DNA Code of Successful M&A Integration Key Success Factors for Post M&A Integration Successful PMI Concept • The success of an acquisition does not arise from skilled negotiations

theCFO

DNA Code of Successful M&A Integrationwww.your-interim-finance-manager.ch

theCFO

Every acquisition is unique in terms of its goals and implementation. It is a first-time experience for most of the companies involved. And this complex process is subject to enormous stress, high expectations and intense time pressure.

www.your-interim-finance-manager.ch

Key Success Factors for Post M&A Integration

Successful PMI

Concept

• The success of an acquisition does not arise from skilled negotiations or the purchase price. The critical issues are:

• well defined and justified business strategy; and

• correct, tailored approach to post-merger integration,

• The expected synergies can be generated and additional growth achieved only if two companies do indeed become one.



Y = f (x)


x - business parameters behind

the merger

Y - enterprise value generated from the

merger

f - the eight levers and disciplined management of the merger

The Formula for Success


Degree of Merger Process Structuration

Valu

e G

enera

ted fro

m t

he M

erg

er

THE PARAMETERS BEHIND THE

MERGER

THE EIGHT LEVERS OF POST

M&A INTEGRATION SUCCESS OF AN

ACQUISITON

THE DISCIPLINED MANAGEMENT OF

THE MERGER


The merger parameters, the eight levers being the most important business decisions and the management of the merger should be well

structured into the overall process to maximize the success of the merger.


Sequence of the Acquisition

Soft, intangible elements must be analyzed to create a secure

base for upcoming decisions in the

deal.

Strategic objectives for an acquisition must

be well understood as

they influence the overall merger

process.

Determination of type of takeover is vital for the approach selected for the merger integration.

The Parameters Behinds the Merger

The merger parameters must be well understood before the deal and merger integration begin.


The Eight Levers of Post Merger Integration

The most important decisions must be made before the integration begins. These decisions can be condensed into eight levers.


Before the Merger

Today

1 2 3 4 5

6 7 8 9 10 11 12

13 14 15 16 17 18 19

20 21 22 23 24 25 26

27 28 29 30 31

After the Merger

Approach and Management of the Merger

Structured Approach and Discipline in

Managing the Merger

The structured approach and high degree of discipline while managing the merger are vital to maximize the chances for a successful

extraction of deal value.

theCFO

Parameters Behind the Mergerwww.your-interim-finance-manager.ch


Consolidation of a Sector

Regional Expansion

Expansion of the Product Range

Acquisition of New Skills

Business Add-on

The Parameters Behind the Merger

1. Business Logic – 5 Strategic Objectives for an Acquisition

Example 1: Consolidation of a Sector

• Objective - produce cost synergies • Business Context - in saturated markets, companies with similar business activities merge

in order to generate economies of scale and expand their market position. • Implications - transaction usually results in job cuts, it unsettles the affected people from

the very start, and triggers protests among employees and unions. • PMI Approach - a successful integration must be carried out quickly and completely. In a

time of major uncertainty, fast decisions must be made and responsibilities assigned at the very start. This is the only way to avoid paralysis and effectively generate the synergies.

Strategic Goals


Consolidation of a Sector

Regional Expansion

Expansion of the Product Range

Acquisition of New Skills

Business Add-on


1. Business Logic – 5 Strategic Objectives for an Acquisition

Example 2: Business Add-on

• Objective - expansion to new business fields to gain additional sales and earnings• Business Context – market not necessarily saturated, and new opportunities exist. Typical

strategy for conglomerates and companies seeking diversification.• Implications - The company’s organization remains basically intact, people tend to be

supportive. • PMI Approach - The focus of a successful PMI lies in adapting fundamental corporate

governance functions and in developing optimal conditions for long-term sales and earnings growth.

Strategic Goals


Post Merger

Integration


2. Organizational and Cultural Barriers

There is need to analyze the soft behavioral factors such as: • In which organizational

structures and processes do executives and employees act?

• What is the leadership culture like?

• How are decisions made? • What type of incentive

systems impact employees’ work?

