Post-merger Integration Training

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This is a post- merger integration training material.
The contents include:
- Day One capabilities
- Synergy Capture
- Functional Integration:
- IT
- Finance
- Supply Chain
- HR
- Communications and Change

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Post-merger Integration Training

  1. 1. Page 1 Post-Merger Integration Training - Day One Capabilities - Synergy Capture - Functional Integration -IT, page 29 -Finance, page 37 -Supply Chain, page 44 -HR, page 101 -Communications and Change, page 113
  2. 2. Page 4 Day One Capabilities - Our Approach to Establishing the Day 1 Plan Key Deliverables 1. Functional Scope / Strategy a. Required Day 1 Activities b. Post Day 1 Activities 2. Functional High-level Milestone Plan 3. Functional 30-day Action List with Accountable Resources 4. Functional / Program Risks 5. Functional / Program Issues 6. Functional / Program Assumptions Identify Functional / Program Risks, Issues and Assumptions Identify Functional / Program Risks, Issues and Assumptions Identify 30-day Action List Identify 30-day Action List Identify Functional High-level Milestone Plan Identify Functional High-level Milestone Plan Identify Functional Scope - Day 1 - Post Day 1 Identify Functional Scope - Day 1 - Post Day 1 Written Transition Plan This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  3. 3. Page 7 Process Day One Plan Post Day One Plan Issues / Dependencies General Ledger Migrate to New Co GL on Day 1 for post Day1 activity First Financial Close on both Buyer and seller Systems How will local legal reporting be finalized? Obtain licenses; SAP, …, etc. Entity structure must be same as Honeywell Responsibility for business changes: Logo’s Lock boxes Domain Names Checking Accts IP Addresses Intercompany Pricing Determine intercompany pricing policy Minimize intercompany between entities within first 30 days. Establish and implement pricing policy Fixed Assets Confirm/validate Fixed Assets and confirm valuation Migrate Fixed Assets & assoc. deprec to one entity within 60 days Billing/Invoicing Issue consistent invoicing for all new invoices post Day 1 A/R Mgmt. Migrate open A/R balances to uniform on Day 1 Accounts Payable Post all new payables to unified system Close all pre-Day 1 payables in predec. Systems Day One Capabilities - Sample Functional Scope / Strategy Template Once the high-level scope / strategy is developed, we will identify details regarding activities, cost, benefits, resource requirements, issues, etc. This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  4. 4. Page 10 Capturing Synergies This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  5. 5. Page 13 Key Drivers Streamline span of control and de-layering Optimize staff mix and tenure Improve utilization and productivity Eliminate functional duplication Relocate to lower-cost areas Eliminate low value-add activities Business / Partnership Development Product Management Campaign Management Modeling / Optimization Customer Research & Analytics Customer Communications Branding / Advertising Telemarketing P/L Analysis and Reporting eStrategy Development eCustomer Support Business Customer Delivery Collections & Recovery Credit Operations Cust Rel Call Centers/Serv Del/ Telemarketing Fulfillment Services Site Management Fraud CRM/Internet Servicing Group Fin’l Mgmt Cust Delivery Tempe System Advocacy eCard Management eBusiness Development IM, Website, Campaign & Risk Management Finance & Admin eStrategy Marketing Acquisitions & Market Expansion Strategic Partnership & Rewards Programs Financial Manage-ment & Quality Business Card Wallet Share Growth Sales & Relationship Mgmt/Project Trigger Branding & Voice of the Customer Retail Co-Brands & Business Development Bank Partnerships Decision Science Risk & Knowledge Management Portfolio Development Analysis Knowledge Mgmt. Customer Risk Policy Acquisition Policy Finance/Quality Control Co-Brand Risk Management Mgmt Reporting & Analysis CFO & Controller Chase U.S.A. Compliance & Operational Risk Mgmt. Portfolio Acquisition/ New Ventures Competitive Analysis & Investor Rel. Chase Merchant Services Productivity & Quality Cust Requirements Process Management MBB Six Sigma T&D Supplier Quality P&Q Business Analysis Quality Assurance Channel Integration MBB Six Sigma Coaching Illustrative eCustomer Management eBusiness Financial Management Company X Company Y Capturing Synergies - Focused organization simplification efforts can drive significant year 1 saves. Organizational Simplification This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  6. 6. Page 16 Capturing Synergies -. Interdependencies among cost reduction opportunities Opportunities for Improvement in Real Estate-Related Spend Occupancy Capital Projects Services Baseline Real Estate-Related Costs Industry Benchmarks RentUtilities Maintenance & Operations Taxes Depreciation Land Buildings Improvements Service Providers Internal Staff Information Systems Compare to Benchmarks Effort (months) Impact (dollars) High Low 0 6 12 Quantify, prioritize and assess effort to capture ■ Identify / dispose of non- essential properties ■ Outsourcing, strategic sourcing, service delivery optimization ■ Portfolio finance (e.g., Sale / leasebacks ■ Like-kind exchanges / creative tax structures ■ Location optimization (consolidate/redeploy) ■ Structured project finance ■ Identify and obtain public incentives for new facilities ■ Audit leases and landlord charges ■ Analyze and appeal real estate taxes ■ Cost segregation ■ Energy management ■ Facilities Planning / Space Standards ■ Capital projects reengineering ■ CRE operations and technology Baseline, benchmark and identify potential opportunities Sustainable Facilities Cost Reduction1 Fact-based Cost Reduction Portfolio ■ Execution of facilities strategies generally achieve savings between 10- 20%; and, if approached comprehensively and aggressively can approach 25%-30%. 