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XYZ is pleased to have assisted Client X's leadership in developing the following Company A Integration Strategy. The strategy represents an intense, four-week collaboration between Client X and XYZ to define the integrated end state, integration approach, synergy opportunities and Day One priorities for each function. The strategy also addresses cross-functional merger integration topics such ascustomer retention, legal entity consolidation, organization design, workforce stability and communications.
Together, we developed the strategy through a series of workshops and meetings with Client X the way, XYZ shared with Client X many merger integration best (and worst) practices and experiences from other large, complex, global mergers. As a result, many of those experiences and best practices are included in this strategy.
This integration strategy is the result of approximately 50-70 interviews and group workshops designed facilitated by members of the XYZ team. The meetings were designed to work with the Client Xexecutives and senior leaders in most functions.
Keyword: M&A, mergers, acquisitions, post-merger integration, strategy, consulting, report, toolkit
2. Client X Confidential WORKING DRAFT – For Integration Planning Purposes Only
Table of Contents
Executive Summary...................................................................................................................... 1
1.0 Transaction Rationale ............................................................................................................ 7
2.0 Organization Structure........................................................................................................... 8
3.0 Legal Entity Structure ............................................................................................................ 9
4.0 Go-To-Market Strategy......................................................................................................... 14
5.0 Customer Retention Strategy.............................................................................................. 15
6.0 Workforce Planning and Transition ................................................................................... 21
7.0 Communications Plan.......................................................................................................... 27
8.0 Integration Plan (High-Level) .............................................................................................. 33
8.1 Overview ........................................................................................................................... 33
8.2 Sales/Professional Services............................................................................................. 34
8.3 Sales Operations .............................................................................................................. 39
8.4 Product Marketing............................................................................................................. 43
8.5 Customer Support............................................................................................................. 46
8.6 Development..................................................................................................................... 49
8.7 Product Release and Manufacturing and Distribution ..................................................... 50
8.8 Finance ............................................................................................................................. 52
8.9 Tax .................................................................................................................................... 56
8.10 Human Resources.......................................................................................................... 58
8.11 IT ..................................................................................................................................... 60
8.12 Real Estate ..................................................................................................................... 65
8.13 Legal ............................................................................................................................... 67
9.0 Synergy Summary ................................................................................................................ 69
10.0 Success Metrics.................................................................................................................. 72
11.0 Implementation Roadmap and Governance.................................................................... 73
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3. Executive Summary
Client X Confidential Page 3 WORKING DRAFT – For Integration Planning Purposes Only
Functional Integration Strategies
The key function-specific integration strategies include:
Functional Areas Day One Key Activities / Priorities End State Design
Sales / Professional
Services
• “Re-plan” the sales plan
• Develop sales, partner and professional
services playbooks
• Develop sales force retention plan and
task force
• Coordinate with IT and Marketing to
develop a plan to quickly acquire and
migrate customer information
• An integrated sales force to sell Client X
and legacy Company A products and
professional services under a single
Client X corporate brand and product
roadmap
• An integrated professional services
organization configuring and
implementing Client X products and
Company A legacy products (as
necessary)
• All partner and alliance relationships
combined into one program under the
pre-merger Client X organization
• Adopt Client X sales processes, systems
and policies
Sales Operations • Augment current Bid Desk
• Create the sales operations playbook
• Mobilize a pricing and contracting
retention task force
• Company A Sales Operations
organization integrated into Client X
using Client X’s systems, processes,
contracts, pricing and metrics
• A unified customer view that allows any
customer to order any product, in one
transaction, with seamless pricing and
contracting structures, algorithms, terms
and conditions
Product Marketing • Establish Marketing personnel retention
task force
• Develop brand architecture and
messaging
• Develop customer communications and
value proposition
• Establish a customer data task force and
plan for quickly migrating Company A
customer information
• Develop transitional branding and short
term promotional plan
• Company A marketing function
integrated into Client X using Client X’s
order management systems, reporting
processes, systems and metrics
• Client X will continue as the single
corporate brand; Company A corporate
brand will be re-branded as Client X
Customer Support • Develop customer support playbooks
• Plan for organizational structure and
integration timeline
• Establish risk mitigation team to plan for
potential disruption
• Company A customer support function
integrated into Client X using Client X’s
systems, reporting, processes, policies
and metrics
• Consolidation of all support facilities
• Further analysis needed to determine
reporting structure related to Company A
combined Support and Development
organization
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4. Executive Summary
Client X Confidential Page 6 WORKING DRAFT – For Integration Planning Purposes Only
Synergy Summary
Over the last 18 months, Client X developed and updated a preliminary, high-level estimate of revenue
and costs increases that may result from integrating Company A , primarily for determining the range of
offer prices that are financially reasonable. We have summarized that model, below.