Analysis of soft, intangible elements creates a secure base for upcoming decisions in the deal


Post Merger

Integration


2. Organizational and Cultural BarriersExample 1: Acquisition of a privately owned mid-side business by a corporation

• Business Context - the owner serves as a company’s information and decision-making center, and there is no need for any type of formal structure. Managers are given ad-hoc instructions,

• Implications - When such an organization encounters the formalized processes of a corporation, conflicts and frustration are pre-programmed,

• PMI Approach - addresses these points, builds bridges for the employees that enable them to make the transition to the new business culture and prevents typical corporate actions that would cause paralysis


Identify and Approach Target

Sign the LOI / SPA

Close the Deal

Integrate Successfully


3. Sequence of the Acquisition

In an ideal world, every merger would be a “home run”

Ideal World• negotiations are conducted quickly,• both management teams work

together,• neither antitrust officials,

management opposition nor critical investors slow the final closing,

• PMI process runs quickly and smoothly and starts before the closing,

• fundamental decisions are made very early and unanimously,

• the integration planning is done promptly in joint teams, with full insight into the other company’s information.

Real World Issues• the other side refuses to cooperate,• exchange of information is not

effective or even possible,• there is apparent doubtful or even

hostile attitude of management,• the antitrust reviews take longer

than planned,• as a result, months pass between

the takeover offer, the signing and the closing.


▪ Process: Integration process begins immediately, open exchange of information from the start, initial decisions can be made before the closing

▪ Attitude of management: open and friendly

▪ Sequence: Closing immediately follows the signing

▪ Process: Integration process must start at once, dynamic and strong leadership by the acquiring company is required

▪ Attitude of management: defensive and destructive

▪ Sequence: Closing immediately follows the signing

▪ Process: Joint integration planning, initial team building, preparation of guidelines, decisions only after the closing

▪ Attitude of management: open and friendly

▪ Sequence: break between signing and closing, most commonly due to regulatory requirements

▪ Process: one-sided integration planning, clear directions for Day Zero and the integration and stabilization of business is the top priority

▪ Attitude of management: defensive and destructive

▪ Sequence: break between signing and closing due to management opposition, the seller strategy or other conditions

Home Run Time Out

Short Shrift Delayed Game


3. Sequence of the Acquisition – Types of Takeovers

Slow DealsFast Deals

Att

itu

de

of

Ma

na

ge

me

nt

Time

Defe

nsi

ve /

Dest

ruct

ive

Open /

Friendly

theCFO

The Eight Levers of Post Merger Integrationwww.your-interim-finance-manager.ch



theCFO

The post merger integration process must address the deal realities from the very start to optimally use the time until closing. From the start, the company should:• consider potential barriers to the

acquisition and integration process,• systematically explore options for action,

and • identify the correct programs and

decisions that will result in a successful deal execution and integration.

Post Merger Integration Approach


Eight Fundamental Decisions

Restructuring (“Costs”) TYPES OF SYNERGIES Growth

Fast under time pressure INTEGRATION SPEED Slow and steady

All areas EXTENT OF INTEGRATION Some areas

Takeover INTEGRATION SPIRIT Merger of equals

Immediately after signing START OF INTEGRATION Deferred until closing

Clean team INTEGRATION TEAM Joint team

Informal, in advance APPROACH TO DECISIONS Explicit, extensive

En passant CHANGE MANAGEMENT Explicit, comprehensive


The Eight Levers – Eight Conscious and Fundamental Decisions

The integration concept derived from eight levers can succeed because it sets the correct course through conscious decisions.



At the start of integration planning, clarity about the type of synergies to be generated must be created and thoroughly converted into corresponding actions.

Cost Restructuring

▪ An integration effort does not differ substantially from a cost-cutting, restructuring or turnaround program,

▪ All divisions of both companies are to be subjected to a rigorous review of potential cost savings,

▪ From the very start, it must be clearly communicated that unpleasant decisions must be made and layoffs carried out.

Growth

▪ The integration is more like a strategic growth project,

▪ The nature of the integration is forward-looking,

▪ The focus is placed on understanding customer needs, evaluating market opportunities and generating new business ideas in a creative process.


1. TYPES OF SYNERGIES



At an early stage a company should define how much time it wants / can devote to post merger integration, which should be followed with a realistic integration

schedule. This will ensure reasonable expectations are created and will prevent a company from unnecessarily being put under time pressure.

Fast Integration

▪ Common approach during hostile takeovers or in mergers that will result in extensive layoffs; also common for the financial investors whose focus is on investment horizon and rate of return,

▪ High speed may result in decisions being made with increased uncertainty and under time pressure.

