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Developing a Post-Acquisition Strategy - Completion And Beyond

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*The crucial first three months (100 days) after the deal
* Issues on staff, compensation and benefits
*In-house systems synergy
*Retaining management and intellectual capital
*Efficient knowledge transfer

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Developing a Post-Acquisition Strategy - Completion And Beyond

  1. 1. DEVELOPING A POST-ACQUISITION STRATEGY: COMPLETION AND BEYOND Case studies, Concepts, and Debatable Ideas Kenny Ong CNI Holdings Berhad www.myCNI.com.my www.OOBEY.com
  2. 2. <ul><li>The first 100 days </li></ul><ul><li>In-house systems synergy </li></ul><ul><li>Staff, Compensation and Benefits </li></ul>www.myCNI.com.my www.OOBEY.com
  3. 3. Rewarded vs. Unrewarded M&As From: “Habits of the busiest acquirers”, Robert Palter and Dev Srinivasan, McKinsey Toronto www.myCNI.com.my www.OOBEY.com
  4. 4. 1. The First 100 Days www.myCNI.com.my www.OOBEY.com
  5. 5. Strategies for M&A “ Double-Digit Growth”, Michael Treacy www.myCNI.com.my www.OOBEY.com <ul><li>Base Retention </li></ul><ul><li>Share Gain </li></ul><ul><li>Positioning </li></ul><ul><li>Adjacent Market </li></ul><ul><li>New Business </li></ul>GROWTH
  6. 6. Post M&A Type 1: Buying Market Share No evidence of previous company One Kingdom Pre-integration Blueprint Slow Trigger, Fast Bullet www.myCNI.com.my www.OOBEY.com Integration Operating Model Price Premium Buying Market Share Net Cost per Customer < Direct Acquire
  7. 7. <ul><li>Make or Buy? </li></ul><ul><ul><li>It is easier to meet the standards of competition if you buy an existing player </li></ul></ul><ul><ul><li>Adjacent acquisitions must remain as a SEPARATE ENTERPRISE </li></ul></ul><ul><ul><li>Integrate Management Control (systems, technology) </li></ul></ul><ul><ul><li>Inter-transfer of management talent, knowledge and capability are important </li></ul></ul>Post M&A Type 2: Invade Adjacent Markets www.myCNI.com.my www.OOBEY.com
  8. 8. Post M&A Type 3: Acquire New Business <ul><li>No core advantage to bring in </li></ul><ul><li>Investors mind-set vs. Managers mind-set </li></ul><ul><li>Value unlocking via operational improvements </li></ul><ul><li>Invest in Management/Leadership </li></ul><ul><li>Premium = Combined value > stand alone </li></ul>www.myCNI.com.my www.OOBEY.com
  9. 9. First 100 Days: Conflict Points <ul><li>Leadership style differences </li></ul><ul><li>Who’s is charge? (Who won?) </li></ul><ul><li>Organic vs. bureaucratic cultures </li></ul><ul><li>Open vs. closed communication </li></ul><ul><li>Decision making speed & style </li></ul><ul><li>Collegial vs. competitive </li></ul><ul><li>Structures that don’t match </li></ul><ul><li>Values incongruence </li></ul>www.myCNI.com.my www.OOBEY.com
  10. 10. The First 100 Days 25 50 75 100 Save Star Performers Revise Strategy/Value Maps Staffing Plans Assess HR Value Re-align Strategy Coaching/Team Dev Restructure Capabilities Audit Culture Integration www.myCNI.com.my www.OOBEY.com
  11. 11. 2. In-house systems synergy www.myCNI.com.my www.OOBEY.com
  12. 12. Strategy: Disciplines, Priorities, and KPIs Operational Excellence (low cost producer) Ref: The Discipline of Market Leaders , Michael Treacy & Fred Wiersema; 1995 Product Leadership (best product) Customer Intimacy (best total solution) www.myCNI.com.my www.OOBEY.com
