Improving the Post Merger Integration Process with Microsoft Office 2007 Microsoft Corporation

Improving the Post-Merger Integration process with Microsoft Office Groove 2007

Secure, efficient collaboration to improve post-merger

business integration

White Paper

Published: November 2007

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Contents

Overview ......................................................................................................... 1

Now That the Deal Is Done: Critical Factors for Successful Post-Merger Integration .................................................................................................... 2

1. Effective integration planning ............................................................. 3 2. Effective internal and external communication ................................... 3

Challenges to a Successful Post-Merger Integration ................................... 4

Solution: How Microsoft Office Groove 2007 helps improve Post-Merger Integration .................................................................................................... 4

What Is Office Groove 2007? ....................................................................... 5

The Office Groove 2007 Solution ................................................................. 6

1. Office Groove 2007 supports effective post-merger integration planning ..................................................................................................... 6

2. Office Groove 2007 facilitates secure communication (internal and external) .................................................................................................. 12

Office Groove 2007 in Action – Agility ........................................................ 13

Conclusion ..................................................................................................... 13

Improving the Post-Merger Integration process with Office Groove 2007 1

Overview

Merger activity is on the rise. According to the Wall Street Journal, global merger and acquisition (M&A) deal volume in the first seven months of 2007 was $3.65 trillion, up 51 percent compared to the same period in 2006.1

Many studies have shown that the majority of acquisitions do not meet their financial goals. According to an analysis of over 7,000 mergers and acquisitions, between 55 and 77 percent of mergers fail to deliver on the financial promise predicted when the merger was initiated.2

Evidence Study Sponsor

65%-70% of deals fail to enhance shareholder value McKinsey, 2000

58% of deals reduced shareholder value A.T. Kearney, 1999

27% increase value,33% no change, 50% reduce value

BusinessWeek, Mercer

An article in The Economist stated that ―A stream of studies has shown that corporate mergers have even higher failure rates than the liaisons of Hollywood stars.‖3

Why do mergers and acquisitions fail to meet expectations?

A Bain & Company survey of 250 global business executives involved in M&A found that the number-one reason such deals are unsuccessful is ―ignored potential integration challenges.‖ More often than not, mergers fail to deliver expected value because of poor post-merger integration execution.4

A critical success factor for post-merger integration is getting people from the companies involved to begin working together quickly, even though they may be on separate network infrastructures and in different locations during the transition period.

Microsoft® Office Groove® 2007, part of Microsoft Office Enterprise 2007, provides a collaboration solution that can help improve post-merger integration. It enables team members from multiple organizations to efficiently share large amounts of information across multiple locations and networks.

1 Wall Street Journal, August 31, 2007.

2 Alexandra Lajoux, The Art of M&A Integration (New York: McGraw Hill, 2005).

3 ―How Mergers Go Wrong,‖ The Economist, July 20, 2000.

4 Jay Grob and Matthew Meachem, The Merger Before the Merger (Bain & Company, February 1, 2005).

“A successful integration melds not only the various technical aspects of the businesses, but also the different cultures. The best way to do so is to get people working together quickly to solve business problems and accomplish results that could not have been achieved before.” Key Lesson from “Making the Deal

Real”, Harvard Business Review


Office Groove 2007 also protects all data with military-grade security. Often, the solution can be deployed quickly and with little IT support.

There are three key aspects of the Microsoft Office Groove 2007 solution that help support post-merger integration:

Enabling dynamic, cross-organization teamwork

Providing anytime, anywhere access

A single place for virtual teams to work together

Now That the Deal Is Done: Critical Factors

for Successful Post-Merger Integration

Recent research on mergers and acquisition (M&A) best practices reveals some of the most common factors affecting the success of post-merger integration:5

Effective integration planning with a focus on synergies, the merger‘s expected revenue

and cost benefits

Effective communication

Clearly defined corporate and merger goals, while simultaneously addressing cultural

differences

Retention of customers and key employees

Speed of post-merger transition

Technology cannot replace the critical leadership skills needed to lead post-merger integration, but it can bring the people, information, and processes together in a single workspace to work more efficiently. When technology is used to enhance collaboration between the merging organizations effective integration planning and effective communication are directly improved raising the chances of a successful integration. Recent M&A research supports the relationship between effective integration planning and communication to overall merger success.6

Evidence Study Sponsor

Firms that focused on choosing a strong deal management team and performed in-depth integration planning did 66 percent better than average.

