Mergers Acquisitions Divestitures Integration Framework (M&A) (MADI)

All rights reserved. Subject to general limitations, some copyrighted material(s) are deemed fair use(s) based
on this program(s) intentions to stimulate creativity for the enrichment of the general public, comment,
criticism, research, news reporting, teaching, and scholarship. Cited work(s) are the property of the author(s)
/ copyright holders.
Richard Swartzbaugh

Executive Summary
Mergers and acquisitions are both aspects of strategic management, corporate finance and management dealing with the buying, selling, dividing and
combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location,
without creating a subsidiary, other child entity or using a joint venture. M&A can be defined as a type of restructuring in that they result in some entity
reorganization with the aim to provide growth or positive value. Consolidation of an industry or sector occurs when widespread M&A activity concentrates the
resources of many small companies into a few larger ones, such as occurred with the automotive industry between 1910 and 1940. The distinction between a
"merger" and an "acquisition" has become increasingly blurred in various respects (particularly in terms of the ultimate economic outcome), although it has not
completely disappeared in all situations. From a legal point of view, a merger is a legal consolidation of two companies into one entity, whereas an acquisition
occurs when one company takes over another and completely establishes itself as the new owner (in which case the target company still exists as an independent
legal entity controlled by the acquirer). Either structure can result in the economic and financial consolidation of the two entities. In practice, a deal that is a merger
for legal purposes may be euphemistically called a "merger of equals" if both CEOs agree that joining together is in the best interest of both of their companies,
while when the deal is unfriendly (that is, when the management of the target company opposes the deal) it is almost always regarded as an "acquisition". Change
management is an important component of talent management, and materially contributes to the success of M&A integration. Talent Management System (TMS)
Success with mergers, acquisitions, divestitures, integration (MADI), including M&A due diligence, requires the design and execution of a customized
MADI Plan to ensure achievement of business outcomes, and optimal integration and alignment of the organization’s talent and cultures. A sample framework for
M&A, and M&A integration (including talent, process, technology, and execution tools) is presented and discussed herein. Actual approach, techniques, tools, and
resources remain to be determined based on business needs, industry practices, geographical practices, organizational preferences, etc.
2
Mergers, Acquisitions, Divestitures, and Integration (MADI) Framework, Including Due Diligence

Executive Summary Continued
3
Sample M&A Components
Charter and Governance
- Identify deal drivers and performance metrics
- Clarify integration objectives
- Define integration scope
- Summarize milestones, budgets, and high-level risks
- Determine how to staff the integration
- Establish clear hierarchy and accountabilities for project
- Outline key deliverables
- Achieve buy-in from stakeholders
Risk Management
- Identify project risks and assumptions
- Evaluate impact of risks and probability of occurrence
- Develop mitigation strategies and contingency plans
Integration Schedule, Tasks, and Budget
- Set key milestones to track and control the project
- Define the phases and activities to achieve milestones
- Sequence the phases and activities
- Determine and build in dependency relationships
- Estimate resources, costs, and schedule
- Conduct a priority audit
- Engineer early wins to help quiet the skeptics
Cultural Integration
- Learn the hard core truth about cultural integration
- Determine what’s practical and viable
- Perform cultural diagnostics: Merger Risk Assessment, Operating Style Analysis, and Culture Context Questionnaire
- Identify the few mission-critical traits
- Ensure cultural clash is not used as an excuse for failure

Executive Summary Continued
4
Sample M&A Components Continued
Leadership
- Set the right expectations about the integration process and its inherent complexities
- Administer the Impact of Acquisition Survey
- Manage unfamiliar and unforgiving complexity
- Focus on the critical leverage points
- Communicate effectively even when there are more questions than answers
- Identify stakeholders and customize communication plans
- Motivate people in a destabilized environment
- Retain key players without over-promising or over-paying
Close Project
- Capture lessons learned, including mistakes people are reluctant to admit
- Compare performance of integration processes to benchmarks from M&A research
- Manage systematic project shutdown

5
1. Mergers, Acquisitions, Divestitures, and Integration (MADI) Framework,
Including Due Diligence.…………………………………………………………………………………….. 6
Table of Contents Page(s)

6
Evaluate a Mergers, Acquisitions, Integration, and Divestitures Framework
© 2018 Pritchett

7
© 2018 Pritchett
Step 1: Establish M&A Integration Guiding Principles
Before a deal closes, the acquirer's senior management should establish a set of M&A integration principles that will help direct the actions of
integration teams. Explicit guidance on M&A integration fundamentals gives people a collective sense of purpose and priorities. If teams are left to
figure things out on their own by inference or conjecture, they are more likely to veer off target, pursue conflicting agendas, and delay or make poor
decisions.
M&A integration guiding principles should help answer questions such as:
o How fast will the M&A integration proceed?
o When should integration planning start?
o What are the critical priorities?
o Will communications be open and transparent?
o Will a formal M&A integration methodology be followed?
o What will be the approach to managing cultural differences?
o How will teams collaborate and report?
o Will lessons learned be documented and disseminated?

