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Issue #191

Tuesday, January 1, 2014

In this edition of our newsletter, we are pleased to present the third article on Post-Merger Integrations authored by one of Customer Centricity's first clients, Paul Floyd, who has transitioned to the world of Business Strategy consulting including helping companies with Post-Merger Integrations.  In this series, Paul shares insightful perspectives on M&A deals and what it takes to be successful at integrating new acquisitions. Enjoy!

Post-Merger Integrations - The Importance of Thorough Planning
by Paul Floyd

Key post-merger integration success factors were outlined in the conclusion to the article “How to Improve the Odds of M&A Post Merger Integrations.” The most important success factor is related to People and was discussed in the article titled “Post-Merger Integrations - The Arrogant Cowboy and the Indecisive Tortoise.” This article addresses the second success factor which is the need for thorough and effective planning:

  • Align the M&A Strategic Objectives with the Overall Integration Approach
  • Plan Thoroughly; Use Strong Program and Project Management Principles
  • Prioritize; Avoid Conflicting Processes and Divergent Initiatives

Companies often merge and let thorough planning be replaced by a statement to the company about the rationale for the acquisition followed by an ongoing series of actions and reactions to subsequent events as they occur.  Months and quarters can go by with very little progress on integration as the focus of the people quickly returns to the challenges of operating the separate businesses as they existed prior to the merger.  In order to truly obtain the expected benefits of the acquisition, actions need to be taken early to execute on the critical projects that will lead to the achievement of the original goals for the merger.

How do we start? What plans need to be in place to have a successful integration?

The structure for the integration effort will vary depending on an early assessment to align the M&A strategic objectives with the overall integration approach.   There are several integration best practices that are important to consider:

  • Form a Steering Team – The Steering Team should include leaders from both the acquiring and acquired companies. The team should be kept contained so decision making proceeds quickly. The team has many responsibilities including appointing the integration leader, establishing guiding principles, settling on a vision for the combined entity, defining the overall objectives, and tracking progress. It is especially important that the Steering Team takes the time to align the M&A strategic objectives with the overall integration approach. Was the acquisition done to acquire customers, expand into new business segments, add new product lines, add new innovative technologies, add scale, or a combination of factors? The rationale for the M&A needs to be clearly understood and then aligned with the ensuing integration effort.
  • Appoint an Integration Leader – Often referred to as the Integration Tsar, this person needs to have the respect of both the acquired and acquiring companies and should be a decision maker with the right balance of project management expertise, operations experience, business knowledge, and people leadership skills to effectively work across a diverse group of functions. He/she may be an expert brought into the company from the outside to specifically run the integration, or may already be within the company with the benefit of additional coaching from an external expert. Ideally, the Integration Tsar will have a significant role or be the overall leader for the integrated entity or division being formed with the merger.
  • Form Integration teams – The types of teams that are formed will depend on the type of integration being done. They may be set up by function (e.g., Finance, HR, Sales, Operations, IT, Marketing, Engineering), by product line, by technology, by service offer, by business unit, or a combination that meets the objectives of the integration.
  • Envision the Desired Future State – Each team should assess the current state of the area it is addressing and then follow up with a clear vision of the desired future state. As an example, if two companies are merging that have overlapping product lines, then the state of the current product lines needs to be clearly mapped out first and then followed up with a vision of the products that will carry the company forward once the integration is completed. It is likely that the future state will include some products that will be merged while others will be sunset. Once the future state is defined, the integration planning should be focused on the most expedient path to get to the desired future state.
  • Prioritize the Efforts; Avoid Conflicting Processes and Divergent Initiatives - The integration teams will likely come back to the steering team with a significant number of projects that need investment during the integration. Some will have higher priorities than others and will need to be started immediately. Other projects will be deferred until later in the integration and some will be dropped. It is also important that this prioritization include some projects that can achieve quick early successes to get the integration off to a fast start.
  • Use Strong Program and Project Management Principles - The PMO or project management function is a critical team to include in the leadership of an integration effort. An integration is a combination of tactical actions, short term projects, and longer term programs. All need to be led using a disciplined, well-vetted project management approach.
  • Communicate, Communicate, Communicate – Keep the company updated and informed at all stages of the planning and integration.

Seems straight-forward enough; When do we start integrating?

The integration should proceed after planning is completed and the efforts are prioritized and approved.  Adjustments can always be made as progress is tracked and results are assessed.  There will be many challenges along the way especially since there is a combined business to continue running during the integration.  It is important that current customers and prospects are not impacted in an adverse way by the underlying changes that will occur as the integration progresses.   Success will ultimately be measured by the ability to maintain and grow the current business while obtaining the synergy and expansion results brought forward by the integrated or combined company.  Taking care of the people, planning thoroughly, prioritizing continuously, and being flexible to the changing dynamics of the business as it rapidly integrates are key to success.

In future articles we will explore the third success factor, Execution, and how success is measured with Post-Merger integrations. In the meantime, if you are wrestling with an upcoming M&A deal, planning for an integration, or having current integration challenges, feel free to contact us. We are here to serve!

About Paul Floyd

Paul is an experienced technology operating executive with extensive international leadership experience and a track record for achieving rapid product and service growth on a global scale. Paul thrives on working with companies to build great products and services, and using technology to achieve breakthrough solutions for major business challenges. Paul’s experience includes large, medium, and start-up environments. Paul has led major corporate change including the evolving dynamics of a start-up and the many challenges presented by acquisitions, integrations and divestitures. He brings a strong combination of technology, business, operations, and people leadership skills to all of his engagements.

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