KPMG

Companies can lose 1 to 2 percent of their planned growth during integration unless there is a dedicated integration plan for revenue retention.

Accenture

5 Paulter, Paul, The 8 Effects of Mergers and Post-Merger Integration: A Review of Business Consulting Literature (Bureau of

Economics, Federal Trade Commission, January 21, 2003). 6 Paulter, The 8 Effects of Mergers and Post-Merger Integration

“In many ways, an acquisition is like an arranged marriage: the „parents‟ negotiate the deal, sign the contract, and then expect the „newlyweds‟ to live together in harmony.”

– Ashkenas, DeMonaco, and Francis, ―Making the Deal Real.‖


Pursuing synergies vigorously and communicating well helped improve a merger‘s financial performance by 45 percent.

KPMG

1. Effective integration planning

The need to plan early for post-merger integration is critical to success. In addition to beginning early, integration planning should clearly focus on the merger synergies, the expected revenue enhancements, and cost savings resulting from the combination of the companies.

The post-merger integration planning team must work with the deal team to understand the projected synergies, and then create a road map to achieve them. This task is challenging because employees from the merging companies may be located in multiple geographic regions and work on separate networks. Integration team members cannot share documents and information through their network and often must depend on e-mail to work collaboratively.

Collaborating via e-mail and sending highly valuable, business critical documents raises serious security concerns, including the potential loss of intellectual property. Recent research7 in high-tech manufacturing has shown that close to 80 percent of workers have used non-secure public communications tools to collaborate with partners, and only 27% of business users and 37% of technical decision-makers surveyed consider their collaboration tools to be ‗definitely‘ secure. Therefore, the vast majority of the managers realize the risks they are taking when sharing information through non-secure e-mail, yet they do little to avoid this risky action.

In addition, e-mail may not be able to support the sharing of larger documents, such as benefit plan documents, causing members to burden IT or even print and mail paper copies of documents. E-mail based collaboration can also create versioning issues and cause revisions to be lost. These issues can create delays for the integration team when collaborating via e-mail rather than a secure workspace.

2. Effective internal and external communication

Most acquisitions involve organizational restructuring to improve efficiency of the combined company or ensure the fit with the new owner. As with any merger, there are tough decisions that need to be made and communicated.

―Decisions about management structure, key roles, reporting relationships, layoffs, and other career-affecting aspects of the integration should be made, announced, and implemented as soon as possible after the deal is signed—within days, if possible. Creeping changes, uncertainty, and anxiety that last

7 ―Microsoft Collaboration in High-Tech Manufacturing Survey 2007‖, Microsoft PressPass, October 25, 2007.


for months are debilitating and immediately start to drain value from an acquisition.‖8

Communicating early and often to the newly acquired employees helps reduce uncertainty. The acquiring company often has a standard plan for post-merger communication, but in almost all cases, effective internal communication requires collaboration between management, human resources and other departments of both companies.

With so many internal decisions to be made and a significant amount of time spent communicating with employees, some companies going through post-merger integration lose focus on their external communication to customers, clients, vendors, the community, and the media. As with internal communication, it is critical for the management of the two companies to work together to effectively communicate to its external stakeholders and customers.

One cause of ineffective or delayed communication is inefficient processes. Integration team members often waste time reading and reviewing multiple e-mail messages and multiple document revisions, preventing timely delivery of communications content.

Other communication challenges related to post-merger integration are similar to those involved in integration planning, as both require employees to work across the merging companies. The same difficulties regarding different locations and separate networks apply.