8
© 2018 Pritchett
Step 1: Establish M&A Integration Guiding Principles

9
© 2018 Pritchett
Step 2: Define M&A Integration Strategy & Governance
Just as people can be challenged to perform better when they are confronted with more demanding expectations, they also are motivated to upgrade
performance when they are given a clear sense of direction. The acquirer who steps forth promptly to structure integration goals for employees
provides a crucial focus for organizational resources. Many of the conventional problems associated with mergers and acquisitions are a direct
offshoot of people going off on tangents, operating in a fog, or essentially shifting into neutral for lack of well-defined targets.
Newly merged or acquired organizations need road maps with well-charted routes and specific destinations. But it is very common for employees to
muddle around for a long time before they finally figure out what is going on and where the integration is headed. It should be clearly
communicated to what extent the target company will be integrated. Integration matters more in some types of mergers than others, and it matters
more in some functions than others, depending on the rationale behind the deal. At least two months before the deal closes, the integration strategy,
processes, and structure should be determined. An efficient and serviceable structure for integrations consists of three layers:
1. A steering committee
2. An integration management office (led by an integration manager) and
3. A variety of additional teams usually organized by function (I.e. sales, human resources, finance, and information technology, etc.) or by business
unit, product line, process, or geographic location.
Regardless of how the teams are set up, roles and responsibilities should be clearly defined so people can be held accountable. Plus, decision-making
protocols and escalation paths should be communicated so integration issues can be resolved quickly.

10
© 2018 Pritchett

11
© 2018 Pritchett

12
© 2018 Pritchett
Step 3: Provide M&A Training
An unprepared or overconfident acquirer can get lucky and succeed at one merger the same way a bad poker player will sometimes win a hand. It
takes more than good fortune to successfully integrate target companies time after time. That kind of consistency requires a replicable, scalable
methodology just like the proven one taught in the Merger Integration Certification Workshop.
While it is true every deal is different, the underlying processes (i.e. prioritization, scope change, culture change, risk management, communication,
synergy program management and reporting) required for success are the same from one integration to the next.

13
© 2018 Pritchett
Step 3: Provide M&A Integration Training

14
© 2018 Pritchett

15
© 2018 Pritchett

16
© 2018 Pritchett

17
© 2018 Pritchett

18
© 2018 Pritchett

19
© 2018 Pritchett
Step 4: Create M&A Integration Charters
The first deliverable created by an integration team is a charter. It specifies the purpose, deliverables, success criteria, budget, and schedule for the
team. It is a simple document designed to clearly outline the “who, what, and how” elements of an integration and gain commitments from resource
owners in advance.
The document also defines the expectations about the roles of the Steering Committee, Integration Management Office (IMO), and additional
integration teams.
A clear charter reduces the possibility of scope creep, one the most common afflictions of integrations. Scope creep occurs when activities are added
little by little to the project until original timelines, numbers, and objectives are no longer viable. The boundaries for integration work should be
clearly defined in a integration team charter so the overlap of responsibilities is minimized and efficient coordination among functions is fostered.
In this section, we cover how to create this document. And we provide charters and a high level plan from M&A projects .
Plus, we include review exercises on charter creation specifically for the HR, sales, product development, and technology functions. We also provide
customizable presentations for team kickoff meetings that explain the chartering and integration process.