1Significant facilities opportunities typically exist; these can be pursued through the ‘spend reduction’ and/or ‘infrastructure reduction’ tools Facilities-related opportunities typically have flow-on cost impacts – e.g. payroll and delivery – and can also affect overall firm culture. These impacts should be factored into execution plans This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  7. 7. Page 19 Capturing Synergies - Given the fluid nature of most integrations, understanding likely benefit timing, potential impact and operational inter-dependencies is critical to achieving and exceeding established targets. Impact and Timing of Various Cost Reduction Techniques Conceptual Timing of Benefits Realization Impact Savings as % of spend High (>25%) Medium (10-25%) Low (5-10%) Long (> 12 months) Medium (6-12 months) Short (3-6 months) • Relocation Spend Reduction • Demand Management • Supply Mgmt. • Tax Management • Supply Mgmt. • Redesign • Benchmark, ‘Adopt & Go’ Process Streamlining • Improve Policies and Procedures • ABC Infrastructure Rationalization • Rationalize Software Licenses • Rationalize Projects • Curb Demand • Consolidate Apps., Hardware, Svcs. • Consolidate Data Ctrs • Instill Strong Perf. Mgmt. • Establish Shared SvcsOrganizational Simplification • Enhance Staffing & Tenure • Expand span-of- control • Functional De- duplication • Utilization/ Productivity • De-layering • Elimination of Low Value-Add Activities • Relocation This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  8. 8. Page 22 Capturing Synergies - Overall governance and operating model – e.g. center-led v decentralized – also needs to be decided at the front end. Both program-specific requirements and longer-term firm-wide principles should be considered. LOB ownership of execution Limited segment flexibility Creating a “team” feeling Leverages scale economies Simpler overall control, management; clear accountability Enables fast replication Consistent management, execution Avoiding excessive loads on few individuals Avoiding loss of cross-LOB benefits Greater responsiveness to BU needs Enables BU specific customization Crystal clear accountability Increased flexibility, control & cost management Improved LOB responsiveness Avoids “one size fits all” approach Early identification of “hot spots’ for center-led deep dives Facilitating cross-LOB initiatives Creating organizational “memory” Advantages Challenges Centralized Decentralized Hybrid Strong Medium Weak Centralized Decentralized Hybrid Builds Org Expertise AdaptabilityResponsiveness Scale Economies Control Summary – Governance Structure Advantages & Disadvantages Scorecard This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  9. 9. Page 25 Additional, and perhaps significant, tax-related opportunities are likely achievable. Tennessee unitary group planning to reduce the number of entities subject to Tennessee taxation Review total telecom annual spend (including sample invoices) to identify excise tax refund opportunities Opportunities regarding Unclaimed Property can apply to all aspects of a bank, not just savings accounts and safety deposit boxes Captive insurance company can provide cost effective coverage against currently uninsured risks such as business interruption, loss of data, terrorism, etc. It may also generate both financial statement benefit and annual state tax benefits Loan participation company may be used to create favorable state apportionment and generate state tax savings Limited partnership and other flow-through entity planning to reduce state income taxes and allow for losses in certain subsidiaries to be off-set against income or gains in other subsidiaries. May also produce apportionment planning opportunities. Procurement company to reduce sales and use taxes and property taxes Leasing company can provide sales and use tax deferrals and permanent savings Review of experience rates and rules for carryover of successor rates and new employer rates to ensure the lowest state unemployment tax rates are applied Tax reductions through the identification of discrepancies between assessed values of property and actual values Credits and Incentives planning to assist with decision-making regarding location on personnel and facilities Tax Efficient Restructuring Tax Cost Recovery Opportunities Directly Related to the Merger Tax Cost Recovery Opportunities Indirectly Related to the Merger Capturing Synergies - Additional Tax-Related Opportunities This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  10. 10. Page 28 Capturing Synergies - The Resource Factory Headcount reduction typically drives 40-50% of total integration savings; tight PMO management of the “resource factory” is needed to meet merger targets Speed of deployment needs to be improved from the previous merger Frequent and transparent communications around staffing process are critical for remaining employees to commit to the new organization Key Considerations SeparationOrganization Design DeploymentCritical Talent Retention Selection / Deselection Define end-state org structures Set staffing levels by LOB/ function and geography Develop position descriptions Develop criteria for identifying top talent Establish and manage talent lists Create financial and non- financial retention programs Determine selection approach Identify – Unaffected positions – Affected: work elimination, staff