Keep in mind, however, that these figures are rough and early estimates based on publicly-available data.
An important task of the integration planning teams will be to confirm, update – and ideally exceed –
these estimates.
Estimated Synergies
If the Company A acquisition closes in Client X’s third quarter, Client X estimates that the combined
annual operating costs (the annual run rate) can be reduced by $1.4 billion by May 31, Year 3. Client X
expects to achieve approximately 15% of that cost reduction in the current fiscal year, approximately 80%
of the target by the close of FYYear 2, and effectively the balance in FYYear 3.
Date
Estimated Annual Operating
Cost Reduction (Run Rate)
Portion
Achieved
May 31, Year 1 $210 M 15%
May 31, Year 2 $1,110 M 80%
May 31, Year 3 $1,380 M 97%
May 31, Year 4 $1,420 M 100%
However, Client X also estimates losses in legacy Company A revenue, primarily in the software
licensing and professional services segments. From a Company A trailing twelve-month revenue baseline
of $2.7 billion, Client X expects a loss in legacy Company A revenue of $620M, $1,230M, $1,340M, and
$1,330M in FYYear 1, Year 2, Year 3, and Year 4 respectively.
Taking into account these cost reductions and revenue losses, Client X anticipates that the net operating
cash flow impact to Client X of this acquisition to be ($330M), $320M, $270M, and $340M in FYYear 1,
Year 2, Year 3, and Year 4 respectively.
These cost reductions, revenue losses, and cash flows are summarized below:
Fiscal Year Cost Reductions ($M) Revenue Losses ($M) Net Cash Flow ($M)
Year 1 $210 $620 ($330)
Year 2 $1,110 $1,230 $320
Year 3 $1,380 $1,340 $270
Year 4 $1,420 $1,330 $340
Note 1: Figures in $ Millions
Because Client X does not yet have access to detailed Company A financial and operational data, these
estimates are based solely on publicly available information. Once the acquisition closes, Client X will
update its estimates.
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5. Legal Entity Structure
Client X Confidential Page 9 WORKING DRAFT – For Integration Planning Purposes Only
3.0 Legal Entity Structure
Overview
Integrated End State
The integrated legal entity structure eliminates the redundancies created by the Company A acquisition.
It maximizes tax benefits and operational efficiencies yet minimizes operational cost, legal liabilities and
reporting complexities. The process to consolidate the Client X and Company A / its subsidiary separate
legal entity structures is complex due to the number of entities and countries involved, as illustrated by
the pre-acquisition Client X and Company A structures shown below. The process is likely to take one to
two years at a minimum. Some entities may never be integrated. The integrated Client X legal entity
structure simplifies the combined structures of all three legacy companies.
Client X Legal Entity Structure as of 05/31/yy:
Client sensitive information deleted
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6. Legal Entity Structure
Client X Confidential Page 12 WORKING DRAFT – For Integration Planning Purposes Only
o Complete all tax filings in a timely manner
o Identify agreements regarding option chargeouts
• Legal
o Shelter Client X from legal liabilities when contracts are transferred
o Preserve customer licenses and consider local rules surrounding transferability
o Identify and manage all outstanding lease obligations and applicable transferability
o Analyze regulatory requirements
o Identify and manage all possible and outstanding litigation
o Analyze and evaluate reorganization alternatives
• Finance
o Record Company A activities in Client X entities as quickly as possible
o Ensure ability to accurately report financial results
o Maintain duplicate filing requirements and records
o Integrate Company A activities in Client X entities as quickly as possible
o Maintain duplicate systems
o Minimize unnecessary cross charges by keeping the structure simple
o Maximize synergy savings in General & Administration (G&A) costs structure
• Operations
o Develop customer interface guidelines for Red entities
Rationale
Restructure activities of the combined organization without careful consideration of key functional areas
can yield expensive and irreparable consequences in the areas of Human Resources, Tax and Legal.
Careful planning to reach agreement on the restructure plan from each function in the SWAT Team will
increase the likelihood of success and will enhance efficiencies in the restructure process.
Synergy
Synergies resulting from legal entity restructure are expected in the following areas:
• Headcount reduction in G&A functions
• Minimize one-time tax provision charges from entity consolidation
• Decreased expenses associated with the number of tax filings, administrative overlap, transfer
pricing analyses, contracting redundancies, etc.
