The 10 Most Common M&A Integration Mistakes

Transcription

1 The 10 Most Common M&A Integration Mistakes This PDF file reveals the most common M&A integration mistakes. The entire unredacted presentation in PowerPoint format that includes how to avoid the mistakes (not visible in this PDF) is available to: PRITCHETT consulting clients MergerIntegration.com paid subscribers or Merger Integration Certification Workshop attendees

2 # 1: Lack of Pre-Planning When integrations fall short of their objectives, inadequate pre-close planning contributes to the failures more than half of the time. No formal integration oversight authority established Limited or no risk assessment activities Weak due diligence Planning begins after close Unclear objectives Integration starts off slow Early wins not achieved Integration teams veer off on tangents Energy is spent on extinguishing one fire after the next Acquirer loses credibility Determine leadership structure Establish Integration Management Office (IMO) at least 60 days prior to deal close Draft integration strategy to help prioritize workstreams Complete operational, cultural, and risk assessments Secure access to due diligence documents Draft integration charter and confirm governance (IMO should report to C-suite committee) 2

3 # 2: No Formal Integration Strategy Acquirers should define a clear integration strategy early and before their teams begin to develop plans. Operating model in flux or undefined Internal disagreements about priorities and direction of integration Integration goals unclear No end-state defined for integration Integration efforts incongruent with deal thesis Integration takes longer than expected Lack of clarity frustrates integration team members Synergy targets are missed Develop integration strategy strawman to communicate direction and secure buy-in from executives Assess the risks of integration strategy Create integration workstream prioritization framework Establish Steering Committee and Integration Management Office (IMO) 3

4 # 3: Failure to Prioritize Workstreams Without prioritization, every workstream will be considered as important as the next, and it will be difficult to maintain focus on actions that will deliver the most value. Integration workload is overwhelming Functional leads make repeated requests for direction Senior management anxious about slow progress of integration Synergy targets carry no more importance than all other goals Low-value workstreams absorb too much attention Synergies are not pursued aggressively Tremendous effort is expended to make little progress Integration teams lose faith in the deal Communicate integration strategy, objectives, and timetables Create integration workstream prioritization framework for use by functional leads Assign synergies to high-priority workstreams Make sure IMO reporting focuses on high-priority workstreams Deprioritize medium-priority workstreams if workload become too heavy Have IMO assist functional workstreams 4

5 # 4: Senior Leadership Void The Integration Management Office (IMO) should report to a Steering Committee of C-level executives so integration work receives its due attention and unresolved issues have a defined escalation path. IMO reports into a single function like HR or Finance Confusion over who owns the integration work No sense of urgency among integration leads Integration under-resourced Functional integration teams work in silos without regard for dependencies Integration work is deemed unimportant Integration problems requiring top-level input go unresolved Employees question whether leadership cares about the success of the deal Announce new leadership structure as quickly as possible Establish charter and governance Set up IMO as a transparent extension of designated C-level executives Create issue escalation and decision-making framework for senior executive team to ensure high-priority issues get moved up the chain quickly 5

6 # 5: Weak Communication Planning Communication is usually the worst managed aspect of integrations. People are often left out of the loop or receive mixed messages. Communications are reactive, not proactive Little risk assessment prework to determine high-priority communication needs Information sharing on an as needed basis No process established for answering questions The uncertainty harms employee morale and productivity The rumor mill runs wild Leadership is perceived to be uncaring and out of touch A players jump ship Craft key messages for each key stakeholder audience in advance of Day 0 Create communication plan matrix for Day 0 thru 90 days Establish communication channels, and if needed, create new ones Draft memos for senior executives for their approval in order to accelerate communications Create rolling FAQ log that can be updated weekly and shared with affected employees 6

7 # 6: Poor Synergy Program Management Synergies should be validated, and then rigorously tracked and reported. Synergy estimates too optimistic Costs to achieve (CTA) badly estimated No formal owners of synergy targets No connection between synergy goals and integration workstreams Progress, or lack thereof, unreported Cost overruns occur due to poor CTA projections No corrective action is taken on synergies in danger of being missed Accountability for synergies is widely disbursed Deal fails to deliver on anticipated value Stress test synergy targets during due diligence to confirm projections, and then adjust if necessary Validate cost to achieve (CTA) of synergies Confirm frequency and source of synergy reporting updates Assign synergies to owners. Ensure synergy-related workstreams are marked as a high priority 7

8 # 7: Inadequate Resourcing Poorly resourced integrations take longer, cost more, delay synergy realization, and often burn people out. No formal scope or governance to guide resource planning Integration work treated as second priority, behind everyone s day job No air cover from senior executives for needed resources Talented people avoid integration work Integration completion is delayed Functional integration leads are overworked Team members become frustrated and resentful Baseline of resourcing requirements for next integration are not established Synergy goals are not achieved Create integration charter that defines functional resource expectations and timing Create job description summaries for functional leads Scope and prioritize integration workstreams so functional leaders have a clear understanding of the level of effort and time required to complete integration work Secure external resources to offload special projects and other integration work Reduce number of non-integration, nonessential, in-flight initiatives 8

9 # 8: No End-State Transition The process for handing off integration work (when the end state is reached) should be well defined and communicated. End state unclear and difficult to define because integration and regular work are intermingled No formal targeted date for conclusion of the bulk of integration activity No exit strategy communicated Integration drags on and on The scope of the integration creeps Long tail integration tasks are orphaned when integration teams disband Remaining integration tasks are never completed Define end state for each function prior to plan development Run the integration as a separate project, apart from day-to-day operations Develop formal end-state transition process with clear roles and responsibilities Determine deliverables associated with remaining open items Communicate what open items have to be done, by when, and by whom Document the hand-offs of open items to functional leads 9

10 # 9: Slow Organizational Planning Slow decision-making on organizational design leaves employees in limbo, and damages productivity and morale. Competing business models and priorities Too many executives and key leaders unsure of their roles and responsibilities Little communication to rank and file regarding new leadership structure Employees play politics and jockey for position instead of doing their jobs The organization begins to drift without a clear direction Employee morale suffers and productivity declines due to the uncertainty and confusion Clarify NewCo business strategy and operating principles as soon as possible Communicate when the announcements of leaders will be made Accelerate the naming of key executives and their reports make it a high priority Expedite any reduction in force so remaining employees can quickly return to focusing on their work 10

11 # 10: No Formal Feedback Feedback from stakeholder groups should be captured to improve the integration process. Information on previous integrations confusing, hard to locate, and/or nonexistent Feedback is via only rumor mill and informal communication channels No established process to address and correct poor practices Competency in M&A integration does not improve and may even get worse Employees become passive because they have no say in making improvements Acquirer obtains bad reputation for being insensitive and unresponsive to its stakeholders At day 100, initiate a formal process to collect feedback Conduct an employee survey developed and administered through HR Obtain additional feedback from senior management, integration team members, and consultants involved in the integration project Facilitate a meeting with integration team members and functional leads 11

12 This PDF file reveals the most common M&A integration mistakes. The entire unredacted presentation (in PowerPoint format) that includes how to avoid the mistakes (not visible in this PDF) is available to: PRITCHETT consulting clients MergerIntegration.com paid subscribers or Merger Integration Certification Workshop attendees