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Value Maximizing Acquisition Integration


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A three-page excerpt from a guidebook profiling Cisco and its best practices Value Maximizing Acquisition Integration.

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Value Maximizing Acquisition Integration

  1. 1. growth team m e m b e r s h i p™A three-page excerpt from our 16-page Best Practice Guidebook:Value Maximizing Acquisition IntegrationThe contents of these pages are copyright © 2010 Frost & Sullivan. All rights reserved.
  2. 2. growth team m e m b e r s h i p™ 1Best Practice GuidebookValue Maximizing Acquisition Integration guidebook summary Firm: Cisco Systems, Inc Industry: Computer Peripheral Manufacturing Headquarters: San Jose, California, United States Geographic Footprint: Global Ownership: Public Revenue (2009): $36.12 billion USD Problem: Business Results: Given the volume of acquisitions, diversity of acquired products and • Increased revenue and product opportunities from acquisitions business models, and intent to fully integrate all acquired businesses, since 1993 Cisco needs to create an integration process and organization to handle • 80% employee retention rate from acquired companies multiple concurrent acquisitions with minimal disruption to business for • Capacity to complete an acquisition on average every six weeks for both Cisco and the acquired company. the past 14 years Solution: Resources Required: Cisco develops an acquisition integration process that includes: • Dedicated integration staff • Building a clear management structure and cross-functional integration • Company culture that fosters acquisition acceptance team, owned by the corporate development team • Ensuring early engagement and participation by the team responsible Applicability of Best Practice to Executive Functions: for the integration execution Function Applicability • Developing a formal integration process—from due diligence to CEO/Leadership post-integration monitoring Corporate Development • Creating a metrics-driven monitoring system—based on value-drivers* and synergies • Constructing a timely and effective communications strategy * Value-drivers are defined as the goals set by Corporate DevelopmentThe contents of these pages are copyright © 2010 Frost & Sullivan. All rights reserved. to monitor the success of the integration.
  3. 3. growth team m e m b e r s h i p™ best practice guidebook 2 Cisco’s acquisition integration process emphasizes early interaction with target companies to improve execution and focus on the deal’s value-drivers Acquisition Integration Process Overview Deal Announcement Day One Integration Completion Deal Strategy Integration Plan Integration Plan Integration Post-Integration Development Development Evolution Execution Monitoring Pre-Commitment to Deal Commitment to DealObjective Objective Objective Objective ObjectiveArticulate deal strategy, planned Conduct operational due Modify the Plan of Intent through Execute the integration plan and Monitor the company post-product offer, and go-to-market diligence of the target company tactical interaction with the focus on milestones and value- integration to identify long-termstrategy in preparation for target to arm the integration team with acquired company. drivers. benefits and potential challenges.engagement. the information it needs to make the deal successful.Participants Participants Participants Participants Participants • Deal Sponsor • Integration Leaders • Integration Leaders • Executive Integration • Corporate Development • Deal Lead • Integration Team • Integration Team Committee • Integration Leaders • Target Team Counterparts • Integration Leaders • Integration Team • Acquired Team Counterparts Activities Activities Activities Activities Activities • Review target background • Conduct Operational • Mobilize integration • Carry out integration • Assess post-integration information and Due Diligence team to work together activities reviews from integration preliminary findings • Identify key employees in with their functional • Hold weekly integration team • Create Integration Vision the target company counterparts in the target meetings with the • Update integration process based on deal value-drivers • Draft high-level integration company Integration Team and based on lessons learned • Identify customer and budget • Conduct gap analysis Integration Leaders • Perform quarterly stakeholder concerns and • Draft Integration Plan of of each function using • Conduct monthly portfolio reviews for two potential operational risks Intent integration checklists integration reviews with years • Define operational • Develop communication • Use gap analysis to evolve the Executive Integration diligence objectives strategy the Plan of Intent into the Committee • Finalize questions for Plan of Record • Conduct a formal Operational Due Diligence • Roll out communication integration review six Checklist strategy months into the executionThe contents of these pages are copyright © 2010 Frost & Sullivan. All rights reserved. Source: Cisco Systems, Inc; Growth Team Membership™ research.
  4. 4. growth team m e m b e r s h i p™ best practice guidebook 3 key takeaway: Match the level of executive management oversight to the scale of the deal In addition to the Executive Integration Committee (EIC) responsible for integration, Cisco employs two alternate levels of executive management for large- and small-scale integrations Integration Management Structure Integrating Large Deals Executive Integration Committee (EIC) Integrating Smaller DealsCisco Functional Heads Large deals typically involve Corporate Development Role and Responsibilities: Smaller deals typically involve Integration Executive public companies with • Provide input and private companies with fewer thousands of employees. These decisions related to issues than 1,000 employees. For these deals’ integration management Deal impacting the integration Deal Sponsor deals, the EIC is supplementedTarget Company structures use the EIC, Target Senior Sponsor plan and Division with a steering committee company Sales Functional HeadsFunctional Heads supplemented by a steering CEO Executive • Ratify the integration plan comprised of the heads of committee comprised of heads and oversee strategic functions supporting the Cisco of functions and their target goals of the acquisition business unit sponsoring the company equivalent. Large-deal • Ensure resource deal. Small-deal EIC and steering EIC and steering committee availability for integration committee members are members are usually vice teams typically vice president-, general president- and senior vice • Approve business change manager-, and senior director- president-level executives. decisions level executives. Integration Leaders Role and Responsibilities: There are two Integration Leaders on • Leads integration planning each Integration Team: one from Cisco’s • Directs execution of integration activities Corporate Development team and • Reports to the Executive Integration Committee an Integration Leader from the target Integration Leaders • Serves as business advisor to deal sponsor/target company (which becomes involved in the executive process after the deal announcement). The target company Integration Leader is typically a COO or CFO—someone with expertise on the target’s finances, Integration Team operations, and systems. Role and Responsibilities: Full-time, cross-functional, subject-matter-expert team that: • Interacts with the target/acquired company • Identifies gaps and synergies for the integration plan Integration Team • Develops detailed integration plan • Implements integration activities The contents of these pages are copyright © 2010 Frost & Sullivan. All rights reserved. Source: Cisco Systems, Inc; Growth Team Membership™ research.
  5. 5. growth team m e m b e r s h i p™ Please contact us to learn how to access the full Best Practice Guidebook or for information on Growth Team Membership.™ Email us Visit us online www.gtm.frost.comThe contents of these pages are copyright © 2010 Frost & Sullivan. All rights reserved.