Break Integration into Macro Phases To Help You Manage Complexity

March 23rd, 2012
The bulk of integration activities should be organized into the macro phases outlined below. This makes it easier to break up the activity and to project manage the numerous tasks at hand. Included here are a few highlights of the activities that each phase entails:

1. Pre-planning. Setting the parameters of integration timing, addressing core business strategy issues, if necessary, and securing outside resources.

2. Integration due diligence. Securing background data on all functional business areas and business activity to inform your integration planning.

3. Integration office planning. Establishing an IMO to run your integration project.

4. Execution. All major integration activities, commencing from day one of your integration to the end state.

5. End state or wrap-up: Post-integration surveys and integration-closing activities.

Well executed stakeholder interviews can help diagnose integration complexity

February 24th, 2012

A proven method to attain some risk assessment and complexity guidance is by talking to company executives engaged in the merger or acquisition. They will typically provide solid information which can be used to shape your integration strategy

 

The optimal integration risk survey should be created to address the company, industry, and deal type that is specific for your integration. Below is a list of “universal” risk assessment questions you can use to build from and craft your own assessment survey.

 

·         What is the business rationale and the key financial metrics that support the “deal”

·         What are the core business strategies of Newco (the newly combined company) or of the acquiring company?

·         What are the most sensitive areas of the business that might be prone to disruption?

·         Are there significant government or regulatory affairs challenges for this industry (e.g. Pharma integrations)

·         Will some portion or unit of the acquired or merged company be carved out and left alone-which will require some extra effort to preserve it during the integration?

·         What’s the timeline expectations for the integration that have been communicated to key stakeholder audiences (e.g. investor community)

·         Are there major IT system integrations required to realize synergy benefits or operational efficiencies? What is the expected timing of those integrations?

·         Are there any key executives that might leave as a result of the merger or acquisition and which would result in an experience vacuum in a particular area?

·         How involved will the integration team be in synergy workstream tracking and management (more on that in later chapters, but a good detail to parse out early)

·         Are there any EPA or union concerns that have to be addressed outside of the usual?

·         Are there any past business practices that are incongruent with the Newco or acquiring company’s business strategies (e.g.  credit standards for new customers )

·         Are there any community affairs issues that will result in a more rigorous communication plan being required?

 

These are just samples of the kinds of areas where discovery will be needed to gauge integration complexity. In addition to this you should add questions that are germane to the industry, deal type and company.

Assessing Potential Integration Challenges: Be Ready!

January 27th, 2012

 

Integration pre planning should always include time dedicated for assessing potential integrations risks and challenges at a high level to see if you are missing any important areas.

 

Here are some areas to consider and that many consider to be the typical “hot spots” of an integration, and some questions to ask as you prepare:

 

Effective program management and Governance:

·         What is the right governance structure for the integration program?

·         Do you have the capabilities and resources required to execute well?

·         Are you prepared to implement your integration plan based on the expected Day 1 timing?

 

Delivering value:

·         We talked at length in chapter 3 about how difficult it is to make sure integrations deliver on expected value, as it’s easy to erode value with poor integration planning and execution.

·         As you assess your ability to deliver in this area, ask yourself:

·         How can value be delivered with the expected people, c ultural and business challenges?

·         How can we mitigate adverse disruptions to day to day operations?

·         Are the synergy targets realistic, and is there collective buy-in from senior management that they are attainable?

·         What changes may be necessary in the operating model to ensure a successful integration?

 

Establishing the right level of integration:

·         What is the “right” level of integration required to deliver value and active business objectives?

·         What is the recommended pace and timetable for the integration? Is it too short, too long; are there integration decisions that need to be delayed for some reason?

 

Culture and Change:

·         What are the most prevalent cultural differences between the 2 companies, and what might happen if they are not addressed?

·         How much cultural integration work is required as part of the integration planning and execution

·         How do you mange the sometimes conflicting needs of all the stakeholders?

·         How to ensure communications are frequent, relevant and add value to all stakeholder audiences?

 

Business environment:

·         What are the normal pressures on day to day operations?

·         What potentially adverse or disruptive events could threaten normal operations?

·         Any political or environmental issues that could distract from the integration work?

 

 

 Be prepared, and Good luck!

