How best to prepare for Day One and develop a long-term integration plan to capture deal value
Of all the ways a company can grow, acquiring another company, complete with its own employees, operating systems, and global footprint, is among the most challenging. The bigger the acquisition, the bigger the challenges.
When a large multinational technology distributor began to focus on the acquisition of another multinational business that it thought would enable its future business strategy, there were many challenges to face. The size of the deal–it was a multi-billion dollar carve-out from the seller–and the number of people, facilities, cultural differences and systems involved, suggested a potentially rocky road to success.
Both the buyer and acquired company had global footprints in over 35 countries, a combined employee base of over 15,000 and hundreds of thousands of combined customers. Imagine the depth of due diligence required across multiple functions just to get an understanding of the company. Then imagine the amount of effort and manpower it would take to integrate the two companies. Finally, consider the planning and execution needed to achieve a smooth Day One cut-over to operating as a combined entity, less than nine months from deal signing. How was the company going to deliver on potential synergies and create a path to future growth and sales?
“In planning and executing integration for a complex deal like this, the goals are clear: to capture and build lasting value for the client and ultimately their shareholders.”
Deploy a cross-functional deals team to manage the acquisition from due diligence to deal closing and help our client capture value
PwC was already engaged as a tax advisor for the acquiring company. From that starting point, we were able to introduce our M&A integration specialists into multiple corporate and regional functions to collaborate with the buyer early in the due diligence process. While PwC’s Deals advisors worked on financial diligence and integration issues, our HR diligence and tax advisors also began their analyses on behalf of our client.
Finance, IT, and HR integration management offices (IMOs) were established to drive Day One and integration planning. Throughout these early steps, we collaborated with the client to identify additional information from the acquired company. We also worked together to outline questions to ask and areas to prioritize related to diligence.
Our goal was to provide valuable insights to each of the functional leads, not only in the U.S. but also in Europe and other global locations where the company would be facing HR, tax, and finance issues.
The company also asked PwC to help develop the transition services agreement (TSA). It was an uncommon step for the buyer as the seller usually creates the TSA, but one that helped gain insight for the future integration plan.
Once the deal was signed, the team (which by now was cross-functional) began to work with our client to plan for operations as a combined company by:
Given our broad exposure to the business, the company’s CIO also requested a sole-sourced business intelligence workstream for financial reporting and analysis of the combined company.
By collaborating closely with the client, we were able to take a tactical approach to the many challenges of deal negotiation and integration. As the company faced new questions and issues, our team was able to step in and offer advice as to the next steps.
Big savings, big sales, and a path to the future
When the multi-billion dollar transaction was complete and the integration of the acquired company was successfully executed, leaders estimated an annual $100 million in cost savings within the first two years of operation. They also identified an incremental 20 percent in synergy opportunities. Early financial results reported by the company to its investors showed a dramatic growth in net sales and operating income (GAAP) as well.
Just as important, we were able to help the company work toward a better deal on working capital than it had originally discussed with the acquired company, getting them to add hundreds of millions of dollars to the working capital pool and increasing the value of the deal by ten percent.
Today the company has extended its geographic footprint to more than 30 countries and broadened its global capabilities, discovering new revenue streams around the world as it demonstrates its value-added benefits to its customers and vendors. We are still working with the client, assisting with additional post-integration work in finance, tax, and legal areas, helping the company continue to accelerate its business strategy and generate even more value along its path to growth.
PwC Deals Partner, PwC US
PwC Deals Director, PwC US