Challenges to a Successful Post-Merger Integration

Some of the common challenges with post-merger integration planning and communication include:

Different organizations, geographies, networks, firewalls, and technology

Integration team members lack a single space to share information and work together

Team members are frequently traveling and require offline access to documents

Maintaining a single version of documents that require input from multiple team members

Security and confidentiality of information must be ensured

These challenges can delay or even help prevent the achievement of the merger‘s expected benefits.

Solution: How Microsoft Office Groove 2007 helps improve Post-

Merger Integration

As the quote at the beginning of this paper suggests, the best way to successfully integrate the technical aspects of the merged businesses and

8 Ronald N. Ashkenas, Lawrence J. DeMonaco, and Suzanne C. Francis, ―Making the Deal Real: How GE Capital Integrates

Acquisitions,‖ Harvard Business Review, January-February 1998.


cultures is ―to get people working together quickly to solve business problems and accomplish results that could not have been achieved before.‖

Microsoft Office Groove 2007, part of Microsoft Office Enterprise 2007, can help solve the communication and collaboration challenges organizations face during a post-merger integration.

What Is Office Groove 2007?

Office Groove 2007 is a Windows®-based collaboration software program that helps you and your team members work together dynamically and effectively on projects and activities from any location. Office Groove 2007 enables colleagues, partners, and customers to collaborate and stay productive, whether they are online or offline, all within Office Groove 2007 workspaces that have advanced security protection and require no IT assistance to set up.

Office Groove 2007 helps post-merger integration teams bring the team, tools, and information together in one place, a secure workspace that is accessible to all team members right on their computers. Office Groove 2007 provides a collaboration solution that enables post-merger integration teams to effectively plan, coordinate, and manage communications. Team members work more efficiently, regardless of location or network connection. Office Groove 2007 provides both online and offline collaboration capability through synchronization. The solution can be deployed quickly and without being impacted by traditional barriers to collaboration, such as network permissions and firewalls.

Office Groove 2007 works with Microsoft Office SharePoint® Server 2007 and Windows SharePoint Services to form a highly integrated

Key Benefits of Microsoft Office Groove 2007

Work together securely, effectively, and

dynamically

Bring the team, tools, and information

together in one place, in seconds

Create and customize workspaces

without worrying about server space or

security

Securely Collaborate with colleagues,

partners, and customers — with one

product. Stay productive anywhere, online

or offline.

Workspaces are stored on team

members‘ computers

Stay in sync, automatically and

efficiently.

Automatic synchronization keeps team

members up-to-date

Streamline content creation and process

execution

Extend business files, data, and

workflows to team members wherever

they work

Work with files and structured data right

in the workspace, online or offline

Team updates easily become part of

the corporate record


collaborative platform, one that helps teams and organizations work together and share information more effectively. Office Groove 2007 is ideal for ad hoc collaboration within teams, and Office SharePoint Server 2007 is a Web-based solution with a scalable, searchable back end that is ideal for broad information sharing across a team or organization.

The Office Groove 2007 Solution

Some of the characteristics of Office Groove 2007 solutions for post-merger integration are:

Teams can form quickly and can include members from all organizations involved in the

merger.

Large amounts of information can be gathered and disseminated to team members in a

secure and timely manner.

Team members have access to documents both online and offline, which is critical for

post-merger integration team members who frequently work away from the office.

Confidential information remains secure at all times, on the desktop and across the wire.

1. Office Groove 2007 supports effective post-merger integration planning

Office Groove 2007 helps the post-merger integration team work and plan together effectively inside a collaborative workspace that puts team members, tools, and information in the same context. Office Groove 2007 workspaces can be created with no IT assistance or server space, saving the team time and reducing the chance of post-merger integration delays.


Post-Merger Integration Planning Workspace

Fabrikam Inc., a worldwide manufacturing firm, has acquired Contoso.

1. Scott Mitchell, the integration manager for Fabrikam, decides to set up a Microsoft Office Groove 2007 workspace for post-merger integration planning after seeing the challenges that employees experienced during previous company acquisitions. Scott creates an Office Groove 2007 workspace for his team on his computer.

2. In a matter of minutes, he sends invitations to join the workspace to key people from both Fabrikam and Contoso, who are currently on separate networks.


