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M&A Post-merger integration

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M&A School
ZEO University/AVentures Capital

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M&A Post-merger integration

  1. 1. Post-merger integration: “Now it’s your problem” 18 FEB 2017
  2. 2. “60% of M&A destroy shareholder value” Research of 2500 deals by L.E.K “companies spend more than $2 trillion on acquisitions every year. Yet study after study puts the failure rate of mergers and acquisitions somewhere between 70% and 90%. " Harvard Business Review Ebay’s (EBAY) purchase of Skype for USD 2.6 billion, later to be sold at just USD 1.9 billion Microsoft writes off $7.6B, admits failure of Nokia acquisition Yahoo Hints That $1 Billion Tumblr Acquisition Was Mostly Wasted Money
  3. 3. Question: How would you define successful M&A?
  4. 4. Valuation Deal Structuring Due Dilligence Integration Today’s topic covers 80% of deal success
  5. 5. Question: Is integration required at all?
  6. 6. Business Independent business unit with separate P&L Separate business unit with some shared support functions and synergies Sub-unit with shared overheads and unified operations, GM or top-line responsibility No identifiable sub-units Core functions: Sales, production, logistics, customer support Separate function with independent management Parallel functions extracting some synergies Unified process and system with separate divisions Single function under one manager Support functions: Finance, HR, IT Brand Separate brands A brand under an umbrella Branded offering of a big brand “AAA becomes BBB” Culture Distinctive culture Separate culture with shared umbrella identity Joint culture with separate identities Single culture No integration Full integration
  7. 7. Integration focus 12-24 months: Preserve acquired assets 24 months+: Extract synergies
  8. 8. Question: What are the assets in these companies?• Salesforce • EPAM
  9. 9. Typical priorities: Customers/users Corporate governance Finance: treasury, controlling Marketing Culture HR, IT, legal Business management
  10. 10. Question: When is the right time to tell customers?
  11. 11. Announcement message targeting customers and employees Turn anxiety into opportunity
  12. 12. Question: When to do if a major customer walks away two months after closing?
  13. 13. The key to successful integration is in the deal structure 1. Selling shareholders motivation 1. Why they sell? 2. Are they involved and will they stay? 3. Earn out 4. Stock swap 2. Legal protection 1. Are there assets outside of the deal? 2. Reps & Warranties 3. Change of control procedure
  14. 14. Question: When is the best time to put together a business plan/budget for the new business unit?
  15. 15. Multiplying Chaos: Operational symptoms you don’t want to acquire another company 1. Do you have company KPI dashboard? Do you review it on the monthly basis with you management team? 2. How many times KPIs from the dashboard didn’t tie up with financial reporting? 3. Are you satisfied with your budgeting process? ERP system? 4. Is your HR strong? Do you measure the health of your organization (engagement, eNPS)? 5. Can a new person tell who is doing what based on your org chart? 6. Do you have clear purpose, goals and strategy? When was the last time you reviewed it? 7. Are your corporate values defined and embraced? 8. Does your executive team have enough time to consumer their vacations?
  16. 16. Integration is the biggest operational challenge you’ve see so far Be PREPARED 1. Dedicated project manager 2. Project plan and check list 3. Daily status meetings in the first week, weekly status meetings going forward

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