• Minimize time and cost in releasing employees
• Retention of key employees
• Minimized ultimate cost of contingent and non-contingent liabilities
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7. Customer Retention Strategy
Client X Confidential Page 15 WORKING DRAFT – For Integration Planning Purposes Only
5.0 Customer Retention Strategy
Overview
Customer retention is essential to realizing the value of the Company A acquisition. As such, a central
team will be formed to address customer retention. This team, consisting of executives from sales,
marketing, global practices and others as needed, will define customer segments, determine their needs
and retention criteria and execute on plans to meet those needs. They will direct Sales, Marketing, Global
Practices, Customer Support and the executive team on specific actions required for the retention of
customers. In addition, they will manage customer issues and quick response. This team will be in place
for as long as customer retention and revenue targets associated with the Company A acquisition is a
concern.
Approach
Client X will implement a four-step approach to its customer retention strategy due to the high value of
customer retention and need to mitigate Company A Customer Assurance Program (CAP) risk.
Assess the Situation
• Analyze and segment the current Client X and Company A installed base along four dimensions
(underlying database, industry position, Company A products, Product Portfolio) including, but not
limited to, an understanding of the following:
– Customers most likely to leave
– Customers most likely to upgrade / migrate
– Customers most likely to take action based on the CAP
• Develop scenarios and response strategies based on segmentation. The sales team is currently
exploring 14 scenarios and developing strategies for each scenario (see below). These scenarios
will be grouped and simplified for communication to the sales force. In addition, they will be
adjusted to reflect the guidance that sales of Client X products are always preferable over Company
A products. The current scenario list developed by the Client X Sales Force is as follows:
Strategy Dimensions Product Strategy Organization
Competitor C
Response
Investment
One CLIENT X DB,
Lim. Company A
, CLIENT X apps.
• Consistent
corporate
message
• 10yr. product
support play
• Up-sell Company
A ONLY
• Cross-sell Client X
• If relationship is
equal, Client X rep
remains
• SC coverage to be
determined by:
– Footprint
– Geography
– Industry focus
Competitor C
RISK: Green
• Standard Client
X measures
• Develop 24
month pivot plan
• Continue
standard
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8. Customer Retention Strategy
Client X Confidential Page 18 WORKING DRAFT – For Integration Planning Purposes Only
Strategy Dimensions Product Strategy Organization
Competitor C
Response
Investment
Eight Client X DB, Ext.
Company A 8.0,
Competitor C
dominates
• Consistent corp.
message
• 10 yr. product
support play
• Promote
Company A up-
sell and cross-sell
• When customer is
ready provide
stability message,
as required
• Company A rep
remains
• Promote 9.0
Competitor C
RISK: Yellow
• Standard Client X
Nine Client X DB, Ext.
Company A 8.0,
Competitor C
competes
• Consistent corp.
message
• 10 yr. product
support play
• Promote
Company A up-
sell and cross-sell
• When customer is
ready
• Provide stability
message, as
required
• Company A rep
remains
• Promote 9.0
Competitor C
RISK: Green
• Standard Client X
Ten Client X DB, Ext.
Company A
ONE, Competitor
C dominates
• Consistent corp.
message
• Focus on specific
industry
• Focus on major
footprint (cross-
company)
• If applicable,
Client X migration
strategy
• Provide stability
message, as
required
• If buying, Client X
rep promoting
Client X
• Otherwise,
Company A ONE
rep remains
• Standard Client
X measures
• Standard Client X
Eleven Client X DB, Ext.
Company A
ONE, Competitor
C competes
• Consistent corp.
message
• Focus on specific
industry
• Focus on major
footprint (cross-
company)
• If applicable,
Client X migration
strategy
• Provide stability
message, as
required
• If buying, Client X
rep promoting
Client X
• Otherwise,
Company A ONE
rep remains
• Standard Client
X measures
• Standard Client X
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9. Workforce Planning and Transition
Client X Confidential Page 21 WORKING DRAFT – For Integration Planning Purposes Only
6.0 Workforce Planning and Transition
Integrated End State
Company A workforce capability will be restructured around critical business areas including
Development, Support, Consulting and Sales. Current estimates indicate an elimination of approximately
35% to 45% of Company A positions. It is estimated that approximately 25% of redundant Company A
positions may be transitional and will be eliminated within 18 to 24 months.