3. When they accept the invitation, each person receives a copy of the workspace, which is stored on their computer.

4. Office Groove 2007 helps ensure that all members‘ copies of the

workspace stay in sync every step of the way. The workspace is a virtual place that enables teams to collaboratively share, modify, and discuss files; chat; hold threaded discussions; manage recurring project meetings; track tasks, opportunities, and issues; and more.


5. The integration planning team can use the workspace to share large data files, collaborate in real time, and track issues related to post-merger integration. Offline access to all documents, discussions, and information in the workspace enables team members who frequently travel to be more productive when working away from the office.


Creating the Post-Merger Integration Project Charter

Scott is finalizing the post-merger integration Project Charter, but he requires assistance from executives to confirm the future cash flow projections for the merged company. Scott requires input from Jeff, Fabrikam‘s finance director, and Carol, who was the finance director for Contoso prior to the merger. Scott uses the Files tool in Microsoft Office Groove 2007 to post the Project Charter, and then sends Jeff and Carol a message through Workspace Chat with questions about expected revenue synergies. Carol can quickly open the Project Charter document in the workspace and reply to the Office Groove 2007 message with details about the past sales revenue of Contoso.

Jeff is in meetings all morning, but when he opens Office Groove 2007 on the airplane during an afternoon flight, he sees the Office Groove 2007 message and Carol‘s reply. He makes changes, adds comments, and saves the edited Project Charter document back to the workspace. When Jeff gets to his hotel and connects to the Internet, his changes are automatically sent to Scott‘s computer and synchronized with his copy of the workspace. Scott will see that his questions have been answered.

In the process before Office Groove 2007, when the post-merger integration team is formed, a large amount of documentation is sent as an e-mail message to the team members. In some cases, external Web-based tools are utilized to share information. This becomes an issue in terms of the network connectivity requirement, the access control issues, and the lack of portability of information. Iterations of documents are typically sent as an e-mail message between team members.


By utilizing an Office Groove 2007 collaboration workspace, the post-merger integration team members have an efficient, secure workspace in which to create and share knowledge. Previous limitations on the portability of information are eliminated. Teams are now able to easily share information with all members in the workspace. Integration teams can help keep everyone on your team apprised on important project milestones, meetings, and updates.

Post-Merger Integration Planning for Employee Benefits

Ben is the benefits administrator for Fabrikam. Megan has been the benefits administrator for Contoso for the past 15 years. Ben and Megan have begun coordinating their efforts to merge the employee benefit plans. The benefits integration team starts with a simple Microsoft Office Groove 2007 workspace consisting of a Files tool, which they used to share large files, such as benefit plan documents and other information. Ben and Megan use the Discussion tool to securely exchange information about employee plan updates. They quickly discover that it would be helpful to have a benefit integration team activities calendar where they can share important planning milestones. They begin to use the Calendar tool to build a shared employee benefits integration schedule to track important deadlines, meetings, and upcoming communication delivery dates.

Office Groove 2007 is an ideal solution for facilitating dynamic teamwork across the firewall, as in the preceding example. Office Groove 2007 is the workbench for very frequent information exchanges and dynamic teamwork. Office SharePoint Server 2007 is a portal for storing and archiving large


amounts of data that can provide the centralized, scalable systems where that work gets published, broadly shared and searched, and integrated with structured business applications.

Some of the documents created in Office Groove 2007 may need to be archived to an internal Office SharePoint Server 2007 site, both to allow access for other members of the team while the project is ongoing, and to create a record once the project concludes. Team members can easily synchronize the documents back to an Office SharePoint 2007 Server site to remain part of the permanent project record archive.

2. Office Groove 2007 facilitates secure communication (internal and external)

The process for creating and reviewing communications to employees of the newly acquired company can be streamlined with Office Groove 2007. With Office Groove 2007, reviewers have access to the most up-to-date version of communication memos. Offline access enables reviewers to complete their responsibilities even when out of the office. Since speedy communication is critical during post-merger integration, the ability to resolve issues via real-time discussions in the workspace helps keep the organization better informed.

