Did you know that GBS can be a catalyst for your M&A integration and carve-out programs?
Global Business Services or GBS is a multi-functional back office organization that exists in many companies in today’s corporate world. GBS organizations are primarily created to consolidate back office functions under one organization, one operating principle and one leadership team. GBS organizations offer increased efficiencies, reduced cost of management and cost arbitrage by leveraging talent from low cost locations.
While GBS can provide significant benefits to the parent organization, there are several areas where GBS can play a critical role and actually in many cases, act as a catalyst. One such area is the area of M&A integration and carve-outs.
GBS teams over the course of multiple transitions, consolidations and changes have amassed great amount of experience, skills and expertise that can easily be transferred and be leveraged in any M&A integration and carve-outs programs.
Here are some of the GBS characteristics that can help in M&A integrations:
- GBS organization are involved in numerous transitions of functions from business units to GBS. Transition project management provides a structured approach on how to capture knowledge from existing functions, transfer knowledge and skills to new teams. All tasks and activities linked with transitions are usually organized in a transition project management playbook in a structured manner. Moreover, there is a transition management office like a PMO to manage the program
M&A angle: GBS teams can provide experience and expertise on functional integration, transition management as well as provide PMO for managing integrations.
Codifying processes and knowledge
- GBS teams have developed approaches and methodology to capture information and knowledge from functions in business units. The methodologies would include mapping and documentation of processes, assessment of functions and processes, clarification and break down of roles and responsibilities to sub-process levels, process flows and interfaces/handover-points and process management.
M&A angle: GBS teams can be involved in codifying existing processes of the target organization as well as design the future state processes after consolidation
- Functions within GBS are managed by robust process governance, performance KPIs and metrics and service level agreements with business units. Due to the structured approach, there is greater transparency on the performance that allows a more efficient management of functions and at the same time allows detection of issues and challenges early for right time intervention.
M&A angle: GBS governance structure, operating rhythm and distribution of responsibilities can be used as benchmarked standards for Integration Management Office (IMO) – which is the PMO (Program Management Office) for integrations. Once IMO is setup, the teams can leverage the same communication channels, reporting structure and engage GBS admin resources to assist them in running IMO administration.
Balancing with business-as-usual
- Managing transitions alongside running day-to-day operations, GBS teams over a period develop expertise on how to balance business-as-usual priorities with the needs of a transition. Leveraging this type of experience, GBS teams can predict more efficiently the effort requirements of a transition and can also, provide a framework by which competing business-as-usual can be compared with transition needs and get prioritized accordingly. As this is ingrained in the work culture of GBS, the amount of noise around priorities tend to be much reduced.
M&A angle: GBS teams can assist integration teams to estimate efforts for integration as well as provide structure/arrangements by which business-as-usual can still be conducted.
- GBS teams are well aware of the sensitivity and confidentiality requirements of a functional transition from one team to another. The teams have a good comprehension of the stages of change management (Kübler-Ross change curve) that the functional teams of the business units go through during transitions whether lack of motivation, frustration, anxiety or fear of losing their jobs, GBS teams understand the sensitivity that is required while dealing with these functional teams and yet are able to extract process knowledge from teams.
M&A angle: GBS teams are adept in handling sensitivity and confidentiality surrounding transitions. During integrations, several functions and roles may need to be consolidated or transitioned to new teams thus, creating job uncertainties. GBS teams can handle those transitions still keeping the sensitivities intact.
3rd party and outsourced vendor management
- GBS organizations have many of their functions outsourced to 3rd party service providers and in some cases, off-shored to distant locations. And yet, GBS teams remain accountable for those processes and functions to the business units. For any new transition, GBS teams use their internal as well as 3rd party resources where the functional activities are largely transferred to 3rd parties and management of functions to GBS. This provides a very unique expertise of managing complex relationship management but at the same time, provides tremendous advantage where GBS teams can be ramped up easily for new transitions
M&A angle: GBS teams have expertise in managing numerous 3rd party service providers as well as manage remote teams as well they can quickly ramp up their resources (internal and 3rd party) for new transitions. In an M&A integration, GBS teams can efficiently identify and execute upon transitioning existing activities of the acquired company to a 3rd party service provider.
- Each transition comes with a cost target that needs to be realized within a short frame of time. Moreover, a transition comes with a pre-determined budget and the performance of the project is tracked and measured against the budget (part of Business plan ROI). This tracking and measuring expense against budget, realization of cost savings are an integral part of transition project governance (PMO)
M&A angle: Integration projects also come with synergies targets that needs to be realized within a short period of time. Integration teams can leverage GBS expertise to realize synergies as well as use the governance mechanism of tracking and monitoring synergies, expense vs budget, etc.
- GBS organizations are made up of multiple functions like finance, HR, treasury, employee services, IT, facilities management, procurement, organization security and several other functions. However, in spite of functional diversity, GBS is still managed as a single organization entity. Its leadership have multi-functional background and have the ability to handle multi-functional complexities, risks and interdependencies.
M&A angle: GBS’s ability to handle multiple functions in their daily operations as well as in transitions, GBS teams can provide this unique expertise to handle integrations which are also multi-functional in nature.
- Due to multi-functional coverage, GBS teams have access to enterprise level IT/ERP platforms, data warehouses and therefore, in a position where they can run meaningful business-critical management and business intelligence reports.
M&A angle: GBS ability to mine data and provide analytics can place them run analytics assessment of the target company during due diligence stage.
- GBS transitions involve creation of future state support organizations that will provide services to the businesses after transitions. These would include designing organization structure models, roles and responsibilities with job description, harmonized job titles, staffing the new organization and assessment of existing business unit workforce.
M&A angle: As part of the consolidation, every integration needs a target operating model, a future state organization design and staffing of new organization. GBS teams can help with providing the structure as well as assisting with the mechanics of job descriptions, standardizing roles and other elements of organization design.
Call to Action
Given the similarities that already exist in GBS teams as well as the requirements of an integration, GBS teams can play a much bigger role during M&A integration.
Due diligence stage: Ability to conduct assessment at a process and its underlying IT platforms, GBS can definitely unearth target’s capabilities as well as constraints of their existing operations especially their back office. In addition, GBS can also quickly and quite accurately estimate synergies based on productivity gain, potential opportunity to outsource and offshore work to low-cost locations, back-office leadership consolidation and IT platform consolidation.
Pre-closing: GBS teams can provide critical resources to become members of the integration project team. These resources can play roles as workstream leaders, integration transition leaders, change and culture leaders as well as program administrators. GBS can also play a role in design of integration program with setting operating rhythm, standard templates and tools including complex project management tools. GBS can also help in future state organization design of the combined organization especially on the mechanics and administration side of organization design.
Day-One: Many day-one and closing requirements are closely linked to processes/functions that are supported by GBS. Analysis and forecast of working capital requirement for the initial stage post-closing, change-over of payroll systems, change of terms for customer and vendor contracts, change of ownership of legal entities in different countries, hand-over of pension processes and many others need to be supported by GBS actively.
100-days and implementation: Apart from providing workstream and integration project leadership, GBS teams can support integration operating rigor with managing and monitoring weekly interactions, updates, steerco meetings, working meetings and others.
Given the value GBS brings to the table during M&A integration process, it is time that organizations realize their true potential and start engaging GBS teams upfront.
I’m certain as more companies realize the advantage of GBS structure, the M&A teams will start embracing this GBS-inclusive approach.