reduction, job restructuring Develop assessment approach and tools Draft candidate slates Fill slots Notify employees of individual status Track outcomes Develop severance packages Transition work to remaining employees Prepare systems to process increased separation volume Confirm reporting and stakeholder relations Relocate departments/ individuals as needed Confirm overall resource deployment HR Policies and Programs Communication Inputs End-state org vision, including financial and operational goals Guiding principles for integration Synergy targets 2 separate organizations, cultures, operating models, and geographic footprints Baseline headcounts, HR policies, and compensation/ benefits programs Outputs Streamlined, integrated organization of retained staff Employee exits Clear responsibilities and reporting lines Retention and effective deployment of top talent Integrate comp/benefits programs (including titling/leveling) Standardize performance/career management Communicate openly and promptly on selection process and progress People moves (e.g. exits, redeployments) often require a significant percentage of merger reserves. Central Finance should therefore work closely with HR to coordinate reserve impacts driven by the ‘resource factory’ This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  11. 11. Page 31 “Corporate” buyers look for an M&A Partner that: -They trust -Has done M&A before -Has a methodology and tools to accelerate the migration -Can help deliver an issue free Day 1 -Can help deliver synergies Buy PMO and Functional Workstream Support Together (including IT) Buy IT Functional Support Only Decision FactorsBuyers IT Integration - Selling M&A IT Services The buyer depends heavily on deal size, the volume and complexity of the IT work, and the power and influence of the IT organization. Therefore, the sales effort must follow a dual track; corporate-focused AND IT-focused CEOCEO CFOCFO VP, Business Development VP, Business Development Integration Program Manager Integration Program Manager VP, Mergers & Acquisition VP, Mergers & Acquisition CIOCIO VP, Application Development VP, Application Development VP, Infrastructure Development VP, Infrastructure Development Purchase Options “IT-focused” buyers look for an M&A IT Partner that: -All of the above, plus -Has done M&A IT before -Has a solid IT track record -Knows the clients’ applications and architecture This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  12. 12. Page 34 IT Integration - XYZ’s M&A IT Lifecycle Capabilities and Opportunities Better Leverage Our M&A / ERP Practice Synergies Achieve Additional IT Due Diligence Penetration •IT Cost Reduction / Synergy Identification •IT Outsourcing •IT SLA Development •IT Infrastructure Consolidation / Carve-out Planning and Implementation •ERP Consolidation / Carve- out Planning and Implementation •IT Strategy •Marketing / Brand Awareness •IT Organization Design •IT Integration / Divestiture Management Setup and Support •Legacy System Consolidation and Retirement •IT Due Diligence •Relationships and Alliances •Strength of Team •Knowledge Capital •Strength of Qualifications•Focus Area Better Integrate Our IT Cost Reduction Tools into the M&A Toolkit Our M&A IT practice has a solid foundation and significant opportunities exist to bring it to the next level Further Develop Our M&A IT Team This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  13. 13. Page 37 Functional Integration: Finance This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  14. 14. Page 40 M&A Lifecycle Stage Value to Client Definitive Due Diligence Revenue Growth, Tax and Legal Strategy, Cost Reduction and Synergy Identification Negotiation of Final Transaction Definition of Transition Services Agreement Implementation and Transaction Closing Preparation Organizational Readiness for Day 1: Implementation of People, Processes and Systems Governance, Policies and Procedures Closing and Execution of Implementation Plan Organizational “Steady State”: Revenue Growth Synergy Capture Cost Reduction and Operational Efficiencies Finance Integration – Value at different stages of the M&A Lifecycle This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  15. 15. Page 43 How strong is our practitioner base in this area? Who are our primary competitors in this space? Extremely Strong Global Corporate Finance - 70 professionals in the U.S., supported by more than 500 professionals worldwide with offices in more than 30 countries CFO Services – 200 dedicated professionals in the U.S., supported by a global consulting organization Our MDP and Global capabilities are a competitive differentiator We are well positioned in the marketplace - Finance Integration is in our power alley. IBM / PWC CGE&Y Bearing Point Accenture Boston Consulting Group Various Boutique Consulting Firms Finance Integration – Our capabilities and the competitive landscape This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  16. 16. Page 46 Supply Chain Integration - High Level Work Flow Collect Additional DataCollect Additional DataCollect Additional Data Acquirer / Target Purchasing “Lock Down” PurchasingPurchasing ““LockLock DownDown”” New Acquirer / Clean Team Define Data Requirements Define DataDefine Data RequirementsRequirements Acquirer / Target Customize Templates Finalize Request Collect DataCollect DataCollect Data Conduct Kick-Off Collect Data Validate Data Analyze & Identify Opportunities Analyze & IdentifyAnalyze & Identify OpportunitiesOpportunities Integrate Data Level 1-4 Analyses Prioritize & Prepare Recommendations Prioritize & PreparePrioritize & Prepare RecommendationsRecommendations Clean Team Estimate Effort Prioritize Define Implementation Steps Final Priorities Final Work Plans Acquirer / Target Clean Team This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  17. 