Post-Merger Assimilation

Transcription

1 Reduce Risk Maximize Returns Increase Value Post-Merger Assimilation A 100-day Plan for Creating a Single, Vibrant Organization The first day following the acquisition of a new company is crucial in setting the tone for the integration process. Mistakes here can result in the loss of critical talent, loss of sales and key customers and a lack of progress on key initiatives. Communication to the key stake holders and front room customer-facing associates take center stage in ABC s 100-day plan.

2 2 Introduction After extensive due diligence, marathon negotiations and securing the necessary financing the deal has finally closed. The team is jubilant, yet exhausted. It time to celebrate, right? Afraid not, the heavy lifting is about to begin. Heeding the lessons of past transactions we have observed, properly executed due diligence will not ensure post-merger success. Many transactions fail post-merger because of ill-conceived and poorly designed merger integration or assimilation. Once a deal is done, nothing is more important than a plan for managing people effectively in the newly created company. This paper highlights post-close lessons learned from our experience with both large and small deals. Introtion What Does a Successful Integration Look Like? Leadership should adhere to three guiding principles as part of the integration plan they are: 1. Create a single, new, vibrant organization rather than the us/them environment that undermines the mission of bringing two companies together. 2. Engage staff in the journey of creating the new organization. 3. Provide employees with certainty about the direction of the company and their individual roles and responsibilities as quickly as possible. Typically, business leaders who make mergers happen don t identify principles like these and don t look at the process close enough or understand that can be painful and wrought with mistakes.

3 3 In almost every transaction from acquisition to a merger of equals, the management of each company looks towards two key goals: retention of talented people and attainment of the financial results. In a successful transaction, the employees are treated as assets to be developed rather than costs to be cut. This is especially true in the transaction where the pre-merger due diligence identified that the cultures of the two companies were decidedly different. When a merger occurs, a number of overriding questions are created within each organization. Although most companies recognize these questions they don t develop an integration game plan to address them. Just a few of the questions are; What does this mean for me? What is going to happen to my department or my boss? Vendors will ask how this will impact our contracts. What does this mean for our customers? The Integration Plan The Following is an overview of the elements of a plan separated into pre- and postclose segments. Pre-Close 1. Form Integration Team To execute the plan in accordance with the guiding principles, companies should develop an integration team. When forming the team, remember that the acquiring team is ready to deploy on day one. Not typically true of members from the business being acquired and they need to be part of the day one process as well. It s likely they will require some time to be prepared to contribute to the team. The work of the team is to critically examine talent pools, practices and processes, as well as the cultural elements of each company to ensure that the best elements are reflected in the new company.

4 4 This team should also have as its goals to: Overcoming the allegiances to the past; Encourage employee buy-in; Prevent Confusion; Answer the rumors and miscommunication; Reduce employee turnover. 2. Prepare to address a number of items prior to the close of the deal. These must be ready for day one communication to all relevant stakeholders. Prepare an informational presentation consisting of the organizational, leadership and customer communication plan. Business Strategy - The investment thesis used to create the impetus for proceeding with the deal was likely based on an integrated business strategy projecting economies of scale, increased market share and reduced administrative and overhead costs. You should be prepared to communicate this central vision to both teams. Include the consolidated financials from the business model built for the acquisition as well as the key goals for the business (revenue targets, growth, cost etc.) In addition, the synergies baked into the investment model need to be reflected in the target financials and operating plan. Integration Strategy The structural plan for the consolidated business needs to be clear. Pay close attention to seemingly small details how to answer the phone or take an order even if nothing has changed to those processes. Leave no room for interpretation. In the absence of a clear strategy, the teams on both sides of the transaction will develop their own view of what will happen next. We have seen this result in the loss of top talent and key customers. In addition, employees at all levels will question what the impact of the event will have on them, leading to a further loss of productivity.