  13. 13. <ul><li>Product Leadership </li></ul><ul><li>New, state of the art products or services </li></ul><ul><li>Risk takers </li></ul><ul><li>Meet volatile customer needs </li></ul><ul><li>Fast concept-to- counter </li></ul><ul><li>Never satisfied - obsolete own and competitors' products </li></ul><ul><li>Learning organization </li></ul>Strategy: Disciplines, Priorities, and KPIs <ul><li>Operational Excellence </li></ul><ul><li>Competitive price </li></ul><ul><li>Error free, reliable </li></ul><ul><li>Fast (on demand) </li></ul><ul><li>Simple </li></ul><ul><li>Responsive </li></ul><ul><li>Consistent information for all </li></ul><ul><li>Transactional </li></ul><ul><li>'Once and Done' </li></ul><ul><li>Customer Intimacy </li></ul><ul><li>Management by Fact </li></ul><ul><li>Easy to do business with </li></ul><ul><li>Have it your way (customization) </li></ul><ul><li>Market segments of one </li></ul><ul><li>Proactive, flexible </li></ul><ul><li>Relationship and consultative selling </li></ul><ul><li>Cross selling </li></ul>www.myCNI.com.my www.OOBEY.com
  14. 14. <ul><li>Product Leadership </li></ul>Each Discipline Requires Different Priorities & Resources Operational Excellence Customer Intimacy Organization, jobs, skills Management systems Information and systems Culture, values, norms www.myCNI.com.my www.OOBEY.com
  15. 15. Each Discipline Requires Different Priorities & Resources <ul><li>Operational Excellence </li></ul><ul><li>Central authority, low level of empowerment </li></ul><ul><li>High skills at the core of the organization </li></ul><ul><li>Disciplined Teamwork </li></ul><ul><li>Process, product- driven </li></ul><ul><li>Conformance, 'one size fits all' mindset </li></ul><ul><li>Integrated, low cost transaction systems </li></ul><ul><li>The system is the process </li></ul><ul><li>Command and control </li></ul><ul><li>Quality management </li></ul>Organization, jobs, skills Management systems Information and systems Culture, values, norms www.myCNI.com.my www.OOBEY.com
  16. 16. <ul><li>Product Leadership </li></ul><ul><li>Ad hoc, organic and cellular </li></ul><ul><li>High skills abound in loose-knit structures </li></ul><ul><li>Concept, future-driven </li></ul><ul><li>Experimentation and 'out of the box' mindset </li></ul><ul><li>Person-to-person communications systems </li></ul><ul><li>Technologies enabling cooperation </li></ul><ul><li>Rewarding individuals' innovative capacity </li></ul><ul><li>Risk and exposure management </li></ul><ul><li>Product Life Cycle profitability </li></ul>Each Discipline Requires Different Priorities & Resources Organization, jobs, skills Management systems Information and systems Culture, values, norms www.myCNI.com.my www.OOBEY.com
  17. 17. Each Discipline Requires Different Priorities & Resources Organization, jobs, skills Management systems Information and systems Culture, values, norms <ul><li>Customer Intimacy </li></ul><ul><li>Empowerment close to point of customer contact </li></ul><ul><li>High skills in the field and front-line </li></ul><ul><li>Customer-driven </li></ul><ul><li>Variation and 'have it your way' mindset </li></ul><ul><li>Strong customer databases, linking internal and external information </li></ul><ul><li>Strong analytical tools </li></ul><ul><li>Customer equity measures like life time value </li></ul><ul><li>Satisfaction and share management </li></ul><ul><li>Focus on ‘Share of Wallet’ </li></ul>www.myCNI.com.my www.OOBEY.com
  18. 18. Post M&A: 4-Wheels Model Culture Business Objective M&A Strategy www.myCNI.com.my www.OOBEY.com Structure Resources Leadership Person
