 3 months up to 18 months)
Resources & Responsibilities Integration Manager Responsibilities • During Due Diligence, to become acquainted with the Target‟s business • Preparation and modification of the integration plan • Work with team, HR and communications in order to get a positive start of integration • Defining goals, resources and timetables for the integration project • Bringing integration teams together • Planning and running the kick-off meeting & follow-up meetings • Guide and support the integration teams • Coach and assist in problem solving • Reporting and defining instructions and goals to/from the Integration Steering Group • Monitor that the teams meet expectations in the given allotted (SPEED!) • Make sure non-negotiable issues are understood and implemented • Help personnel adjust to change • Assist in identifying and reducing cultural barriers • Ensure the tools and information sharing between the teams • Develop learning methods • Prepare reporting and reviews • Hold summary discussions
Resources & Responsibilities Integration Steering Group The Integration Steering Group is the governing board of the integration phase. Role / Members • Supervises the Integration Project Manager‟s and the integration team‟s work • Should meet at least monthly • Representatives from both Buyer‟s and the acquired entity • May include individuals with specific expertise relevant to the project • Normally 3-7 individuals to maximize the effectiveness of team work Responsibilities • Selects the members of the Integration team (based on Integration Project Manager‟s proposal) • Specifies the measures, goals/targets and reporting instructions for the Integration team • Supervises and supports the Integration team‟s work • Makes decisions on the more significant issues • Monitors the project costs vs. budget and approves the expenses incurred by the integration teams
Resources & Responsibilities Integration Stream Team ManagerThe members of the core team, often the same as the team / stream managers, are responsiblefor identifying the issues to be addressed and developing the integration plan.Best results can be achieved when team members are experienced individuals from the Buyerand the acquired entity. In the case of integrating support functions (HR, ICT, finance and legal),it is recommended to recruit members who have previous experience of integration projects. The key Integration team manager tasks : • Being the team builder • Introducing the team members to one another • Seeing that the team members have all information/tools needed for the task • Clarifying the goals/targets/times tables/reporting etc. • Ensuring everyone in the team understands the goals the same way and is committed • Manage and encourage team to progress • Sees that the team keeps the schedules and prepares reports • Being the source of assistance and guidance, when needed
Resources & Responsibilities Market / country integration Operative :When integration covers multiple countries, it is important to clarify which global guidelines, rules and tasks can be applied at the local level, and where country-specific exceptions need to be made. Statutory: • Level of integration – retain separate legal entities or merge • Ordering, invoicing etc., to be made under which company name. Coach / facilitator If the Buyer has limited integration experience or none, an integration coach can be appointed to assist the Integration Steering Group and/or Integration Manager. The coach or a meeting facilitator can also be useful in the kick-off meeting and when considering specific team issues, like HR
Integration Team – Single Acquisition Adopted from „M&A Integration‟ (David M. Schweiger)
Integration Team – Multiple Acquisitions Adopted from „M&A Integration‟ (David M. Schweiger)
Integration of Corporate Functions Cultural Integration Systems & Finance & HR Information Legal Control Technology Sales & After Sales / Supply Chain Communications Marketing Client Services Management Production/ R&D Operations Synergies & Value Creation
Integration – Human Resources Org. Structure & HR Practices Compensation & Top Management, Alignment Benefits Key Managers Evaluation Payroll Pension & HR Information Superannuation, Systems Insurances Compatibility HR Organisation Plan for & Competence Relocation of Personnel (if need be)
Integration – Systems & Information Technology Standard Central Services & Application/Business Infrastructure Team Systems Integration IT Security Policy IT Standards Local IT/Systems Teams Competency
Integration – Legal Follow-up Memo – Follow-up Due Employee SPA or APA Diligence Findings Participation/Unio n Agreements Risk Management Intellectual Legal Personnel & Assurance Property Rights Training
Integration – Communications Integration Review of Review/Alignm Communication Internal ent of External , Process & Communication Communication Tools Corporate Corporate Web & Social Identity & Culture Media Branding Presence Alignment Integration Intranet Printed Integration Materials in Sales & Services
Integration – Sales & Marketing Integration & Customers/ Revenue Process Review Stakeholder Protection Plan communication Med to Long Commercial Sales & Term Revenue Contracts Review Marketing Strategy Support Material Brand Alignment/Strate gy/ Awareness
Integration – Supply Chain & Sourcing Review of Due Plan to Leverage Critical Supplies Diligence Findings the Joint Risk Management Purchasing Power Key Supplier Supplier Contracts Relationship Review Management
Integration – Production & Operations Review of Due Plan to Leverage the Critical Supplies Risk Diligence Findings Joint/ Centralised Management Production Capacity Key Supplier Supplier Contracts Relationship Review Management
Integration – Research & Development Review of Due Research R&D Resource Testing and Diligence Portfolio Profile Development Findings facilities Design/Develop Sub-contractors Documentation Leveraging Joint ment and Other Key Practice R&D Scale and Applications in Partners Capabilities use
There are few certainties in life or mergers.But with clarity around which factorsmatter, we can make better informeddecisions and stack the odds in our favour.