5 5 Post-Close Day One It s true, you really only get one shot at creating a first impression. Day one is all about reaching out to all of the key stake holders and imprinting them with the positivity you need them to possess going forward. Employees, key customers, leadership, and field commercial teams are usually captured in this process. In general, most businesses rely on the chain of command to flow down communication through the organization. This can be a huge mistake. It is crucial that teams get information unfiltered from the top. Further, team members need to have the opportunity to ask questions of the people who should have the answers. One group often missed is the key talent immediately below the leadership team. By reaching out to this group on day one, you can mitigate the risk of losing key talent. The fact that the new leadership team is aware of their contribution to the business goes a long way to earning their respect and support. This group of thought leaders can also become an important source of feedback on the integration process. This group should be examined closely beginning day one and continuously thereafter to understand the talent pool, practices and processes within each culture. Week One This week will be driven by finance and human resources efforts. The finance team needs to establish reporting processes and a clear delegation of authority. Major programs and projects need to be revisited in the context of the consolidated enterprise. Specifically any major capital expenditures (particularly those associated with capacity creation) and new product introductions should be scrutinized. It is critical that the teams review the financial forecast shared in the diligence and negotiation process. Often the buyer has discounted optimistic forecasts and this is the time to understand the risks and mitigation opportunities to ensure early success. Many businesses overlook the importance of making sure the teams share a common chart of accounts. This is the financial equivalent of speaking the same language. Time spent comparing definitions now will avoid painful discoveries later on.

6 6 This is also the time to announce any key leadership changes that were not shared on day one. The most frequent regret expressed in hindsight by integration teams is that they should have acted more quickly on people issues. This can be avoided, staving off any potential sabotage to the integration that will be costly to the new company. Getting the team through these changes quickly is key to overcoming inertia and getting the team focused on the performance of the new combined enterprise. This transition will avoid confusion and tune out noise. The process should be honest (even if it s admitting you don t have all the answers) and messages should be simple and to the point. Month One In addition to a long list of internal operating items, this is the time when the focus on external stakeholders needs to be expanded. The key customers and suppliers should have been touched on day one with general communications related to the transactions. Month one is the time to consider more strategic management of these stakeholders. Supplier consolidation and supplier agreement renegotiation should be in full swing at this point. Distribution rationalization, negotiation of new service agreements, and lease renegotiations all need to be part of the integration team s month one agenda. Day 100 By the end of the first 100 days, the critical elements of business operation should have been completed. Although complete integration including enterprise systems can take months, the focus of the first 100 days is to: Lock in the leadership team and organization structure; Define the consolidated strategy, operating plan and performance targets; Establish routine integrated operations; Launch and continue key business initiatives; Complete the efforts to compassionately assist people out who don t fit the new organization and be finished with organizational change.

7 7 Tips for an Effective Communication Plan Take advantage of all available forms of communication to provide essential the essential connection and guidance that is the key to success. Invest time and resources into activities such as meeting with every employee at least twice during the first 90 days, conducting town hall meetings, a merger specific newsletter, and website which allow employees to ask questions and get answers. The development of a comprehensive communications strategy involving all operating functions is essential, being sure that executives understand that they should be available for as many of these activities as possible. What Does Success Look Like? There are myriad metrics that may be used to measure and track success of the company post-merger. Some may be unique to the business but should certainly include: Financial measures, such as profitability or return on investment; Customer measures, such as satisfaction, service and quality; Human resource measures, such as employee engagement and monthly pulse checks; Operational measures such as cost and savings. From our experience, with the proper people, mindset, and integration plan in place, within 90 to 120 days, hallmarks of a merger on the track to success will include: Retention of all top performers; Less than 10% turnover; Customer Satisfaction on target; Profit levels are as expected and on target.

8 8 In Closing Post-Merger integration or assimilation is all about people. The transformation of a business requires people to transform it, to develop it, and to support it and that is true no matter what area of a business you are talking about. The ABC comprehensive integration plan provides a roadmap for that crucial first 100 days that can help you to minimize risk and accelerate success. We can also assist in all areas of pre- and post-merger activities including acquisition due diligence and the development of a post-merger assimilation plan. Contact ABC for details and help.