 

 

 

2011 Post Merger Integration Lessons Learned

January 13th, 2012

As we put  a formal bow on 2012, here’s a few nuggets on some lessons learned that we can all keep handy as we start another exciting year of integration work. Enjoy!

Lack of Air Cover:

It is critical the IMO report into a high ranking executive, preferably a C-suite executive. Here’s why: Integrations will surface issues no one expected, and that will require senior level intervention. Many times someone will have to “call the play”, as you will have competing viewpoints and an operational stalemate. These must be escalated and expedited quickly, and having the IMO report into the C-suite makes this much easier to handle.

Under Communicating:

Sometimes leaders feel they are the only ones that need to know what’s going on and the rest of us can be left in the dark to wonder what’s going on and to hoe for good things to happen. Here’s what happens to most people when they are uncertain about the companies direction or their role in it: they freeze and productivity plummets. Make sure you communicate early and often during integration and set up tools to do so (see Communication Planning Chapter).

Too Many Outside Consultants-not enough insiders:

I once was asked to join integration late in the process because it was behind schedule, only to find the IMO was being run by some entry level consultants left behind by the large consulting firm who helped the company do the deal. They were very smart, had diplomas from some great schools, but were inexperienced and had lost credibility among the functional team members they had to work with. Don’t staff your IMO solely with consultants. Use them to help support where needed, but make sure you have personnel from one of the merged or acquiring companies as part of your IMO.

 

You have to be a good cop, and a bad cop:

 

IMO leaders have to support the new company but they also need to quickly isolate folks who are not “getting on the bus” as we like to say. Do not tolerate detractors for long, they will poison your efforts and undermine your integration planning and execution. Get ahead of this by suggesting the person talk to senior management or by formally recommending the person be redeployed.

 

The Open Door Policy:

On the flip side, integrations can be tough as many times people are losing jobs, or status, or might have to relocate, or all of the above!

I have a rule when we are on site (at the acquired company) during integration work-open doors. Unless absolutely necessary I make sure any doors to conference and war rooms we are occupying are always open, so folks can see us working and not feel any more anxious than they already are. New faces and closed doors make people nervous, so try to avoid it when you can and be accessible for those who just need to talk or ask questions.

 

 

You don’t have a dog in this fight:

One of the biggest traps in this business is getting sucked into company politics. I always remind my team members that even though people will share company gossip-they are to refocus conversations on integration business and avoid company politics. This particular issue occurs often and can be extremely distracting and distracting. Listen, but don’t take sides or advocate a position unless it directly affects an integration workstream or key deliverable.

 

Do your homework:

Even though you may be working for the acquiring company, do some homework and get to know the acquired or merged company before you get onsite. (not just the due diligence info either!)

Know how long the company has been in business, what it produces or services it provides. This is so easy today given our digital world that not boning up on a company is inexcusable. People will appreciate the fact that you took the effort, and most importantly, it will inform your integration planning efforts considerably.

 

Have a bias for Urgency:

Integrations should be fast paced and methodical with a bias for urgency. Have an issue come up in the morning? Get it resolved by that afternoon-and then communicate next steps. Keep moving as there is nothing worse than an integration that plods along and undermines momentum. There’s an affliction called “integration fatigue” that occurs when integration work goes on too long and IMO leads and functional team members get bored and want to move on and do…anything else!

Integrations should have an end and as soon as prudently possible is best.

 

Don’t try and solve world hunger:

Sometimes integration activity becomes a home for all the ills and aspirations of the organization. Because there’s so much activity and muscle being expended folks think any problem can be solved!

Don’t let integration “scope creep” load your integration workplan with projects that are organizational initiatives and not integration initiatives. Here are a few examples of scope creep projects to be cautious of including as part of integration workstreams:

 

·         Big IT system implementations (an ERP for example)

·         Strategic projects that would occur with or without integration (e.g. store redesign)

·         Employee training projects that are not related to training newly acquired or merged employees

 

 

Dispense with the Politics:

Integrations can be very contentious political processes, but integration leaders need to be apolitical and rise above the day to day political morass. If you don’t, you will lose momentum and be perceived as just another cog in the new wheel, nit a catalyst for the new organization.

 

 

Be inspirational, and lead:

Integrations are tough for most all employees on both sides or a merger or acquisition. You can help by being a proactive, positive integration leader and an active problem solver for the new organization. People will appreciate it immensely, and it will help keep your integration team focused and engaged.

