Top 5 things to consider at the time of Mergers & Integration

M&A is one of the complexities of modern day corporate world. At the outset, it is required to gain competitive advantage and, therefore, should be part of any serious-play arsenal. And yet, since it is fraught with pitfalls and contradictions all along the journey, many companies either have failed to implement a successful merger or worse, shied away from using this strategic advantage.

This is the first of a series of articles on Mergers and Acquisitions. Through this series, we will try to de-mystify some of the challenges and provide action points that may lead to a higher probability of the success of a merger.

One of the origin of failure points is foundational actions that need to take place at the time of initiation of a merger, that is the period starting on the day of the merger announcement and the subsequent few days.

While many aspects may influence an integration, I would like to highlight two aspects that has a significant impact:

·       Limited available information during due diligence, a bias to exaggerate the positive side of the buying company and under-playing the negative side by the seller. As a result, decisions and solution directions end up being based on many assumptions.

·       Unlike other transformational journeys taken by organizations that are preceded with a reasonable length of time to mobilize, mergers are highly confidential till the announcement day. Immediately, after that one gets into active merger period.

To avoid the above pitfall, here are the Top 5 elements that should be addressed around this period:

Strategy to Tactical steps and Actions

·       Elements like the purpose of acquisition, outlay of strategic vision for the next 2-3 years, technology play and leadership structure, need to be converted into a series of action items in a program plan. These series of action items need to assigned owners but also a complete RACI (Responsible, Accountable, Consulted, Informed) grid should be created with effort and timeline. In addition, when a RACI grid is completed, the organization needs to review the capability, capacity, availability, readiness, incentivization and relevance of the resources who will be involved in the integration. Care should be taken on not to under-estimate the effort and commitment required for integration or over-estimate the capability and experience of the engaged teams. It is better to be conservative up-front than be optimistic as the issues get amplified multifold in a very short span of time.

Stakeholder Reflection and Alignment

·       At due-diligence (dd) stage due to sensitivities surrounding a deal only a select set of stakeholders are involved and are aligned on the strategic objective of an acquisition. At the time of merger announcement, it is important that the stakeholders are brought back into the fold since there is a time lapse between due-diligence and merger announcement. In addition, the initial alignment at the time of due dilgence tend to be at a more strategic and high level, while at the time of the merger announcement the alignment needs to be redrawn and validated at solution and implementation details level. The other aspect that needs to be considered is that during dd only a small set of stakeholders are involved whereas post-merger announcement stage, a much bigger team of stakeholders need to be involved for alignment

Internal Capabilities versus External Expertise

·       This is one area that is hugely debated across the industry. We believe that both sets of people bring in a unique advantage to the mix. Unless a company is a serial acquirer, most of the companies may not have enough home-grown bench strength to suffice the requirement for this highly specialized work. On the other side, due to the speed, complexity and multi-disciplinary nature of integration, each integration tends to be unique in its own way and therefore, has to depend on huge amounts of contextual and cultural knowledge of an organization.

Integration Management Office (IMO)

·       The program management office of an integration is extremely important to be setup early on. The reason is simple. An IMO activity dashboard resembles the cockpit of a Boeing with lots of activities, traffic lights and buttons and one can’t afford to get an airplane started either without the pilot and co-pilot or without the right monitoring tools/actions in place up-front. The second aspect of the IMO apart from the setup is that it also leads the mobilization of the organization to rally behind an integration and create a sense of urgency.

Assumptions

·       Assumptions made during due diligence need to validated at the earliest as soon as the trigger is pressed. These assumptions will either be converted into facts or need to be replaced with new facts that may result in changing respective actions and it times even course-correct the direction of an integration.

Integration is a complex process with high levels of synchronization, careful planning, huge interdependencies and most importantly, it needs to be performed at a certain speed and a sense of urgency. A robust plan with the right elements and their right structure can take an organization a long way.

Our endeavor is to share our experiences with others so that hopefully, they don’t have to struggle with similar challenges. In the end, each integration is unique and is a combination of art and science either as a scientific art or an artistic science.

This is a repository of experience and we constantly, look for ways to enrich them by sharing and incorporating feedback. Please feel free to contribute to enrich it by leaving your comments either at this forum or emailing to anirvan@fifthchrome.com