20
© 2018 Pritchett

21
© 2018 Pritchett

22
© 2018 Pritchett

23
© 2018 Pritchett
Step 5: Develop M&A Integration Risk Mitigation Strategies
Growth through M&A is a high-stakes game. The element of risk adds to the drama, excitement, and overall appeal of the merger game. But as
always, where there is much to be gained, there is precipitous downside risk as well.
Think about how much money is at stake. Then consider the number of people in the two companies and all the careers that are involved. Also,
reflect on how other stakeholders are watching intently—your customers, suppliers, bankers, the public who owns your stock. And, of course, the
press may be hanging around just aching for a hot story about how things are going wrong. Your competition would love to make a field day out of
this.
Obviously there is a lot on the line here. The next few months aren’t going to be a day at the beach. Making the deal was just a warm-up ... the real
job is making it work.
M&A advisors working on contingencies tend to avoid discussions about potential post-merger problems. Unfortunately, one plus one sometimes
equals less than two. Every merger will have some negative synergies such as turnover of key talent, sales losses, incompatible systems, productivity
declines, turf battles, cultural friction, or something else. Rest assured, one or more gremlins will try to get you.
It is difficult to be over-prepared. You should think ahead, identify major risks, determine their likelihood, and develop plans to eliminate or mitigate
them.

24
© 2018 Pritchett
Step 5: Develop M&A Integration Risk Mitigation Strategies

25
© 2018 Pritchett
Step 6: Develop M&A Culture Integration Plans
You can’t keep everyone happy when it comes to culture change in a merger. So, here’s the deal. Don’t get scattered trying to address all the cultural
preference items people make noise about. And don’t tiptoe around the delicate culture issues if they’re crucial and need to be hit head-on. Focus
sharply on what’s mission critical.
Ordinarily, only about 5 percent of the cultural issues truly qualify as mission critical. What does that mean? This small handful of traits accounts for
about 95 percent of culture’s influence on operating performance. These are the “vital few.” The cultural matters that remain are more or less noise,
the “trivial many.” And it’s a mistake for the organization to get distracted by these lightweight issues. Why? Because this remaining 95 percent that’s
basically noise will soak up people’s attention, yet account for only 5 percent of culture’s overall impact on business results.
In this section, we offer research that offers important clues for cracking the code on culture in M&A. Plus, we provide tools that identify the few,
meaningful cultural differences that should be addressed in a culture integration plan.

26
© 2018 Pritchett

27
© 2018 Pritchett

28
© 2018 Pritchett

29
© 2018 Pritchett
Step 7: Develop M&A Integration Communication Plans
M&A communication planning is difficult because a merger is always a fast-breaking story. Every day brings new developments. The truth is a
moving target, and often dead on arrival. Rumors start to fly as soon as people pick up the scent that a merger is in the works. This is high
drama. Hot stuff. Everybody has an opinion, and all the rules of gossip prevail. In this tense environment, it is easy for messages to be
misinterpreted, twisted, or exaggerated.
Communication planning requires much more thought in a merger than it does during more stable, less stressful circumstances. Yet, most key
managers receive little education on what to say, and just as importantly, what not to say. There is little opportunity for them to make an
insignificant remark. Practically everything they communicate is taken seriously, studied for innuendo, or held up to the light for subtle
implications. Just because a comment from an executive is well-intentioned doesn’t mean that it is effective. When merger difficulties develop, 75
percent of them have their roots in communication problems. In fact, at the very time company communication needs to be better than ever, it’s
often at its worst. And the trouble is that communication problems never seem to remain just communication problems. They end up causing
productivity and morale declines and—eventually—profitability problems. Work becomes more frustrating and stressful for everyone. A well-crafted
communication plan can help reduce employee anxiety and cynicism, protect the acquirer's credibility, and prevent top management from being
accused of reneging on its promises.
In this section, we list the questions to expect from different constituencies and the proper information to convey to each. We also provide
playbooks, agendas, and guidelines for conducting announcement, day one, and benefit meetings. Plus, our presentations and articles (more than
twenty) explain M&A communication planning best practices.