Integration Approach
Client X will rapidly plan and implement two near-term transformational activities:
• Reconfigure the Company A business model and workforce capabilities
• Engage retained Company A employees in the future business of Client X
Leadership Transition
Prior to transaction Close, Client X will identify and determine the strategy for retaining or releasing
Company A executives in the top three layers of the organization. A senior Company A executive
sponsor will be appointed to co-lead the reconfiguration of Company A and effectively co-lead the entire
integration effort from Location B.
Senior functional leaders and teams within Company A will align to a peer leader and team within Client
X.
Workforce Planning – Employee Engagement and Retention
Client X will utilize a standardized identification, selection and offer process for the retention of key
Company A positions. Creatively structured and meaningful incentives will be required for critical
workforce segments to protect against the loss of:
• Customer relationships
• Customer support and maintenance capabilities
• Exceptional industry talent residing in the Company A organization
Targeted and critical workforce segments within Company A include Development, Support, Consulting
and Sales. There are also key employees throughout the organization who will be critical to transition
business processes, knowledge and relationships and who will be needed on a short-term and transitional
basis.
A program designed to provide incentives for performance as well as continued employment is currently
in design. Company A employees will be categorized over two classes (Executives and Employees) and
four groups (Redundant, Transitional, Retain, Strategic Talent).
Client X’s current incentive and support tools include the economic value and structural design of:
• Cash performance incentive
• Cash milestone incentive
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10. Workforce Planning and Transition
Client X Confidential Page 24 WORKING DRAFT – For Integration Planning Purposes Only
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11. Communications Plan
Client X Confidential Page 27 WORKING DRAFT – For Integration Planning Purposes Only
7.0 Communications Plan
Overview
A large part of the Company A acquisition success will be related to the effective stabilization of the
market, customers and employees. Client X will deploy a 360° communication strategy that proactively
addresses internal and external audiences, and plans for delivering consistent and coordinated messages
across all of these audiences. 360° communications will help protect the Client X brand reputation,
customer and workforce stability, and will drive delivery of the value proposition. The outcome of this
strategy will be an ongoing communications infrastructure and process that supports the consistent
delivery of messages to internal/external audiences and manages two-way feedback.
360° Communication Guiding Principles
• Speed and responsiveness
• One face to the market
• Minimal business disruption
• Protection of brand reputation
• Reinforcement of positive brand aspects
• Integrated strategy, plan and tools
• Clear and consistent messaging – no
ambiguity, fact-based content
• Leadership visibility
• Focus on managers and employees
• Two-way feedback
• Fair and respectful treatment of people
• Over communication
360° Communications Management
A cross-functional Client X communications team with representatives from all aspects of
communications (Corporate Communications, Analyst Relations, Investor Relations, Internal Corporate
Communications, Corporate Public Relations, Corporate Marketing, Branding, Sales & Consulting,
Products & Services, and International Corporate Communications) will coordinate and execute the 360o
communication strategy and plan. Client X’s executive leadership will be responsible for the
development of key organizational messages that will quickly and consistently be disseminated to internal
and external audiences.
Communication Priorities
In general, the external communication infrastructure and process within Client X is well developed. To
date, key messages have been crafted by Client X executives and disseminated to the various audiences
through standard communication channels. The nature and complexity of this acquisition prompts a
heightened need to proactively manage and sustain favorable perceptions in the near- and long-term. It
will also require the communications team to implement a rigorous focus on key audiences – primarily
employees and customers – and drive communications through new channels and methods.