17. Page 49 Supply Chain Integration - Data Collection and Validation Prior to Clean Team Initiation ■ 5 - 10 days ■ Company A and B will verify that 95% spend is captured (independently) ■ Data integrity and categorical groupings finalized Collect DataCollect DataCollect Data Collect Data and Solve Collection Issues Collect Data and Solve Collection Issues Review, Sort, and Validate Collected Data Review, Sort, and Validate Collected Data Forward MS Access Databases (Company A and B) Forward MS Access Databases (Company A and B) ■ 3 - 5 days ■ Company A and B to forward in separate MS Access files ■ MS Access database with separate files for Company A and B ■ 5 - 10 days ■ Review templates and methods with purchasing ■ Deliver data request templates Typical Duration Comments Work-product ■ Total 2 - 4 weeks Conduct Data Collection Kick Off Conduct Data Collection Kick Off ■ 5 - 10 days ■ Parallel data collection conducted by Company A & B ■ Produce downloadable files or database; reports on paper only in extreme circumstances This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  18. 18. Page 52 Supply Chain Integration - Clean Team Prioritization and Recommendation Steps Prioritize & Prepare Recommendations Prioritize & PreparePrioritize & Prepare RecommendationsRecommendations Review Complete Opportunity Set Review Complete Opportunity Set Prioritize Opportunities Prioritize Opportunities Develop work Steps to Capture Savings Develop work Steps to Capture Savings Develop Savings Estimates and Resource Requirements Develop Savings Estimates and Resource Requirements ■ 5 - 10 days ■ Develop order in which to attach opportunities ■ Priority-ordered list of opportunities ■ 3 - 5 days ■ Review information from analysis ■ Compile opportunities from varied analyses into common form for prioritization and comparison ■ Complete opportunity list from each team for Level 1, 2, and 3 analyses Typical Duration Comments Work product ■ 3 - 5 days ■ Utilize business case tools to determine savings potential ■ Estimate requirements to implement supplier changes, capture savings ■ Business case; cost to implement and benefits ■ Forward benefits to PMO Synergy Capture Database Prepare for “Lock Down” Session Prepare for “Lock Down” Session ■ 5 - 7 days ■ Format findings into presentation, prepare meeting logistics ■ “Lock Down” session ■ Total 4-6 weeks ■ 10 - 15 days ■ Develop listing of steps necessary and time to complete each step ■ Work steps necessary to capture savings provided to purchasing teams This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  19. 19. Page 55 Analysis Deliverable From Original Data Collection Analysis Supplier Items Similarities & Differences Template Supplier Items Similarities & Differences Template Common Supplier Template Common Supplier Template Supplier Item Detail Template Supplier Item Detail Template Supplier Master Template Supplier Master Template Supplier Items Opportunity Template Supplier Items Opportunity Template Aggregated List of Level 1 Opportunities Aggregated List of Level 1 Opportunities Contract Summary Template Contract Summary Template Analysis From Original Data Collection / Additional Data Request Spend Item Similarities & Differences Template Spend Item Similarities & Differences Template Common Commodity / Class / Templates Common Commodity / Class / Templates Spend Item Detail Template Spend Item Detail Template Spend Data Master Template Spend Data Master Template Spend Item Opportunities Template Spend Item Opportunities Template Aggregated List Level 2 Opportunities Aggregated List Level 2 Opportunities Contract Summary Template Contract Summary Template Additional Data Request Template (via legal) Additional Data Request Template (via legal) Additional Data Request Template (via legal) Additional Data Request Template (via legal) Level 1 OpportunitiesLevel 1 Opportunities Level 2 OpportunitiesLevel 2 Opportunities for all common suppliers for all common commodities/ classes Supply Chain Integration - Sequence of Data Collection and Analysis Templates Completing templates in this sequence will drive four-level opportunity identification From Original Data Collection This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  20. 20. Page 58 Supply Chain Integration - Data Collection Tools and Templates • Supplier Master • Supplier Item Detail • Freight Carrier Item Detail • Spend Master • Spend Item Detail • Freight Spend Item Detail • Contract Summary • Global Commodity Contracts INITIAL DATA COLLECTION TEMPLATES • Additional Data Request • Supplier Performance • Specific Contracts SECONDARY, TARGETED DATA REQUESTS This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  21. 21. Page 61 SUPPLIER ITEM DETAIL Company: Acquirer Supplier: WW Grainger Supplier Item # Co. Item # Item Description Manufacturer Mfr Product # Product Specs Total Volume Units Total Spend Avg unit Price Max Unit Price Min Unit Price Material Group Material Commodity Material Class Loc Data Source 10034 2 HP SEWAGE PUMP Ingersoll 1003456 2 EA $1,495 $747.39 $800.00 $600.00 MRO Pumps 10035 3" CRIMP CUP BRUSH Fuller 483205 64 EA $760 $11.88 $12.00 $10.00 MRO Tools 10064 3/4" IMPACT WRENCH Stanley 2568739 15 EA $1,201 $80.08 $90.00 $70.00 MRO Tools Wrench 10134 3A528 TYPE C STAPLES Bostich 4583058 4 EA $242 $60.59 $62.00 $60.00 MRO Tools 11035 3L8 WIRE CMPR. LUGS LugCorp, Inc 530-3945 60 EA $182 $3.04 $4.00 $1.00 MRO Tools 11064 4-1/2" GRINDER Subway #3 special no mayo 72 EA $322 $4.48 $5.00 $3.00 MRO Lunch After determining the top suppliers, a list of items that represent 80% of the spend supplied by each supplier should be created using the following template Supply Chain Integration - Supplier Item Detail Template This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  22. 