Delivering deal value is far from a mystery, even in today’s dynamic deal environment. The most experienced dealmakers say they know what to do—and are reporting success. But that success is getting harder to come by.
Research has shown that too many acquisitions fall short of the expectations set for them1. Despite the best intentions, carefully developed strategy often does not translate into the right mix of people, process, and technology for integration.
Dealmakers have conceded the road to value is clear and navigable. The bottom line when it comes to deal success: you do the right activities—in the right ways—and you get the right results. The adherence to seven fundamental tenets will help lead to successful integration.
1. Accelerate the transition.® There is no value in delay. It is critical to focus on obtaining bottom-line results as quickly as possible to potentially maximize shareholder value. While prolonged transitions slow growth, reduce profits, destroy morale and productivity, and lead to missed opportunities and loss of market share, accelerated transitions result in more rapid return on deal investment, better capitalization on post-deal opportunities, and lower levels of organizational uncertainty. Take early action to launch fast paced integration activities.
2. Define the integration strategy. Integration is a highly tactical effort. But the tactics must be implemented in ways that capture and protect the value of the deal. Rapidly converting acquisition strategy into integration strategy is of paramount importance. Developing and documenting an integration roadmap and set of guiding principles to be used in pinpointing and executing a clear integration strategy is a critical first step.
3. Focus on priority initiatives. Resource workload limitations demand that integration efforts be prioritized. And shareholder value must drive the allocation of resources for meeting those priorities. First, potential sources of value capture and value creation must be chosen. Then resources get allocated based on potential financial impact, probability of success, and timeline requirements.
4. Prepare for Day One. Critical Day One tasks need to be determined early, before longer-term, more detailed planning commences. This allows for prompt identification of long-lead time items, well before they can turn into closing day surprises. A detailed plan should then be created, including all actions that will be put in place on Day One. Planning for Day One should begin in conjunction with the due diligence process.
5. Communicate with all stakeholders. Communicate early and often with all stakeholders, including customers, employees, investors, suppliers/vendors, and the general public—providing information directed to their special concerns yet consistent in overall theme and tone. Communications should give the reasons behind the deal, specify the timing for key actions, and be candid about both what is known and what is unknown. Feedback mechanisms should be included so the dialogue can be two-way.
6. Establish leadership at all levels. Early and swift selection of key management posts for the transition is critical to minimize uncertainty, assign accountability, define functional authority, and clarify Companies need to quickly define their go forward organization structure and operating model, and clarify management roles and interrelationships. In addition, during the initial phases of integration, a team-based control structure should be established to link integration strategy and leadership with task-level action and to coordinate issue, action, and dependency management across the organization. A successful integration management structure must clearly define responsibilities and reporting relationships. Teams of functional specialists should be tasked with integrating core functional areas. They in turn report to a team with overall responsibility for managing the integration. Finally, a steering committee of senior leaders provides oversight for the overall effort.
7. Manage the integration as a business process. Mergers and acquisitions rarely fail due to a flawed strategy. Rather, missing targets and deal objectives are often a result of untimely execution of the strategy. Successful integration must happen quickly and systematically. The period of time between deal announcement and deal close and the first 100 days post-close are absolutely critical to realizing quick wins and preparing the combined company to maximize value over the long term.
Companies who do not follow a disciplined approach to integration usually aren’t as successful with their deals as those who do. A disciplined approach to integration helps achieve early wins, build momentum, and instill confidence among stakeholders. An integration roadmap can be helpful in pinpointing and executing a clear integration strategy before a deal is final. Adherence to the seven fundamental tenets can guide companies along the path to a successful integration and allow managers to focus their efforts on sound execution.
For further discussion of the seven fundamental tenets, check out this video:
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1 PricewaterhouseCoopers LLP 2014 US M&A Integration Survey