  19. 19. Post M&A : Framework <ul><li>Joint-Boards </li></ul><ul><li>Org Structure </li></ul><ul><li>Job Design </li></ul><ul><li>C&B </li></ul><ul><li>Policies & procedures </li></ul><ul><li>Decision making </li></ul><ul><li>Transition/Integration Team </li></ul><ul><li>Revise structure to strategy </li></ul><ul><li>Process alignments </li></ul>www.myCNI.com.my www.OOBEY.com <ul><li>Share Gain </li></ul><ul><li>Adjacent Market </li></ul><ul><li>New Business </li></ul>Structure
  20. 20. Post M&A : Framework <ul><li>Info and Comm Technology </li></ul><ul><li>Integration Cost Centers </li></ul><ul><li>Real Estate </li></ul><ul><li>Operating Assets </li></ul><ul><li>Procurement* </li></ul><ul><li>Combined Cost Savings KPI </li></ul><ul><li>Product lines </li></ul><ul><li>Geographic Parking: Services, Production </li></ul><ul><li>Customer Problems Database </li></ul><ul><li>R&D </li></ul>www.myCNI.com.my www.OOBEY.com <ul><li>Share Gain </li></ul><ul><li>Adjacent Market </li></ul><ul><li>New Business </li></ul>Resources
  21. 21. Special Note: Procurement <ul><li>Prices and Terms of current contracts </li></ul><ul><li>Supply market dynamics </li></ul><ul><li>Tactics for Supply Purchase </li></ul><ul><li>Consolidated spending database </li></ul><ul><li>Opportunities to save money </li></ul><ul><li>Cutting T.C.O. </li></ul><ul><li>Manuals on Negotiation Strategies </li></ul>www.myCNI.com.my www.OOBEY.com
  22. 22. Activity Grid to optimize resources www.myCNI.com.my www.OOBEY.com Eliminate (-) What are features/ activities/services to eliminate? Reduce (↓) What are features/ activities/services to reduce? Create (+) What are features/ activities/services to introduce? Increase ( ↑) What are features/ activities/services to increase?
  23. 23. 3. Staff, Compensation and Benefits www.myCNI.com.my www.OOBEY.com
  24. 24. Post M&A : Framework <ul><li>Tone, Speed, Direction, Principles, Requirements </li></ul><ul><li>Post-M&A Roles & Responsibilities </li></ul><ul><li>Geographic role differences </li></ul><ul><li>Decision making processes </li></ul><ul><li>Employee authorities </li></ul><ul><li>Communication* </li></ul><ul><li>Culture integration sessions </li></ul><ul><li>Buy-in ‘Key Players’ </li></ul>www.myCNI.com.my www.OOBEY.com <ul><li>Share Gain </li></ul><ul><li>Adjacent Market </li></ul><ul><li>New Business </li></ul>Leadership
  25. 25. Communication: Internal <ul><li>What: Significance, Direction </li></ul><ul><li>Top Management Roadshows </li></ul><ul><li>Website </li></ul><ul><li>Web TV (Vlogs) </li></ul><ul><li>Employee Conventions, Re-Branding launch </li></ul><ul><li>Concrete, Consistent Messages </li></ul><ul><li>Generate Enthusiasm, allay Fears </li></ul><ul><li>Questions: Workforce merge or separate? Let go? Role assignments? Compensation? </li></ul>www.myCNI.com.my www.OOBEY.com
  26. 26. Communication: External <ul><li>Media Interviews </li></ul><ul><li>Media Day </li></ul><ul><li>Single Face to Market (single proposition) </li></ul><ul><li>Customer Communication Organization (Advantages of M&A) </li></ul>www.myCNI.com.my www.OOBEY.com
  27. 27. Post M&A : Framework <ul><li>Integration-era Incentives </li></ul><ul><li>HR Value: Alignment </li></ul><ul><li>HR Value: Capabilities </li></ul><ul><li>HR Value: Engagement </li></ul><ul><li>Star (‘A’) players </li></ul><ul><li>Competency mapping </li></ul><ul><li>Culture gaps </li></ul><ul><li>Employee views on new entity </li></ul>www.myCNI.com.my www.OOBEY.com <ul><li>Share Gain </li></ul><ul><li>Adjacent Market </li></ul><ul><li>New Business </li></ul>Person