22. Page 64 Supply Chain Integration - Spend Data Templates Hierarchy • Spend Item Detail template will contain item summary data, filtered to include the top 80% of items by total spend • Spend Master Template will contain class-level data, that represents 95 - 100% of the total spend Spend Data Templates are designed to identify class and items with the greatest sourcing opportunities GroupGroupGroup Operations CommodityCommodityCommodity CommodityCommodityCommodity CommodityCommodityCommodity Motors Pumps Pipes, Valves and Fittings ClassClassClass ClassClassClass ClassClassClass Copper Cast Iron Steel ItemItemItem Avg. cost of 12 inch galvanized ItemItemItem Avg. cost of 14 inch galvanized Avg. cost of 16 inch galvanized ItemItemItem ItemItemItem Avg. cost of 18 inch galvanized This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  23. 23. Page 67 The item level detail should be collected on the lowest level material groupings in the previous step. Items that make up 80% of the total spend of the lowest category level (e.g. commodity or class) identified in the hierarchy SPEND ITEM DETAIL TEMPLATE Company: Acquirer Category: Operations Material Commodity Material Class Dow Item # Item Description Co. Supplier # Supplier Name Supplier Product # Manufactr . Mfr Product # Product Specs Total Volume Units Total Spend Avg unit Price Max Unit Price Min Unit Price Data Source Pumps Vacuum 10034 Vacuum Pump 1343 Gulch 2243 Ingersoll 1003456 2 EA $1,495 $747.39 $800.00 $600.00 Pumps Vacuum 10035 Ingersoll Vacuum Pump 1288 Ingersoll 113245 Ingersoll 483205 64 EA $760 $11.88 $12.00 $10.00 Pumps Vacuum 10037 Vacuum Pump 2 1343 Gulch 2244 Ingersoll 1003457 15 EA $1,201 $80.08 $90.00 $70.00 Pumps Vacuum 10134 Pump 1288 Ingersoll 114356 Ingersoll 4583058 4 EA $242 $60.59 $62.00 $60.00 Pumps Vacuum 10134 Pump for column 1288 Ingersoll 114388 Ingersoll 4583080 60 EA $182 $3.04 $4.00 $1.00 Pumps Vacuum 11064 Pump for vacuum blower 1288 Ingersoll 115667 Ingersoll 4583062 72 EA $322 $4.48 $5.00 $3.00 Supply Chain Integration - Spend Item Detail Template This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  24. 24. Page 70 Supply Chain Integration - Global Commodities Contract List This template provides key information unique to contracts for global commodities GLOBAL COMMODITIES CONTRACT LIST Company: Acquirer Contract ID Supplier Name Company Supplier # Commodity Name (Include multiple commodities if appropriate) Commodity Volume (Total) Unit of Volume Regions Affected Hierarchy Total Spend U.S. Dollar 123094 Granger 54321 Motors 7302 piece US, Asia-Pacific Operations/Motors $12,453,803 43241 Gulch 24392 Pumps 12203 piece US, Europe Operations/Pumps $7,982,374 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  25. 25. Page 73 Non- Sourceable 9% Operations 27% Raw Material 59% Not Assigned 5% Raw Materials Raw Mat 1 Raw Mat 2 Raw Mat 3 Raw Mat 4 Raw Mat 5 Raw Mat 6 Raw Mat 7 Raw Mat 8 Raw Mat 9 Raw Mat 10 Raw Mat 11 Raw Mat 12 Inorganic Salts Poly Vinyl Acetate Amines Potassium Hydroxide Raw Material 13 Resins - Misc. Bauxite Alcohol Aromatics Ammonia Organic Acids Silane Toluene Stearic Acid Other Raw Materials* Not Assigned† Operations Freight MRO Outside Maintenance Utilities Packaging Outside Labor Computer Environmental Physical Plant Equipment Benefits Communications Travel Office Supplies Fleet Advertising Uniforms Unassigned Non-Sourceable Tax Miscellaneous Accounts Payable Affiliated Trade Pay Import-Export Expense Payroll Withholding Accrued Allowance-Re Loan Commissions Total Company A Spend: $XXXX M Supply Chain Integration -Opportunity Analysis Guides and Tools – Total Company Spend Top-Level Spend Profile for each company should be identified to verify data accuracy This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  26. 26. Page 76 Not Assigned 4% Freight, Fleet, Travel 16% Operations 27% Raw Material 50% IT / Telecomm 9% Raw Materials / Packaging Clean Team Total Responsibility $ x,xxx,xxx,xxx Team Members: IT / Telecomm / Media Clean Team Total Responsibility $ xx,xxx,xxx Team Members: Freight, Fleet, Travel Clean Team Total Responsibility $ xxx,xxx,xxx Team Members: Supply Chain Integration - Sort Data Sections for Clean Team Use The combined data should be separated for analysis by the individual clean teams Operations Clean Team Total Responsibility $ x,xxx,xxx,xxx Team Members: This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  27. 27. Page 79 Supplier Items Similarities and Differences Template Supplier: McMaster-Carr Supply Company Spend Items Air Compressor (Deluxe Electrical - Horizontal) $1,002,540 420 $2,387 $476,900 190 $2,510 Item no: 42715K22 Air Compressor (Standard Electric - Vertical) N/A N/A N/A $282,000 150 $1,880 Item no: 41905K55 Liquid-to-Liquid Heat Exchanger (Stainless Steel Shell & Tube) $1,534,560 480 $3,197 $203,400 60 $3,390 Item no: 34965K58 Total Spend AcquirerAcquirer Volume Total Spend TargetTargetTarget VolumeUnit Price (Average) Unit Price (Average Supply Chain Integration - Conduct Level 1 Analysis Illustrative This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  28. 28. Page 82 Common Class Template Group: Operations High and Medium opportunities Classes should be analyzed at the supplier and item levels (see following slides) Supply Chain Integration - Conduct Level 2 Analysis * Note: Some commodities which are common among the companies will not have class-level detail available. In this case, all items within the commodity should be examined COMMON CLASS TEMPLATE Acquirer # Common # Common Opportunity Group Commodity Class Annual $ # Suppliers # Items Annual $ # Suppliers # Items Hi-Volume Suppliers Hi-Volume Items Low - Med - Hi Target This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  29. 