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12. Communications Plan
Client X Confidential Page 30 WORKING DRAFT – For Integration Planning Purposes Only
EXTERNAL
Audience Pre-Close Day One Post-Close
Top 50 Client X
customers
• Response to inquiries in
customer call center
• Top customer calls
• Day One press release
• Fax letter from CEO (Day
One)
• Top customer calls
• Transitional
branding/marketing
campaign
• Email with follow-up
webcast
• Face-to-face meeting or call
• New branding/marketing
All other Client X
customers
• Response to inquiries in
customer call center
• Day One press release
• Transitional
branding/marketing
campaign
• Email with follow-up
webcast
• Fax/condensed email or
letter from Sales/Account
contacts (week 1-2)
• New branding/marketing
All other Company A
and its subsidiary
customers
• Response to inquiries in
customer call center
• Day One press release
• Transitional
branding/marketing
campaign
• Email with follow-up
webcast
• Fax/condensed email or
letter from Sales/Account
contacts (week 1-2)
• Customer feedback survey
• Customer updates on
progress
• New branding/marketing
Partners • Response to inquiries in
customer call center
• Day One press release (on
Client X Partner Network
for current Client X
partners)
• Transitional
branding/marketing
campaign
• Email with follow-up
webcast
• Communication based on
relationship for all partners
(week 1)
• Face-to-face meetings
• Conference calls
• Fax/email letter
• New branding/marketing
Client X User
Groups
• Response to inquiries in
customer call center
• Outreach calls pre-close
• Day One press release
• Transitional
branding/marketing
campaign
• Email with follow-up
webcast
• Email letter (week 1)
• New branding/marketing
Company A and its
subsidiary User
groups
• Response to inquiries in
customer call center
• Outreach calls pre-close
• Day One press release
• Transitional
branding/marketing
campaign
• Email with follow-up
webcast
• Email letter (week 1)
• Customer feedback survey
• Customer updates on
progress
• New branding/marketing
Industry and
Financial Analysts
• Press release
• Command Central
• Day One press release
• Transitional
branding/marketing
campaign
• Call downs
• Continued press releases
and analyst briefings on
progress
• New branding/marketing
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13. Integration Plan (High-Level)
Client X Confidential Page 33 WORKING DRAFT – For Integration Planning Purposes Only
8.0 Integration Plan (High-Level)
8.1 Overview
The overarching focus of the Company A integration is to drive value. It will require a well-coordinated
effort across all functional organizations. To ensure that Client X remains focused on the big picture, the
integration strategy must be tested against the following guiding principles:
• Keep things simple
• Implement with hyper speed
• Integrate in a non-linear way
• Utilize a multi-faceted command-and-control Program Management Office (PMO)
• Focus on top opportunities
• Default to Client X policies and procedures
Client X must quickly recognize and seek alternative approaches to integration if the integration strategy
is not in alignment with these guiding principles.
Integration Strategy
This business integration strategy is clear and concise, and can be implemented immediately with little
execution risk. The strategy focuses on supporting the four components of the “One” strategy:
• One corporate brand. Customers are strategically seeking a vendor with a broader, expanding,
well-integrated offering across the software stack.
• One product vision. Future major architectural upgrades will be made to the Client X E-Business
Suite only as a superset product. This vision will incorporate the best features of both companies’
applications, accelerate innovation through focused efforts and continue the required resources for
the Company A product line maintenance and enhancements.
• One go-to-market strategy. Client X will market its single-product vision to avoid confusion in
the marketplace and optimize allocation of its resources.
• One global infrastructure. The transaction will provide customers with global support from
consolidated Client X facilities, while rationalizing duplicate G&A organizations.
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14. Integration Plan (High-Level)
Client X Confidential Page 36 WORKING DRAFT – For Integration Planning Purposes Only
To achieve these goals, the integration team will complete the following steps:
• Mobilize a sales force transition task force. This team needs to be identified, recruited, trained
and ready to deploy on Day One. This team will be armed with the retention playbooks as
described above. Upon Day One or when sales force personnel/performance data becomes
available, this task force will analyze the data and rationalize it for “best fit” to the order board.
Retention playbooks will then be employed to attract and retain the top Company A sales talent as
prioritized by “best fit.” The retained Company A sales force may require specialized Client X
product, process and policy training. The identified sales personnel may attend an Client X “boot
camp” immediately to come up to speed quickly. This is also the team that will work in concert
with the Workforce Planning and Transition Team to execute on the separation procedures for the
Client X bottom 10% and those not included in the order board.
• Develop and execute “sales force playbooks.” Sales force playbooks will be the major
communication and training tool for the Client X and Company A sales force to communicate with
their customers. These playbooks will include:
o Customer messaging (based on market segment and legacy representation – Client X or
Company A )
o Value proposition and benefits of the merger
o Scenario analysis and response
o Product information
o Ordering and pricing processes and policies
o Client X organization, processes and policies
o Contracting processes, policies and terms & conditions
o Incentive package (including any changes to quota and compensation)
• Develop and execute “partner / alliance playbooks.” Partner / alliance playbooks will be a
major communication and training tool for the Client X and Company A partner / alliance
community to communicate with their customers and understand their role as an Client X partner.