Collaboration on Internal Communications

A human resources team consisting of employees from the both Fabrikam and Contoso must work together on personnel communications. Ben, Fabrikam‘s Benefits Administrator, has a standard benefits frequently asked questions (FAQ) document for employees of the acquired companies. Prior to using Microsoft Office Groove 2007, creating and reviewing this document took weeks; Ben had to send an e-mail message to dozens of people, collect all their changes, and then incorporate them into the master document.

With Office Groove 2007, Ben uses the Files tool to post the FAQ document to the shared workspace. When Andrea, Fabrikam‘s vice president of human resources, opens the document, Ben receives an alert that she has entered the workspace. He clicks on the alert, which takes him into the workspace with Andrea. Ben then sends Andrea a message through Workspace Chat with some questions about the retirement plans. Together they engage in impromptu problem solving, which helps get the FAQ out to employees much faster.

In addition to these examples, many other employees who execute post-merger integration activities can benefit from the capabilities of Office Groove 2007. Sales teams that were servicing the same customer can collaborate on their sales plans. With Office Groove 2007, marketing teams can use the Discussion tool to gather information about market activities of a competitor, enabling them to make better-informed decisions and respond faster during the merger transition period.


Office Groove 2007 in Action – Agility

Agility is a global provider of integrated supply chain solutions. It is a publicly traded company with 450 offices in more than 100 countries.

―Over the past decade, the global logistics and transport market has undergone substantial consolidation, which has resulted in the emergence of several major logistics players offering extensive services. Agility has turned to mergers and acquisitions to further use and grow out our network. We are also investing in sophisticated IT technologies to optimize the flow of information through the supply chain.‖ Bilal Saleem Perwaize, IT Business Collaboration Coordinator at Agility, ―

―Early deployment of the 2007 Microsoft Office system has shown how our people can save time, boost productivity, and strengthen the quality of team deliverables,‖ said Perwaize. ―We can invite colleagues, partners, and customers in without worrying about networks or servers. We also found we can take documents offline in Office Groove 2007, which is a really big advantage.‖

Conclusion

As the number of mergers and acquisitions has risen dramatically in recent years, so have the challenges involved integrating the teams and businesses once the deal is done. Many of these mergers and acquisitions fail to achieve their financial objectives, and studies have found a major reason is the inability of teams to work together effectively. The traditional combination of tools, technologies, and transportation simply cannot provide a secure, dynamic collaboration platform required to make the merger work.

As part of the 2007 Microsoft Office System and a key part of the Microsoft collaboration platform, Microsoft Office Groove 2007 solves this problem by making it easy for employees to get up to speed quickly and begin working together on business issues. Office Groove 2007 provides a virtual place for team members to share information and coordinate their efforts. It allows them to connect with one another in a single

Groove in Action – Microsoft

Groove, the company, was acquired by Microsoft in 2005. Groove Virtual Office was used by the IT team during post-merger integration to efficiently gather and consolidate key information from multiple people. Without Office Groove, the process could take several days for an IT integration team member to gather and consolidate information about their business processes from 20-30 people. With Groove, the IT integration team member was able to use Groove Forms to collect the key information in a structured format in a centralized workspace, import the data into Microsoft Office Excel®, and share that information via Groove for final review. The streamlined process cut days off of this particular post-merger integration task.


workspace, regardless of organization, geography, or network infrastructure.

With the 2007 Microsoft Office System, Office Groove 2007 becomes the rich client for dynamic teamwork, while Office SharePoint Server provides the centralized, scalable system where work gets published, broadly shared and searched while integrating with structured business applications.

Office Groove 2007 is more secure and effective for dynamic teamwork than e-mail or conferencing, and it avoids the IT cost and delay involved in creating dedicated user accounts for external access. Files can easily be shared across multiple networks, saving bandwidth and time while making sure everyone has access to the latest version of the project. Team members are always up-to-date on project status, and synchronization allows them to work online or offline. All of these features help generate quick wins that engage the organization and demonstrate the value of the newly merged business.

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