29. Page 85 Supply Chain Integration - Conduct Level 3 Analysis • Step 1: Review the Supplier Items Similarities and Differences template (Level 1 analysis) for a common supplier • Step 2: Review Contract Summary template for selected items • Step 3: Identify all items that may be potentially bundled • Step 4: Repeat the process for all common suppliers • Step 5: Complete the Supplier Items Opportunity template to summarize all Level 3 opportunities (reference Level 1 analysis) Level 3 Analysis reviews all items bought through a common supplier and pursues product bundling opportunities This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  30. 30. Page 88 Not Assigned 6% Non- Sourceable 9% Operating Expenses 26% Raw Material 59% Raw Materials $xxx,xxx,xxx Raw Mat 1 $xxx,xxx,xxx Raw Mat 2 $xxx,xxx,xxx Raw Mat 3 $xxx,xxx,xxx Raw Mat 4 $xxx,xxx,xxx Raw Mat 5 $xxx,xxx,xxx Raw Mat 6 $xxx,xxx,xxx Raw Mat 7 $xxx,xxx,xxx Raw Mat 8 $xxx,xxx,xxx Raw Mat 9 $xxx,xxx,xxx Raw Mat 10 $xxx,xxx,xxx Raw Mat 11 $xxx,xxx,xxx Raw Mat 12 $xxx,xxx,xxx Inorganic Salts $x,xxx,xxx Poly Vinyl Acetate $x,xxx,xxx Amines $x,xxx,xxx Potassium Hydroxide $x,xxx,xxx Raw Material 13 $x,xxx,xxx Resins - Misc. $x,xxx,xxx Bauxite $x,xxx,xxx Furfuryl Alcohol $x,xxx,xxx Aromatics $x,xxx,xxx Acrylated Polymer $x,xxx,xxx Ammonia $x,xxx,xxx Organic Acids $x,xxx,xxx Silane $x,xxx,xxx Toluene $x,xxx,xxx Stearic Acid $x,xxx,xxx Ester - Misc. $x,xxx,xxx Surfynol $x,xxx,xxx Sodium Sulfonate $x,xxx,xxx Other Raw Materials* $xx,xxx,xxx Not Assigned $xx,xxx,xxx Operating Expenses $xxx,xxx,xxx Freight $xx,xxx,xxx MRO $xx,xxx,xxx Outside Services $xx,xxx,xxx Utility $xx,xxx,xxx Shipping Supplies $x,xxx,xxx Labor $x,xxx,xxx Computer $x,xxx,xxx Environmental and En $x,xxx,xxx Physical Plant $x,xxx,xxx Equipment $x,xxx,xxx Benefits $x,xxx,xxx Communications $x,xxx,xxx Travel $x,xxx,xxx Office Supplies $x,xxx,xxx Fleet $x,xxx,xxx Advertising $x,xxx,xxx Uniforms $x,xxx,xxx unassigned $x,xxx,xxx Non-Sourceable $xx,xxx,xxx Tax $xx,xxx,xxx Miscellaneous $xx,xxx,xxx Accounts Payable $xx,xxx,xxx Affiliated Trade Pay $xx,xxx,xxx Import-Export Expense $xx,xxx,xxx Payroll Witholding $xx,xxx,xxx Accrued Allowance-Re $xx,xxx,xxx Loan $xx,xxx,xxx Commissions $xx,xxx,xxx Total Company A Spend: $xxxx M Not Assigned $xx,xxx,xxx Country A $xx,xxx,xxx Division 1 $x,xxx,xxx Division 2 $x,xxx,xxx Unassigned IT $xxx,xxx * - Raw materials under $1.5 million spend Supply Chain Integration - Final Deliverables - Spend Profile This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  31. 31. Page 91 Supplier McMaster-Carr Supply Company $9,874,234 $296,227 Select best agreement Fedex $5,006,520 $100,130 Same as above Boise Cascade $2,197,380 $65,921 Same as above Other suppliers . . . New AcquirerNew Acquirer Rationale CommentsPotential Savings TOTAL LEVEL 1 OPPORTUNITIES $600,000,000 $30,000,000 Supply Chain Integration - Final Deliverables - Aggregated Level 1 Opportunities Combined Spend On Common Items Illustrative This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  32. 32. Page 94 Class/Commodity Pipe $4,300,000 1400 Valves $5,000,000 2000 Other Opportunities ... Combined Spend New AcquirerNew Acquirer Reasons for Fragmentation Comments# of Unique Items Supply Chain Integration - Final Deliverables - Level 4 Opportunities by commodity TOTAL $160,900,000 Group: Operations Commodity: Pipes, Valves, and Fittings Critical to have unique specs Are there opportunities to unify specs? Illustrative This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  33. 33. Page 97 (FTE) Resources 1.5 Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 Week 10 Week 11 Week 12 Week 13 Initial TargetsInitial TargetsInitial Targets Secondary TargetsSecondary TargetsSecondary Targets MRO Office Supplies Computer Hardware / Software2 Fleet / Travel Temporary Services2 3 Freight 3 2 Facilities, Equipment & Services 1.5 Cellular Professional Services A recommended roll-out sequence will be developed based upon prioritization analyses (magnitude / difficulty / contract restrictions / etc.) Supply Chain Integration - Final Deliverables - Roll-Out Sequence This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  34. 34. Page 100 • Actual impact of synergies and costs to achieve recorded on an earnings basis – Realized synergies and costs recorded over four quarters – Year 1 synergies incremental to the base period – Year 2 synergies incremental to Year 1 – “Annual Amount at End of Year 2” captures the total impact of synergies • Pre-loaded with qualitative information as well as final synergy commitments in each measurement area • Estimated impact of synergy after Quarter 8 (“Ongoing Annual Run Rate”) • Clearly identifies any notable differences between committed and realized synergies • Integrated with other synergy databases – Automatic feeds from the HR Net Headcount Reduction Database – Automatic output into the Planned Integration Project Database This database will enable the monitoring of synergy progress vs. commitments Supply Chain Integration - Final Deliverables - Planned Integration Financial Tracking Database This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  35. 