Slow Integration

▪ Common approach during a friendly takeover or an expansion into new business fields,

▪ Slower pace can significantly raise the chances for success,

▪ Slower pace reduces miscalculation risk and eliminates opposition.


2. INTEGRATIONS SPEED



From the very start a company shall determine the extent of necessary integration and identify areas of conflict to balance daily business and the PMI efforts.

Full Integration

▪ The more intense the focus on cost synergies, the more extensive the PMI process: it often encompasses all functions and all regions,

▪ An enormous workload is added to everyday business activities; massive amounts of additional resources must be committed to the integration,

▪ The organization runs the risk of losing sight of the customer and its operations,

Partial Integration

▪ Typical of takeovers in which new products are to be acquired or new customer segments added; Frequently, the only steps that need to be taken are the consolidation of sales or a realignment of finance, HR, IT and back office processes,

▪ Many companies choose a partial integration because it appears to be simpler and less controversial. Painful decisions are avoided by ignoring areas of conflict. Synergies are not achieved and value may be destroyed.


3. EXTENT OF INTEGRATION



Define the proper integration spirit and the suitable communication strategy at an early stage. Built sensors and escalation measures into the integration process to

identify issues and to take necessary countermeasures at an early point.

Takeover

▪ Clear statement of “takeover” is formulated and communicated,

▪ The company being acquired may watch the acquiring company with mistrust and fear the worst. The employees of the company being taken over go into inner exile or resign.

▪ A carefully and timely executed integration is required.

Merger of equals

▪ Merger of equals awakens high expectations e.g. that current practices will remain unchanged and that the both parties are equal,

▪ Often chosen because of the fear of conflict and because it makes communication with all participating parties much easier over the short term, which may result in disappointment, frustration and mental resignation among those affected.


4. INTEGRATION SPIRIT



Ensure that the start of the integration is used optimally by employing farsightedplanning, open communication and the consideration of risks.

Immediate Integration

▪ Both management teams will work constructively together and the integration process will start immediately after the agreement is reached,

▪ the management teams will quickly define priorities and focal points and create integration teams,

▪ the companies will openly share information, and address employees, customers and suppliers in order to eliminate concerns,

Deferred Integration

▪ Time passes between the SPA and the deal closing (“forced waiting”),

▪ During this period of “forced waiting” the acquiring company shall plan for integration and prepare a detailed plan for the closing, including how to deal with employees, suppliers and, above all, customers who will certainly become unsettled,

▪ Intense communications are required to bring stability to and influence the situation.


5. START OF INTEGRATION



The company shall provide for the correct project organization, the appropriate project members and suitable timing.

Clean Teams

▪ When antitrust officials take time to review a deal, the acquiring company can only work with the so called “clean teams”. Such teams lay the groundwork for integration in cooperation with a third party,

▪ Exchange of information between the companies is limited. The limitations of such clean teams must be understood from the start,

▪ Often, it may be much more beneficial to wait and begin the work with joint project teams.

Joint Teams

▪ The joint teams’ key success rules:

▪ the right composition and the provision of the necessary human capacity,

▪ involvement of the management teams,

▪ integration teams involved on both ends: in the acquiring and in the acquired organizations,

▪ the fastest possible transfer of the project work into the areas of responsibility of future managers.


6. INTEGRATION TEAM



A company should define the right mix of formal and informal approaches. In takeovers it is important to make conscious decisions about whether to rule out discussion and make a direction-setting decision, or whether a joint search for a

solution will be undertaken.

Informally in advance

▪ In the context of a friendly takeover of a company with a similar way of thinking, this can be done during a preliminary stage,

▪ Decisions are frequently made about the new organization, future business policies and even personnel during informal meetings,

▪ In this case there is no need for extensive analysis and opinion-shaping processes.

Explicitly after the fact

▪ The more dissimilar the cultures of both companies and the stronger the resistance of management to the takeover, the greater the need for definitive decisions, including detailed instructions from the acquiring company,

▪ Decisions must be prepared in detail and be made at or shortly after the start of the integration with various stakeholders explicitly being included in the process.


7. APPROACH TO DECISIONS



8. CHANGE MANAGEMENT


A company should determine how much change management is required and define the best form and provides tools to execute the change management program.

