Merger Integration

Merger Integration

 

From David Burnie’s company blog, a ten-point checklist that can help make a post-merger integration successful.

 

For most companies, mergers do not occur regularly or recurringly, bringing with them a host of uncertainty and doubt. When two companies merge, it is a unique experience for both companies requiring a particular course of action, capabilities, and skills.

The Burnie Group team has supported numerous post merger integrations from $10M up to $1B across various industries, including insurance and financial services, professional services, pharma, beauty and cosmetics, software and technology, and senior living, to name a few.

Here are ten critical things to get right in every post-merger integration (PMI), no matter the merger type, size, or industry.

  1. Use the time leading up to the closing day wisely

The pre-closing period begins as soon as the due diligence is complete and both sides negotiate and agree upon the terms. Though this period may range from a couple of weeks to several months, we found that a typical pre-closing interval is between four and eight weeks. The pre-closing period is driven by the need to get all Day 1/Closing Day checkmarks in place, such as legal aspects, permits, financing, etc.

Knowing how much time is available before Closing Day will dictate the scope of work that can be realistically completed. From our experience, it takes at least a few days to get an integration project management office (PMO) and integration workstreams set up, including governance with roles and responsibilities.

Suppose you have only a couple of weeks. In that case, the scope of your pre-closing integration topics should focus on must-do legal aspects, financing, clear communication, and most urgent people-related topics.

If you have four to six weeks, a more detailed integration plan can be developed involving all relevant workstreams (e.g., technology, operations, sales and distribution, etc.)

If you have six to eight weeks, you will have the luxury of approaching Day 1/Closing Day in a very planned fashion. In addition to completing all of the above tasks, you can develop the target operating model for the integrated companies.

It is worth keeping in mind that the further out the Day 1/Closing Day, the more likely the merger news will slip through. Thus, the communication workstream should closely manage internal and external communication.

 

Key points include:

  • Friendly vs. hostile takeover
  • Human resource topics
  • The target operating model for the PMI

 

Read the full post, 10 Things You Must Know to Make Your Post Merger Integration a Success, on theburniegroup.com. 

 

Umbrex is pleased to welcome H. Nevin Yuksel-Ekici. Nevin has 20+ years of strategy and transformation experience. This includes 11 years at a global enterprise software, hardware and hybrid cloud firm (Dell/ EMC), and 6+ years at Bain & Company. In her last role, she led cross-BU/cross-functional strategy projects, and co-led strategic planning for Dell Technologies. This involved working with the Dell Technologies executive leadership team and cross-functional leaders to identify and prioritize strategic initiatives, as well as clarifying and solving vague business problems through structured thinking and data analytics. In previous roles, she has led market intelligence, go-to-market strategy, and multiple enterprise-wide program offices to drive merger integrations and transformations. She has set up and transformed teams, and helped them achieve strong results in a short time.

Nevin is happy to collaborate on projects related to strategic planning, business strategy, sales strategy and merger integration.

 

Sean McCoy shares an article that explains why most post-merger integrations fail.

Most mergers and acquisitions fail to achieve their intended synergies and deal rationale, because most post-merger integrations (PMIs) fail. Most post-merger integrations fail because they did not beat The 4 Clocks. There are 4 clocks counting down in PMI, a clock each of the four major stakeholders in a PMI: employees, vendors, owners, and customers. The clocks also largely parallel areas of synergies. The name of the game in PMIs is to complete the integration and achieve the synergies before the clocks hit zero.

The Employee Clock

The Employee Clock measures the opportunity for two key synergies, internal synergies through consolidating excess capacity and external synergies via retaining top performers. Human capital and physical capital are under the microscope of the Employee Clock. Integrations often create excess physical capacity, e.g., plants, locations, and a common source of synergies is consolidation of physical plant.

The human capital element is a race against a brain drain. Top performers from both companies will typically stay on board to see where they fit in the new company. But, they will not stick around forever. The Employee Clock hits zero when top performers decide to move on. Losing top performers is perhaps the most damaging impact to the long-term strength of the integrated company. The high stakes for talent retention are usually why most PMIs begin with determining everyone’s role in the new organization.

The Vendor Clock

The Vendor Clock counts down the opportunity to capture cost efficiencies. A common source of synergies is the consolidation of vendors and systems. The cost of two systems becomes the cost of one system, but beyond that obvious savings, the new company has greater bargaining power with vendors, due to the larger volume of the integrated company. The starting time on the Vendor Clock is usually higher than on the Employee Clock, but vendor and system integrations also take longer, leaving no time to delay.

 

Key points include:

  • Source of funds
  • Revenue synergies
  • Customer churn

 

Red the full article, Post-merger integrations are racing against The 4 Clocks, on McCoy ConsultingGroup.com. 

 

 

Luca Ottinetti’s company blog identifies the drivers of organizational costs and explains why they add significant complexity to the administration of the business.

The costs associated with organizational alignment deal with two functions:  coordination and administration. Coordination costs include resources dedicated to facilitating information sharing, knowledge transfer, and communication.  These resources may comprise teams, committees, or formal lateral units depending on the complexity of the organization. Administrative costs include the top management functions for executive control and direction over all personnel, departments, facilities, and activities such as human resources, accounting, finance, public relations, contract administration, and legal.  Over time, organizational costs increase if for no other reason than business growth and to compensate for cost of living adjustments. In some cases, however, organizational costs increase well above the expected norm. The question is why.

 

Areas covered in this article include:

  • Product line expansion
  • New market expansion
  • Micro-segmentation
  • Vertical integration
  • Merger integration

 

Read the full article, Do You Know Why Your Organizational Costs Are Rising?, on the Great Prairie Group website.