35. Page 103 Senior Executive and Key Leader Integration Retention and Rapid Transition of Financially Valuable People, Intellectual Capital, and Relationships Cost-Savings, Workforce Consolidation, and Efficiencies Merger Management Process Workforce Transition and Integration Culture Integration and Merger Communication HR Integration - Merger Integration Objectives Rapidly eliminate costs from duplicative processes and positions Harmonize Acquire and Target workforces into a single team with shared goals and career advancement opportunities Integrate unequal employment and rewards programs (incentives and stock options) Manage, track the progress, and directly influence the achievement of the key HR and other integration goals through early intervention in problems as soon as they are identified Remain customer- and business-focused during the transition Provide critically important positive momentum within the workforce, and lead by example to support the integration and achieve transition goals as quickly as possible Perceive acquiring company leadership and culture as professional, high-quality, welcoming, respectful, and aware of the value the target company partners bring Harmonize two workforces into a single team with shared goals and career advancement opportunities Integrate unequal employment (benefits, retirement, etc.) and rewards programs Provide consistent messages, accurate information and clear performance expectations for both Acquirer and Target executives, traders and other employees Stabilize and ensure rapid completion of key merger goals including: integration of predecessor systems; customer relationship transition; conversion of financial, HR, payroll, and HQ functions consolidations Integration Objectives Critical Success Factors This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  36. 36. Page 106 Key Priorities • Identify key talent and resources • Develop and implement retention strategy and process • Develop executive talent management strategy and process • Develop performance-based retention strategies • Develop selection process and structure • Develop strategy and process for staffing open positions • Manage headcount and people-related cost reductions Deliverables How • Analysis of organizational capabilities, competency availability and gaps, and employee selection. • Analysis of retention and severance • Develop economic incentives, personal incentives and organizational incentives • Fit & Selection • Exit Strategies • Focus & Incentives HR Integration – Selection and Retention This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  37. 37. Page 109 Key Priorities • Identify key stakeholders • Develop guiding principles and strategic messaging for the deal • Create immediate communications • Assess communications, culture and organizations’ change readiness, including focus groups and interviews • Identify key barriers and obstacles • Develop integrated communication strategy and plan to address internal and external audiences at announcement and through pre-close transition, Day One and integration • Develop workforce stabilization strategy and plan • Define role of acquirer and target leaders and managers in driving change • Monitor and plan for leadership and cultural alignment Deliverables How • Identify organizational opinion leaders • Capture an organizational view of its employee value proposition • Communicate and help to communicate HR Integration – Leadership, Culture and Communications This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  38. 38. Page 112 Key Challenges • Retention of key groups, employees and leaders critical to the business value • Undistracted customer focus during and after the transition of ownership • Consolidation of headquarter functions and other people-related savings • Integration of marketing and sales force • Blending cultures and reducing employee resistance • Compensation and benefits differences and program integration • Creating an environment perceived to be fair • Redeployment of people and facilities • Retraining and team building • Risk management and insurance liabilities Deliverables ScienceofDesign Art of Engagement HR Integration – Challenges of M&A: Human Capital Integration This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  39. 39. Page 115 Communications & Change - Why is corporate culture in a transition process so important? • Between 30-60% of mergers & acquisitions fail to achieve the strategic objectives of the acquirer and actually destroy shareholder, employee and customer value. 1 • The top 2 internal reasons for failure are leadership and differences in corporate cultures. 2 1. Various research studies 2. XYZ M&A Survey 3. Sudarsnam, The Essence of Mergers & Acquisitions 23% 22% 21% 18% 9% 7% Merged Too Many Activities Merged Too Few Activities Leadership Unclear Poor Integration Cultures Too Different Poor Leadership Source: XYZ/Braxton M&A Survey • Although widely acknowledged as important, an open, proactive and systematic treatment of corporate cultures is difficult to accomplish and is usually neglected. XYZ Consulting can act as a neutral, experienced third party to help initiate and guide the cultural transformation process. XYZ Consulting can act as a neutral, experienced third party to help initiate and guide the cultural transformation process. • Managing cultural change is a top factor associated with successful acquisitions. 3 This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  40. 