Implicitly “En passant”

▪ The merger of two companies with similar backgrounds requires fewer explicit actions,

▪ The key is for the appropriate executives and employees to meet at an early stage and to share their experiences and opinions,

▪ Such informal interaction form the basis for the extent of change management program to be implemented later and which can be expected to take shorter when compared to explicit approach.

Explicitly and Comprehensively

▪ Change management becomes the critical factor leading to the long-range success of a merger,

▪ Workshops, get-togethers, town-hall meetings, outdoor training sessions and many other measures must be employed over a longer period of time in order to form one company out of two,

▪ A rapid change process should not be expected.

theCFO

Extracting Value from the Mergerwww.your-interim-finance-manager.ch

theCFO

How can two companies be formed into one powerful organization with a shared mission amid intense time pressures, high expectations and the demands of the daily business world?


Extracting Value from the Merger

Systematic Approach to Post Merger Integration

The tailor-made integration model that

is derived from business strategy,

merger parameters, eight levers and

disciplined execution can succeed because it sets the correct course

through conscious decisions.


Maximizing Enterprise Value

Initial Approach to Target

Letter of Intent / Head of Terms

Share Purchase Agreement

ClosingSuccessful Integration

Strategic Objectives of the Merger


Merger Concept

Start Planning

Integration

Operationalize Plans

Rigorously Implement



Merger Concept

Start Planning

Integration

Operationalize Integration

Plans




▪ Develop strategic merger concept including strategic direction of a new company and its objectives, all aligned with your enterprise business strategy

▪ Start planning the post merger integration as early and as thoroughly as possible

▪ Integration day “zero” (i.e. start of integration) must be intensely prepared through the use of extensive readiness checklists

▪ Discipline in executing the integration plans must be combined with the necessary resources and management power


▪ Organizational and Cultural Barriers – make a preliminary analysis of the cultural and organizational elements of the target such as management motivations and competencies, leadership style or expected management attitudes towards the acquisition

▪ Strategic Merger Objectives – define strategic objectives for an acquisition i.e. “its business logic” and align it with a company’s business strategy

▪ Regulatory Requirements – identify what regulatory approvals and notifications will be required in the merger process


▪ Deal Value Potential – identify and estimate the expected synergies that follow the strategic objectives of an acquisition and make initial estimates of these synergies to assess deal value potential.

Develop a Merger Concept



▪ Deal Speed – on the basis of strategic merger objectives, expected synergies (and how fast a company want or needs to capture them), cultural and organizational barriers and regulatory requirements a company should make preliminary decisions on the type (sequence) of an acquisition it wants or needs to make


▪ Fine-tune Strategy and Deal Value Potential – the organizational and cultural barriers and regulatory requirements may be heavily impacting the merger objectives, hence a company should adjust its merger objectives and its expected synergies

▪ Integration Concept – Make initial assumptions as to the extent and spirit of integration, approach to decisions, start of integration, preparation process and resources

Develop a Merger Concept

Our Systematic Approach to Post Merger Integration


▪ Capturing Synergies - individual integration projects should be identified showing how and where synergies are to be captured

▪ Synergies (Lever # 1) – review previously estimated synergies and make new estimates to identify quick wins that further underscore the logic of the merger. The type of expected synergies is most often the key deciding factor to determine the other elements of an integration strategy

▪ Management and Employees – make preliminary decisions about key managerial positions in a merged company. For high-performing employees that are expected to resign start developing suitable retention programs. Where synergies from restructuring are expected develop key assumptions and general plans for restructuring.


Start Planning Integration



Plans


▪ Integration Spirit (Lever # 4) – the type of acquisition or management attitudes of both companies define the spirit of the deal. Selection of integration team and communication roadmap / plan should be developed showing who will be informed at which time and about which issues

▪ Integration Speed (Lever # 2) and Start of Integration (Lever #5) – determine when integration could begin (“day zero”) and how long it shall last given the anticipated strategic merger objectives, barriers and risks or regulatory requirements

▪ Extent of Integration (Lever # 3) – Determine scope of integration by departments, functions or geographical territories. The scope should be further detailed by individual integration projects, which should be prioritized and planned