30
© 2018 Pritchett

31
© 2018 Pritchett

32
© 2018 Pritchett

33
© 2018 Pritchett

34
© 2018 Pritchett

35
© 2018 Pritchett

36
© 2018 Pritchett
Step 8: Develop M&A Staffing and Retention Plans
Leadership assessments and talent retention in M&A--the decisions regarding who goes, who stays, and who is in charge--help determine the future
direction of the business and the workforce’s views on what the new organization values. Unfortunately, selecting someone to stay does not mean
they will. It is not surprising that people often choose to leave an organization or “de-commit” during a merger or acquisition.
- Acquirers should re-recruit the crucial people in the target company before competitors capture their attention.
- Merging becomes even more risky and problematic without the help of a target company's best performers.
- If the acquired workforce is to be integrated—truly merged—then the staging for this consolidation should begin well before the deal is formally
closed. Problems develop rapidly when the parent firm fails to orchestrate a prompt and systematic assimilation process.
Organizations routinely suffer a loss of identity upon being acquired and with that loss comes an erosion of employee commitment. Motivation
deteriorates as people’s sense of “my company” fades and blurs, making it harder for them to maintain an emotional attachment to the organization.
Also, personal ties to upper-level managers or the owner may be severed as those people leave the scene, eliminating important personal loyalties
that previously generated strong motivational forces. The widespread turmoil created by change turns people’s thoughts inward, away from their job
and toward personal concerns. Self-protective thoughts swirl through their minds, leaving people to wonder about the wisdom in waiting to see what
will happen to their careers. Effective staffing plans and onboarding processes quickly reduce uncertainty and re-focus people back on the business.
In this section, we explain how to evaluate the acquired company's management, design a new organization structure, retain key talent, manage
redundancies, and onboard new employees.

37
© 2018 Pritchett

38
© 2018 Pritchett

39
© 2018 Pritchett

40
© 2018 Pritchett

41
© 2018 Pritchett

42
© 2018 Pritchett
Step 9: Develop M&A Project Integration Plans
An M&A project integration plan outlines exactly how and when major resources, assets, and processes of the acquiring and acquired companies will
be combined in order to achieve the goals of the deal.
Acquirers should follow a proven M&A integration planning methodology (playbook) to define the integration steps and activities so that people in
both organizations can see the work ahead as logical and achievable. The clarity from a carefully crafted M&A integration plan helps align
expectations and replace employee skepticism with optimism.
In this section of our web site, we provide many M&A integration playbooks from successful acquisitions. These Word and Excel documents can
be easily downloaded and customized for your acquisitions.

43
© 2018 Pritchett

44
© 2018 Pritchett

45
© 2018 Pritchett

46
© 2018 Pritchett

47
© 2018 Pritchett

48
© 2018 Pritchett

49
© 2018 Pritchett

50
© 2018 Pritchett
Step 10: Execute Acquisition Integration Plans (Includes Day 1 Plans)
Executing an acquisition integration plan is certainly one of the most difficult assignments one can face in the corporate world. Anybody who has led
the implementation of a large information system or the relocation of a facility knows how many headaches can be associated with those sorts of
challenges. But leading an acquisition integration involves all the problems of those projects plus an even longer list of management demands. In
addition, all of these challenges must be handled in an environment characterized by complex, high-pressure conditions.
Because the convergence of these challenges occurs in a different environment than normally exists for managers, different approaches are required.
Managing a merger, regardless of size, is distinctly different from managing an ongoing operation. The first step one can take toward being an
effective M&A integration manager is to understand what acquisitions represent in the life cycle of an organization. As a method of corporate
growth, they are revolutionary rather than evolutionary. And it is important to recognize that uncommon growth calls for uncommon solutions. This
often means managing the transition in a fashion that seems different from day-to-day operational norms.
Particularly during the early stages of an acquisition, it’s a priority to produce financial synergies. That speaks volumes to the workforce, because for
a lot of those people, the jury will still be out regarding whether it’s a good merger or a bad one. If the company’s financial condition begins to
deteriorate, employees typically point to that as hard evidence that something about the merger was bad to begin with or is beginning to go sour.

51
© 2018 Pritchett

52
© 2018 Pritchett

53
© 2018 Pritchett

54
© 2018 Pritchett

55
© 2018 Pritchett

56
© 2018 Pritchett

58
© 2018 Pritchett
Step 11: Capture M&A Integration Lessons Learned
If a post-mortem merger examination is poorly executed or skipped, hard-won wisdom will likely be lost. Mistakes should be identified and
documented so they are not repeated in the future.
Many of the errors that derail integrations are predictable. Yet, acquirers make them anyway. They don’t do their homework, or they believe their
businesses will be somehow immune to issues that plague other merging companies.
Acquirers can help protect their future deals by learning lessons not only from their integrations, but from others as well.

Mergers Acquisitions Divestitures Integration Framework (M&A) (MADI)

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Mergers Acquisitions Divestitures Integration Framework (M&A) (MADI)

Similar to Mergers Acquisitions Divestitures Integration Framework (M&A) (MADI) (20)

More from Richard Swartzbaugh

More from Richard Swartzbaugh (11)

Recently uploaded

Recently uploaded (20)

Mergers Acquisitions Divestitures Integration Framework (M&A) (MADI)