  28. 28. HR: Special Considerations <ul><li>Frontline (Sales) is key in post-M&A </li></ul><ul><li>Targets for Competitors to poach </li></ul><ul><li>Communication: Roadshows, Repetition, Emphasis </li></ul><ul><li>Integration-era Incentives: </li></ul><ul><ul><li>Retaining key people </li></ul></ul><ul><ul><li>Encourage Cooperation </li></ul></ul><ul><ul><li>Sharing of Knowledge </li></ul></ul><ul><ul><li>Cross-selling </li></ul></ul><ul><li>Temporary Management Structure: </li></ul><ul><ul><li>During transition period </li></ul></ul><ul><ul><li>Cut thru Red Tape </li></ul></ul><ul><ul><li>On-the-spot Decisions </li></ul></ul><ul><ul><li>Priority Access to CEO </li></ul></ul>www.myCNI.com.my www.OOBEY.com
  29. 29. MBO Standards www.myCNI.com.my www.OOBEY.com Useless Poor Average Good Excellent E D C B A
  30. 30. MBO Standards www.myCNI.com.my www.OOBEY.com Useless Poor Average Good Excellent E D Good C B A
  31. 31. MBO Standards www.myCNI.com.my www.OOBEY.com Useless Poor Average Good Excellent Commit Suicide E Not Good D Good C Very Good B Excellent A
  32. 32. MBO Standards www.myCNI.com.my www.OOBEY.com Commit Suicide Not Good Good Very Good Excellent Unacceptable performance E Did not fully meet planned results D Achieved Planned Results C Higher than planned results B Consistently achieved 4 for 3 quarters A
  33. 33. What to Pay? <ul><li>Pay for Service </li></ul><ul><li>Pay for Job </li></ul><ul><li>Pay for Performance </li></ul><ul><li>Pay for Competency </li></ul>www.myCNI.com.my www.OOBEY.com
  34. 34. Performance and Incentives <ul><li>Internal Equity </li></ul><ul><ul><li>Internal Job Rates </li></ul></ul><ul><ul><li>Performance differentials </li></ul></ul><ul><li>External Competitiveness </li></ul><ul><ul><li>External Job Rates - Benchmarking </li></ul></ul><ul><ul><li>Demand & Supply </li></ul></ul>www.myCNI.com.my www.OOBEY.com
  35. 35. What’s the Difference? <ul><li>Increment </li></ul><ul><li>Bonus </li></ul><ul><li>Promotion </li></ul>www.myCNI.com.my www.OOBEY.com
  36. 36. Compa Ratio Table <ul><li>Use this if your company: </li></ul><ul><li>Pays for Performance , and </li></ul><ul><li>Pays for Job rates </li></ul><ul><li>Def: </li></ul><ul><li>Mid-Point = Mid Point of Pay Grade </li></ul>Grade E2 Min RM2,000 MID RM2,500 Max RM3,000 www.myCNI.com.my www.OOBEY.com
  37. 37. Compa Ratio Table www.myCNI.com.my www.OOBEY.com 1 2 3 4 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7
  38. 38. Compa Ratio Table www.myCNI.com.my www.OOBEY.com 1 2 5% 3 4 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7
  39. 39. Compa Ratio Table www.myCNI.com.my www.OOBEY.com 0 1 2 2 3 4 5% 7 9 3 7 4 9 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7
  40. 40. Compa Ratio Table www.myCNI.com.my www.OOBEY.com 0 0 0 2 4 1 0 1 2 4 6 2 3 4 5% 7 9 3 3 5 7 9 12 4 7 8 9 12 15 5 > 1.3 ≥ 1.1 - ≤1.3 >0.9 - <1.1 ≥ 0.7 - ≤0.9 < 0.7
  41. 41. Employee Distinction Group I (Talent Pool) Group II (  Potential) Group III (  Performance) Group IV (Counseling) 2 3 4 5 2 3 4 5 PERFORMANCE POTENTIAL <ul><li>Identify </li></ul>www.myCNI.com.my www.OOBEY.com
  42. 42. Post M&A: 4-Wheels Model Culture Business Objective M&A Strategy www.myCNI.com.my www.OOBEY.com Structure Resources Leadership Person
  43. 43. End Note for Post-M&A <ul><li>“ In the absence of leadership, the people will listen to whoever speaks” </li></ul>A.J., from the movie “The American President” www.myCNI.com.my www.OOBEY.com
  44. 44. Thank You. soft copy of slides: www.totallyunrelatedrandomanddebatable.blogspot.com

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