 

 

 

 

 

Another “Merger of Equals”…..Good Luck!

July 28th, 2010

Integration Project Charters: Why You Need Them

October 29th, 2009

Integration Project Charters can save headaches down the road

Say the word “Charter” and many folks will understandably roll their eyes. Thoughts of unwelcome bureaucracy and red tape will abound. However, for merger integrations, charters can save a lot of time, money and unnecessary turf scraps by getting important decisions and scope details outlined early, and agreed upon by all stakeholders.
Here’s a very simple integration project charter to use as a starter, and best to keep it to 1-2 pages max. Good luck!
Sample Integration Project Charter:
1. Project Title and Description: Integration of XXXX into YYYY. (Here to referred as “Project A”)
2. Integration Project A Purpose: business need, project justification, alignment with strategic plan.
3. Integration Project A Scope:  planning and management of near term initiatives required to integrate merged/acquired entity.  Scope can be changed through approval of the Project Sponsor and Integration Management Office (recommend including this line to prevent the “pile-on” of operational projects individual stakeholders may like to add to the scope).
4. Sponsoring Org (SO) Participants for Project A: List people, titles
5. Integration Mgmt Office Participants for Project A: List people, titles
6. SO & Integration Mgmt office Responsibility & Authority Guidelines:  Outline primary responsibilities of SO and IMO relative to Project A. Example:
-SO responsible for coordinating master integration schedule and delivery dates for functional plans for Project A
-IMO is the centralized decision making authority for Project A 
7. Integration Project A Schedule: pre-close to first 100 days, transitioning outstanding items to a thinner end-state management process

8. Resources:
-Integration Management Office/Integration Project Manager  - role, stakeholder communication
-Integration Team – functional organizations, resource commitments, and their participation
-Stakeholder Requirements As Known: project sponsor, involved acquired/acquiring company functional management/employees, integration team members and their managers, customers, investors, community.

9. Functional Resource requirements:
-Core responsibilities: (Use Functional Job Descriptions for more work detail)

10. Project Deliverables:  Integration Plan, Communication Plan, Synergy Plan, Weekly Status, Lessons Learned, and End State Tracking Log.

11. Organizational, Environmental, and Internal/External Assumptions & Constraints
• Deal Terms that may affect schedule, scope, or cost
• Resource limits (ability, quantity, …) that will need to be factored into the plan

M&A Environment Improving-Make Sure Your Integration Plans Improve Too!

September 8th, 2009

Since the beginning of the year, the conditions that foster deal-making activity have largely improved. The stock markets have rallied and the broad economic recovery has inspired confidence in corporate boards that the worst is over.

Many of the announced deals through Monday, including Kraft’s recent offer for Cadbury, Disney’s $4 billion purchase of Marvel Entertainment and eBay’s sale of a majority stake in its Skype unit, also involved different types of activity, from hostile bids to corporate mergers to private equity transactions.

But no matter what the merger flavor, mergers require integration, and companies who delay getting their integration capabilities up to snuff will see value destroyed and synergy realization delayed.

As we have stressed repeatedly throughout this downturn, slow times are a perfect opportunity to improve core operation competencies. Post acquisition integration is the perfect discipline to examine and improve while deal activity is slow.

Companies can prepare now by taking a few simple steps:

Examine past deals and post integration success and failures: A thorough post mortem on your last integration will yield clues to where your biggest integration pain points reside. Do a little research and outline where integration competencies need to be improved.

Talk to Acquired employees: Senior management and rank and file employees can provide plenty on the pros and cons of your last integration. Was your communication plan spotty; are there still “integration projects” open and requiring attention? Find out so you can prepare accordingly for your next integration.

Create and Integration Playbook: A scalable integration playbook is the foundation for integration expertise. Any company doing integration well is working off a playbook that is a living, breathing repository of integration tools, templates and lessons learned that they use to inform each integration.

Use this time to get your integration skills honed and ready for that next deal.

Scott Whitaker is President of Whitaker & Company, Inc., an Atlanta based consulting firm providing post merger integration expertise, tools, templates and playbooks for companies involved in frequent mergers and acquisitions.