40. Page 118 Transformation Current Corporate Cultures Goal Culture Setting the early goal of a to-be corporate culture is critical for the transformation process • heterogeneous • conflicting • established • homogeneous • performance oriented • continuously reconfirmed Months Organizational Performance Any major change initiative, including mergers, acquisitions, integrations and restructurings, will initially cause reductions in business performance. XYZ recommends openly dealing with resistance. Communication and participation are key to reducing the performance dip and accelerating progression through the transformation phases. Any major change initiative, including mergers, acquisitions, integrations and restructurings, will initially cause reductions in business performance. XYZ recommends openly dealing with resistance. Communication and participation are key to reducing the performance dip and accelerating progression through the transformation phases. Understanding Acceptance Enthusiasm Shock Resistance Communications & Change This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  41. 41. Page 121 1 Corporate Culture Assessment Organization A Organization B Global Regional Flexible, Informal Formal, Structured Factual Emotional Multicultural National Quality maximizing Cost minimizing Simplified Example Where do we come from? Prepare for departure from previous corporate cultures. Why did these cultural characteristics develop? What do we want to keep? What do we want to change? • Creates clarity and transparency regarding the key characteristics of the historically different corporate cultures as well as the characteristics desired by employees and management for the new, integrated organization • Executing and communicating the findings of an objective Corporate Cultural Assessment demonstrates that Leadership recognizes the importance of culture • Acknowledging and honoring where the organizations are coming from is necessary to “free” employees to start building a new, integrated high performance culture Communications & Change – Corporate Culture Assessment This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  42. 42. Page 124 Implement the New Culture3 Specific initiatives for effective realization of a new, high-performance corporate culture must be based on a few key factors: - Management and employee ownership and participation - Openness and transparency - Ongoing structures for feedback and improvement Based on assessment findings and the desired To-Be corporate culture, an analysis of opportunities and barriers should produce a clear prioritization of action areas and specific initiatives. Internal & external communications Anchoring, feedback, continual improvement of core values Strengthened leadership culture Retention program Performance management Conflict management Premium teams (integration project teams, ongoing process and functional teams) Key areas typically promising the highest payback. Communications & Change – Implement New Culture This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  43. 43. Page 127 Focus Area – Services Result for Client Category of Value Due Diligence – Financial analysis of purchase price model and employment-related liabilities Leadership Transition – integrated total executive cash and equity compensation, incentives, employment contracts 360o Degree Communications and Change Management Retention strategies for economically valuable leaders, individuals, and groups Global Total Rewards Strategy and Implementation Spin-Off – comprehensive leadership and workforce transition Negotiation of optimal deal terms and conditions on employee-related matters Stabilized undistracted leadership Stabilized undistracted workforce Retention of economically valuable people and transfer of customers, market relationships, and intellectual capital Integrated compensation, benefits, pensions for undistracted organizational focus and performance Day One Readiness Marketplace communications – a component of 360o Degree Communications Positive perception of the merger and stable relationships with customers, business partners, suppliers and investors Revenue Enhancement / Market Stability Work force transition and reduction Transition Playbook – people management Stable business continuity while reducing costs Synergy Capture / Cost Saving Integration assessment and action planning Effective mid-course improvements to the transition management process Integration Process / Governance HR Function Transformation – including global HR delivery and outsourcing Optimally-structured HR function at the appropriate cost level, delivering on the future needs of the business Infrastructure Stability Communications & Change This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
  44. 44. Page 130 • Transition Workplan, Schedule and Management Reporting Process • Internal Communications • Retention of Key Talent • Terminations • Labor Relations – where applicable • Customer Communications and Retention • Buildings and Contents • Security • Health and Safety • Legal Issues • Vendor Relations and Supplier Communications and Revenue • Community Relations and Media • Confirm involuntary separation policy and practices • Confirm severance pay and benefits policy • Select employees for separation Implement Plan and Selection Preparation Notification & Administration Close Down & Separation • Conduct separation/retenti on discussions • Manage time- limited retention agreements • Communicate • Manage documentation and reporting • Complete final employee separation • Complete final branch close down ` • Approval- Lists & Schedules: • Approve severance and benefits costs • Create separation/reten tion notification scripts • Generate personalized separation packages Branch Close Down and Employee Transition Process Transition Playbook - People Management Communications & Change This document is a partial preview. Full document download can be found on Flevy: http://flevy.com/browse/document/post-merger-integration-training-756
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