Some systems or operations may, in fact, never be integrated. “It depends on the strategy,” Miller says. “Sometimes, leaving something stand-alone is much better than integrating it.”
“Every deal is different,” agrees Steve Burke, director of M&A integration for Intel Capital, the investment arm of $35 billion semiconductor manufacturer Intel Corp. Ten years ago, he notes, the prevailing practice in Silicon Valley was to do a full integration of every acquisition, an approach that resulted in “a relatively mediocre track record.”
For the past several years, Intel has employed what Burke calls a hybrid integration model in which it picks and chooses which systems and operations it wants to integrate fully with its own. “We’ve tried to design an approach based on the business needs of the acquired company and what we seek to achieve by combining it with ours,” he says.
That model works well when acquirers identify the key value drivers that make the deal appealing in the first place. Miller recommends that companies home in on three or four and then define the concrete operational steps that must be taken to realize them. By assigning accountability to individual leaders of the integration team, Deloitte’s Powers adds, companies can boost the odds of success.
“Somewhat differently than in the past, I now drive this team of accountable individuals to come back very quickly — in two to four weeks — with an opinion on how and where they plan to meet their objectives,” Powers says. His goal is to develop a holistic model for the entire integration effort that can be quickly disaggregated so that those accountable can quickly spot and address problem areas. “The net effect,” he says, “is to force clarity on the organization, and on any risks associated with your expectations, which helps you very quickly move the needle toward your end goal.”
Still, it’s worth remembering that speed itself is not the ultimate goal. Companies that focus solely on how fast they can integrate an acquired business may overlook potentially catastrophic risks. Powers recalls working on a deal a few years ago in which the acquiring company and its target both provided real-time transaction processing services for financial institutions, with huge databases operating in the background. A key value driver for the deal was the savings available from combining the data centers, and the acquirer wanted to do it quickly — within a year.
But Powers and his team pointed out that the need to maintain service levels during the combination far outweighed the need to capture data-center savings quickly. “We had to change the client’s perspective,” Powers says. “The combination of the data centers required a great deal more planning to make sure there was a better focus on preventing any disruption of service.”
That called for building more redundancy into the systems and doing far more testing, which extended the integration timetable by six months. But Powers says it was the right thing to do. (To make up for the additional costs and delayed savings that resulted, Deloitte helped the company identify less-risky operations it could integrate sooner, and encouraged it to put off other activities that could have compromised cash flow while the data-center integration was under way.)