Plans


Change Management (Lever # 8) – depending on the results of cultural assessments, type of takeover and other elements the extent of how much change management is required and responding measures have to be defined. This process should be executed with the adequate tools such as workshops, get-togethers, town-hall meetings, outdoor training sessions and many other measures over an integration period

Integration Team (Lever # 6) – Formation of clean or joint teams is a pre-requisite for integration execution. In either case there is need to provide for the correct project organization, the appropriate project members, team capacity and timing in combination with the fastest possible transfer of the project work into the areas of responsibility of future managers

Approach to Decisions (Lever # 7) – there is a need to define the right mix of formal and informal approaches to decision making. In controversial takeovers, it is important to make conscious decisions about whether to rule out discussion (joint search for a solution) and make a direction-setting decision





Plans




Integration Execution - individual integration projects should be by now identified, prioritized and planned:

▪ Once the SPA has been concluded both companies can exchange all relevant information and as a result of preliminary work, quickly make individual integration concepts ready for implementation,

▪ The expected synergies are broken down by region and department,

▪ A project-management office coordinates all activities, but increasingly integrates the line organization,

▪ Concerns among employees are to be quickly dispelled through the use of clear communications,

▪ The line organizations are introducing the integration function by function and country, which grow into a single combined entity.


The complexity and the intense deal pressure of the initial months may water down integration efforts. PMO should ensure fundamental decisions continue to be made in a timely manner and that the progress achieved in the integration.


Integration Execution

Energetic and Experienced Team of M&A

Experts

Integration Diagnostic Tool

Tailor-made Integration

Model


Systematic Approach – Value Added

• I analyze your situation using and develop a tailor-made integration strategy and integration management model,

• During the integration process I:• advise, facilitate, energize

and execute integration strategy hand-by-hand with you,

• facilitate strict monitoring of progress and help ensure that the integration is not forgotten and that the goals are reached in the long term

theCFO

www.your-interim-finance-manager.chAbout Me


Interim finance manager and freelance consultant, based in Switzerland

About Me

A highly-skilled, multilingual, culturally-

aware and experienced business

professional with nearly 20 years of

international career. Since 5 years

intervening as a freelance consultant

across Switzerland and abroad, helping

companies with strategic and operational

business finance, project management,

business transformation and consulting in

various industries and sectors. To find out

more about me download My BIO now.

Tomasz MeissnerMBA, ACCA, CAPM

http://www.your-interim-finance-manager.ch/download.php?file=Bio_Tomasz_Meissner.pdf


My Core Value PropositionEnd-to-end project delivery and on-demand financial advisory

As a professional Interim Manager I help

international companies, small businesses, non-

profit organizations, professional investors and

entrepreneurs with special business finance

projects, to provide on-demand financial advisory or

to cover for a critical resource gap in their teams. I

focus on execution and bring multi-functional

capabilities and skills.


My Core Value PropositionEnd-to-end project delivery and on-demand financial advisory

TAILORED COLLABORATION ON YOUR PROJECT

My approach is tailored and collaborative rather than prescriptive and

proprietary as in traditional consulting. I engage for project duration and can be

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I am independent

and apolitical. The

no. 1 reason I am

on the project is to

deliver what we

agreed

I don’t exit until

project has

finished. I do

handover before

the final sound of

the whistle. I can

even recruit my

successor.

I am quickly available

and immensely

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switch my involvement

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strengthen the team

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An external and independent senior resource in charge of your project

How Do You Benefit?


We set up the first

meeting with to

explore the challange

and to assess if I can

help.

Here we agree

ultimate goals for the

project and select the

best action steps or

changes.

The deliverable is

delivered, the work

is wrapped, all is

handed over and

you are happy.

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in further dialogue to

fully define the

problem and start

scoping the project.

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begins, I get involved

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and work relentlessly

towards agreed goals.

Entry Dialogue Goals Engage Finish

My approach is systematic and disciplined, driven by YOUR needs

How Do I Work?


How To Contact Me?Call me for a non-binding consultation about your business needs

Tomasz MeissnerPhone: +41 (0)79 515 0019

Email: [email protected]

Address: Rue des sept Fontaines 23

CH-1188 Gimel

Switzerland

mailto:[email protected]

Documents

DNA Code of Successful M&A Integration Key Success Factors for Post M&A Integration Successful PMI Concept • The success of an acquisition does not arise from skilled negotiations