M&A Beyond Deal Heat: Execution is Everything
By Marian F. Cook and Tito Ghosh
M&A is a means to implement business strategy, and success should be measured specifically in those terms. The excitement of deal consummation - commonly referred to as "deal heat" - should not overshadow the importance or required rigor of an integration plan
A well-designed and well-executed integration plan has proven to be critical to achieving success, so what should you consider when creating your integration plan?
- Deal v. execution differences. The deal and its execution are two very different, though inter-related, plans and activities. Frequently, an organization is so focused on closing a deal that they don't see beyond it. As a result, deal teams may not include, for various reasons, the people that need to execute on it. Once the deal is closed, they collapse in deal exhaustion and pride, thinking the hardest work is over - when it is just beginning.
To effectively leverage M&A to drive your strategy and results, think about the integration plan early and often. When considering the acquisition, have criteria in place that will help determine the complexity and difficulty of the integration. While paying heed to the need to keep the strategy and deal teams small and information confidential, find a way to get execution-responsible executives involved as early as possible. They will provide valuable and realistic input into getting the expected synergies in the expected timeframe.
- Integration experience levels. Many companies are well-oiled and practiced integration machines. Some even have dedicated M&A teams. Most, however, do not. When creating your plan, remember that experience in integration matters. If your organization does not have the requisite level of M&A experience, find a way to get that experience on the planning and execution team, either hiring integration specialists as employees or consultants.
- Governance and synergy tracking. Integration planning should be focused not just on the mechanics of integration, but the outcomes. Integration is hard work. Establishing and tracking the expected combined company benefits needs to be part of the plan from the start. This is frequently done via establishing an Integration Management Office (IMO).
An IMO is an M&A management construct that exists during the life of the merger, and aligns people, process and technology towards tracking and achieving the merger goals. It is very similar to the Program Management Office (PMO), including executive steering committees and leadership teams. It drives integration planning, defines integration processes, assigns resources, creates communications plans, and manages and reports on progress and synergy tracking. It also needs to be designed with the culturally appropriate amount of structure for the merging organization. It should be consciously designed as light-weight and guiding, strict and rigorous, or somewhere in between.
- The role of the Board. Since most mergers do not achieve their goals, the Board should be actively involved and constructively skeptical of any merger, both before and after the deal. It should test anticipated benefits via ensuring:
- Strategic alignment of the acquisition
- Exhaustive vetting of financial assumptions, market conditions, tax implications and overall valuation
- The due diligence process is rigorous, and 'deal heat' and management bias is challenged with objective, informed questions and data driven discussions
- A thorough process and dedicated resources to achieve anticipated benefits in the anticipated timeframe are in place and reported on
Dedicate the time up front to design the integration and get the right resources in place. There will be tremendous pressure early on to focus only on sealing the deal, but an early focus on integration planning makes the realization of future vision and benefits possible.
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