Whitaker & Company Blog

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

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”

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

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.

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

We are always amazed at how many times we discover a synergy or “planned business benefit” forecast that is already a bust a few months into integration.

The typically symptoms of a plan off track are poor reporting, dispersed liability, and inflated numbers that no one really signed up for in the first place. Executives are quick to point out that the synergy numbers in the deal deck were “aggressive”, and that there was little done to stress test the forecast before it was declared final and communicated to the street or key stakeholders.

Ever wonder why companies fail to achieve forecasted synergies nearly 80% of the time-not hard to understand given the common instances above.

Make synergy realization a reality in your next acquisition by spending some extra time on the following:

Due Diligence Stress Test: Give your integration team (if you don’t have one-get one) a copy of the forecast and have them start analyzing the impact of the integration strategy and timing on the synergy forecast. If possible, have them explore some of the key assumptions and planned benefits to see if realization timeframes are well…realistic.

Tracking and Reporting: Synergy realization should rely on robust reporting that rolls up from each function, and includes cost to achieve budgets and a master spreadsheet that details timing and forecast variances. There should be a version of all this suitable for executive reporting so synergy tracking is visible and actionable.

Accountability: Probably the easiest but most often fumbled part of the process. Synergy targets need to be assigned to individuals, who are then help accountable thru regular reporting and forecast updates. Make sure each planned synergy or business benefit has an owner-and that the owner understands their deliverables.

Make Synergy Extraction part of the Integration Plan: Make synergy tracking and reporting a primary function of your IMO (Integration Management Office), and part of the overall integration plan. This will ensure it receives the proper amount of attention each week, and will allow you to address variances quickly for escalation.

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

Many companies think low or non existent deal activity means they can delay getting their integration planning in order. Nothing could be further from the truth.

Smart companies will use the lull to address integration plans and practices, and get them optimized and ready for when acquisition activity returns to full swing. Let’s face it, when companies get into the due diligence phase with a pending deal or deals, there is little time left to address integration gaps and the likelihood of repeating past integration mistakes becomes more and more predictable.

Not accounting for integration challenges is the number 1 cause of deal failure-so use this “down time” to get your post acqusition integration plan and support model optimized and ready for action!

Great Deal, Bad Integration…Sound Familiar?

Let’s face it, trying to focus attention on post acquisition integration is difficult when planning a merger or acquisition. Companies often overlook the details of integration planning during the heat of the deal making process, as time and energy is spent on due diligence and getting the deal closed-leaving little time for much else.

But according to a recent study the number one cause of deal failure is due to acquiring companies ignoring integration challenges. Companies can avoid this trap by establishing clear integration objectives, by creating concise integration plans and playbooks, and by properly staffing an integration team.

Post acquisition integration plans need to have clear objectives:

• Rapidly capture cost & revenue synergies
• Streamline organization and critical business processes
• Minimize disruption to employees, customers and suppliers
• Execute an issue-free Day One
• Maintain focus on current business

Companies can ensure they realize these goals by creating integration plans, playbooks and by staffing a short term IMO (Integration Management office) to accomplish the following:

• Making sure the acquiring company realizes the goals of their M&A strategy by following through with integration execution
• Creating customized, flexible and scalable integration playbooks.
• Creating detailed operational and functional integration plans with tools, templates and reports to support execution.
• Training and operationalizing an Integration Management Offices (IMO) to help with subsequent integration activity.

Securing dedicated resources to handle integration efforts is also important, as integration deliverables and time requirements are substantial during the initial 100 day period following the deal close, and folks will be hard pressed to properly handle integration duties along with their “day jobs”. One of the most common mistakes companies make is to inadequately staff their integration teams-which often insures a painful, slow and mistake prone integration process.

Whether it’s a $15 million or a $36 billion deal-Integrations have common needs which must be addressed with an integration strategy and a post acquisition integration process. Make post acquisition integration planning a priority for your next deal to help realize your M&A business objectives.

In light of the current economic downturn, companies today are scrutinizng their bottom line more than ever in hopes of shoring up their business. Oftentimes, this scrutiny results in the decision to downsize and/or restructure the organization, which in turn creates a whole new set of challenges as businesses grapple with realigning staff and functions to makeover the “new” organization.

Organizations that do not handle functional realignments correctly may find that the impact of cutting staff can actually end up costing more than the savings realized in salaries & benefits as a result of consequent lost customers, organizational dysfunction, or loss of market position. Employee morale can also rapidly decline as employees try to figure out how to get the same amount of work accomplished with less people, using processes that may be obsolete given the new organization’s structure.

The good news is managers can diagnose and address these issues fairly easily by taking a few key actions soon after a restructuring. Once the new organizational structure has been decided, we recommend that businesses complete an organizational effectiveness assessment. This process typically involves examining critical business processes, and reviewing functional roles and responsibilities to identify overlaps and gaps that would otherwise hinder execution.

In addition, if you have restructured, you have more than likely changed certain functional or operational elements of your company that will directly impact your customers. Once again, a customer experience audit can help managers correct any issues before they become major problems. Our unique approach articulates all of the customer pain points using a VOC approach (voice of customer), and most importantly-clearly identifies the root causes contributing to the problem. We also assess frequency and adverse impact so you can prioritize which issues to address and fix first.

How businesses manage downsizing and the corresponding realignment of their organization is a good indicator as to whether they are going to smartly manage their way through the storm, or create organizational dysfunction that potentially jeapordizes their survival. Taking a strategic approach to realigning your organization, and always keeping an eye on any potential impact to your customers are two ways to ensure that your company will be positioned to thrive again once better economic times return.