9 9 About Albany Business Consultants We Get Things Done Even though "consultants" is part of our name, we are a team of working partners bringing more than ideas we get things done. Albany Business Consultants is an integrated team of senior partners with executive-level experience and expertise in Finance, Operations, Human Resources, Mergers and Acquisitions and Technology and Project Management. Companies hire ABC to find and fix operational and cash flow problems, identify opportunities and guard against risk and liability. Private equity, venture capitalists and bankers rely on them to find the hidden risks and opportunities in potential acquisitions. ABC s team of senior partners brings more experience and greater value by evaluating and mitigating risk in the areas of: 1. Finance 2. Operations 3. Human Resources 4. Mergers and Acquisitions 5. Technology and Project Management

10 10 Our Principals Gary Powell President and Managing Partner Gary has extensive operating experience with a track record of success in global Fortune100 companies. His success as one of the 12 leaders selected to drive the Six Sigma initiative in GE resulted in promotions to run both the $500 million Noryl and $1.2 million Lexan Resin businesses in GE Plastics. Consistent delivery of quarterly operating margins through top line growth and record productivity led to promotion as Vice President GEP Global Manufacturing and company officer of GE. As a member of the Tyco turn around leadership team, he restructured the $2.0 million Plastic and Adhesives Business and played a key role in the successful marketing and sale of TP&A to Apollo Holdings. Gary lead the strategic redirection of Cyclics Corporation increasing sales by 400%. Robert Pryba, C.P.A. Partner Bob has extensive experience in providing accounting and auditing, tax consulting and business consulting to a wide range of clientele. He has a proven record of team leadership in implementation, coordination and review of professional services to clients in manufacturing sector, retail and wholesale sector, professional service firms and governments and not for profit entities. As a founding shareholder of Pryba, Tobin & Company, CPAs, P.C., his leadership skills have allowed the firm and its clients to achieve their goals while establishing the firm as a Top 25 Certified Public Accounting Firm in New York's Capital Region.

11 11 Jack McGaughnea Partner. Jack has an extensive experience in Organizational Design and Organizational Transformation. He also has a unique track record of experience in Operations and Human Resources from start ups to Fortune 500 companies. In over 35 years Jack has had success in applying best practices in Operations and Human Resource Leadership roles to enable companies to strategically transform their organizations, in such roles as the Global Vice President of Human Resources at Cyclics Corporation, Regional Vice President of Operations at HR Logic, as is currently President and CEO of Northeast HR for Hire. Bob Sinuc Partner Bob is a Lean thinking change driver. As contributor to the strategic and tactical business planning process, Bob analyzes and develops new levels of continuous improvement, customer satisfaction, productivity, and profitability. He brings global manufacturing experience through engineering, logistics, finance, human resources, and productivity/process improvement. Bob's storied resume includes engineering Vice Presidencies at General Electric, Plug Power, Cyclics Corp, and AlliedSignal Automotive. Bill Thyne, C.P.A. Partner Bill is a senior financial manager with over 35 years of unparalled knowledge of systems of internal control, financial reporting for both private enterprises and SEC reporting entities. As a facilitator of strategic, tactical and budgetary business planning process, Bill focuses on results with emphasis on activity based analysis and cost containment. Among his distinguished work history, BIll has been the Vice President of Finance at Cyclics Corp, Director of Finance at Finch, Pruyn & Company, and has "Big 4" experience as a Senior Staff Member at Touch Ross & Co. (n/k/a Deloitte & Touche).

12 12 Interested in Learning More? Contact us today for a free consultation on your business or contact us online at albanybusinessconsultantsllc.com. 40 British American Boulevard Latham, New York (518) contact@albanybusinessconsultantsllc.com albanybusinessconsultantsllc.com Reduce Risk Maximize Returns Increase Value