Integration Acceleration

Why successful M&A now depends on getting your ducks in a row as early as possible.

“Far worse would be that you end up buying a company and your plans are not ready when the deal closes,” says Christopher Kummer, president of the Institute of Mergers, Acquisitions and Alliances in Zurich. He argues that by starting integration planning too late, companies often wind up wrestling with unexpected problems that jeopardize the very business case on which their deals were predicated.

The larger and more complex the organization being acquired, the more likely that will happen. Kummer recalls a recent deal in which the acquirer was disappointed to learn, post closing, that government-mandated severance packages in some European countries made it uneconomical to quickly consolidate locations it had planned to eliminate.

“In almost every large global merger, I find people underestimating the need, urgency, and complexity of the issues at stake, to the point where they underresource their integration effort,” confirms John Powers, global merger-and-acquisition consultative services leader for Deloitte.

Besides overlooking intelligence that could affect the economics of a deal, companies that delay integration efforts also forfeit the opportunity to hit the ground running when their deal becomes public. That, too, can lower the odds of success.

“There is sort of a magical time around the announcement of a deal where employees, customers, and partners are very eager and open to hearing how this new combined entity is going to make the world a better place,” says Cisco’s McDonough. For the past few years, she says, Cisco has sought to capitalize on that “magical time” by being ready from day one to explain how the two companies are going to come together and provide unique value, and how the integration effort itself will be structured to realize that value (see “Ready on Day One” at the end of this article).

“That’s key to the success of any integration,” says W. Michael Kipphut, CFO and executive vice president of Tampa-based Sykes Enterprises. The $1.2 billion provider of customer contact management services acquired one of its competitors, ICT Group, in early 2010, hiring KPMG to help it accelerate the integration effort.

“If you know what needs to be done, you can set priorities ahead of time,” Kipphut says. “Any idle time can really kill momentum. People start to think about other things and don’t stay focused on the work at hand.”

Rubin of CBS agrees. “You don’t want the organization in limbo,” he says. “On potential layoffs, for example, you don’t want things to drag out regarding what roles people will have, or whether they will have roles at all. You need to think about these things even before you start due diligence, so you can make quick, smart decisions.”

Fast, but Focused

While early integration planning aims to let companies hit the ground running once a deal is announced, it doesn’t require the immediate integration of every aspect of an acquired business.

“An inexperienced acquirer will launch every single work stream on day one, and it just crushes the organization,” warns Steve Miller, leader of KPMG’s U.S. integration and separation practice. “The experienced integrator will say, ‘Here’s the stuff we absolutely have to launch now, and [from there we will] continuously manage the integration and people’s workloads.’”

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