Integration Playbooks: Don’t overlook creating an “Integration Charter”

August 10th, 2009

Integration Playbooks: Don’t overlook creating an “Integration Charter”

One critical component of any integration playbook is a charter document and a governance process for decision making. Once integrations are underway you can’t stop and resolve issues relating to scope and governance-you won’t have time.

So, make sure you have a straightforward “Integration Charter” document that is signed off by all key stakeholders that:

·        Defines the high level purpose and scope of the integration project

·        Identifies the Project Sponsor (e.g. Division) and key stakeholders

·        Authorizes the Integration Management Office to manage the integration project

·        Identifies resource commitments for the required business function support

Governance:

Equally important is how to administer your integration and establish a governance framework that aids speedy decision making and issue escalation. An example of a governance model for what your IMO (Integration Mgmt Office) is responsible for is outlined below

Status Reporting:

·        IMO is responsible for establishing reporting templates/process, training functional project owners, and collecting/summarizing results

·        IMO is accountable for highlighting issues for the executive sponsors and reporting any functional reporting gaps

Issue Management:

·        IMO facilitates cross-functional collaboration/resolution

·        Functional Owners escalate within their function

·        Those that cannot be resolved via collaboration, functional escalation will be escalated to executive sponsors

Project Scope Changes:

·        Initial Plans developed pre-close and approved by executive sponsors

·        Changes to scope managed via executive sponsor approval

Synergy Initiative Changes:

·        Initial Synergy Plan will be developed by functional owners through close collaboration with the IMO

·        Changes to individual synergy initiative scope, amount, measurement method, or timing requires approval by executive sponsors

 

Org Structure is Your # 1 Integration Priority

July 7th, 2009

There’s a famous saying that nothing much happens in an integration until the org structure is completed, and it is so true.

Whenever there is uncertainty or ambiguity relative to who’s in charge and any new reporting relationships-people tend to freeze until it’s defined.

It is critically important to quickly establish an integration process for determining structure and staffing. Sometimes a knee jerk reaction in these circumstances is to abandon legacy processes for personnel evaluation and staffing, which can have the following unwanted effects:

 

·         Acquirer makes all staffing decisions unilaterally: Be careful that “unknown commodities” at the other companies aren’t overlooked or never considered. The downside of this is that the new company is staffed primarily with managers from the acquirer and is unable to fully capitalize on the acquired company’s assets.

 

·         New organization takes a wait-and-see approach: Nothing much happens in an integration until the organization is set, so it is always best to be proactive and accelerate org decisions, even though they are always some of the toughest and many times results in some bad news for some very good people.

 

·         Acquirer “cleans house”: Sometimes acquirers gut the acquiree and all the institutional knowledge walks out the door when you need it most.

 

Org decisions can be tough and painful, but make them first and communicate them effectively to get your integration off on solid footing.

Merger Integration Playbooks: Flexibility and Adaptability are Critical Success Factors

June 30th, 2009

One of the ideas we always stress with new clients is that their integration playbook is never “done”. Playbooks must be continually adapted and optimized to address a myriad of integration scenarios and business challenges.

Any modifications and enhancements to a playbook should be captured and stored on a shared drive with all other playbook materials (e.g. process flows, tools, templates, org charts etc.). The playbook is the epitome of a living document, and must be cared for as such.

 

However, making sure your Integration Playbook has inherent flexibility “built-in” will make ongoing optimization much easier. Specifically:

 

Build Playbook to Address Many Integration Scenarios:

 

Make sure playbooks can address multiple integration scenarios:

- Subsidiary Bolt-On (or tuck in)

- Functional

- Operational

- Full Integration

 

Knowing which parts of your playbook are needed for each scenario and building these as modular components will make ongoing playbook application much easier.

 

Last but not least-make the process for updating playbooks easy. Versions should be stored on a shared drive, and ongoing enhancements need some organizing principle (i.e. version 1.2, 1.3 etc.).

Make sure to keep separate folders for each playbook section to store artifacts from each integration-clearly identified (e.g. NewCo Day 0 Communication Plan Documents March 2009)

 

Integration Playbooks are never done-they just get better.

 

 

Scott Whitaker is President of Whitaker & Company, Inc., an Atlanta based consulting firm providing post merger integration expertise, tools, templates and playbooks for companies undertaking frequent mergers and acquisitions.

 

Email: scott@whitakercompany.com