These playbooks will include:
o Customer messaging (based on market segment and legacy representation – Client X or
Company A )
o Value proposition and benefits of the merger
o Scenario analysis and response
o Product information
o Ordering and pricing processes and policies
o Client X partnership / alliance information and benefits
o Contracting processes, policies and terms & conditions
Subsume Company A Professional Services Organization and Invoke an Attrition Algorithm
The goal of this exercise is to align professional services costs / personnel with attrition rates of the
Company A revenues. To accomplish this goal, Client X will perform the following:
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15. Integration Plan (High-Level)
Client X Confidential Page 39 WORKING DRAFT – For Integration Planning Purposes Only
8.3 Sales Operations
Integrated End State
The Company A Sales Operations functions will be integrated into Client X functions. The combined
sales force will be supported in all transactions including future Client X and legacy Company A
purchases under the Client X sales operations organizations and management team. Sales Operations will
maintain a unified customer view that allows any customer to order any product, in one transaction, with
seamless pricing and contracting structures, algorithms, terms and conditions. Those Company A sales
operations personnel with specialized systems, processes or policy knowledge will be retained.
Duplicative operational personnel will be separated soon after Day One.
Infrastructure
Upon transaction close, separate infrastructures will be utilized. All contracts will be written on Client X
paper as soon after Day One as possible. There will be strict instructions to all affected employees on
how contracts should be managed Day One with the goal of not slowing down the contracting process
while maintaining control of the contracts signed. All Company A transactions will be managed through
the Global Practices exception pricing and contracting process starting Day One. Quickly after Close,
Company A systems, processes, contracts and pricing structures will be evaluated and a consolidation
plan will be put in place. An integrated end state of the organization will include one set of systems,
processes, contracts, pricing and metrics.
Integration Approach
Given the end state, the expected response of the marketplace, and the expected availability of Company
A critical customer pricing and contracting data, Client X will follow a three-step integration approach:
Prepare the Current Client X Bid Desk to Manage the Post-Day One Volume of Pricing and
Contracting Issues and Exceptions, as well as Company A Transactions
The current team has prepared checklists and plans for Client X acquisitions, but not for one this large or
complex. A number of tasks are required to further prepare this group.
• Develop sales operations playbooks. This includes a set of steps that the Bid Desk will perform
until such a time as a full analysis and strategy can be formulated for pricing/contracting in an
effective manner. Two key considerations are for short-term pricing and customer communications
and messaging. The customer playbooks will become living documents to be changed as the Bid
Desk learns more about creating effective joint contracts. Effective playbooks may include the
following contents:
– Customer messaging (based on market segment and legacy representation – Client X or
Company A )
– Value proposition and benefits of the merger
– Scenario analysis and response
– Product information
– Ordering, pricing and licensing processes and policies
– Client X organization, processes and policies
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16. Integration Plan (High-Level)
Client X Confidential Page 42 WORKING DRAFT – For Integration Planning Purposes Only
• Mobilize a pricing and contracting retention task force
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17. Integration Plan (High-Level)
Client X Confidential Page 45 WORKING DRAFT – For Integration Planning Purposes Only
In addition, there are a number of pre-existing factors that require Client X Marketing’s immediate
attention:
• Company A has a number of campaign commitments that Client X will want to re-brand and utilize
• Company A possesses customer information essential to capturing the value of the acquisition
Since it is expected that Company A data and personnel may not become available until Day One, the
best approach to minimizing these issues is to put in place task forces focused on retaining key personnel
and capturing customer data.
Synergy
Synergy in the Marketing area will be derived from cost reduction in two specific areas:
• Vendor consolidation and reduction in collateral development, advertising/media buys and
marketing events
• Lower operational costs through a significant reduction in Company A Marketing workforce (goal
is to reduce force by [90-95%])
In addition to the reduction in cost, Client X has the opportunity to capture synergies associated with the
combined power of the Client X brand with the Company A products.
Priorities for Day One
Following are the Day One priorities:
• Establish Marketing personnel retention task force
• Develop brand architecture and messaging
• Develop customer communications and value proposition in conjunction with the Communications
team
• Put in place a customer data task force and plan for quickly migrating Company A customer
information
• Develop transitional branding and short term promotional plan
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18. Integration Plan (High-Level)
Client X Confidential Page 48 WORKING DRAFT – For Integration Planning Purposes Only
Priorities for Day One
Following are the top-priority activities for Day One:
• Develop customer support playbooks
• Plan for organizational structure and integration timeline
• Establish risk mitigation team to plan for potential disruption
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19. Integration Plan (High-Level)
Client X Confidential Page 51 WORKING DRAFT – For Integration Planning Purposes Only
Priorities for Day One
Client X will need to maintain Company A product release and M&D operations in parallel at transaction
Close to minimize risk associated with potential product delivery failures. Day One activities include the
following:
• Evaluate Company A product release and M&D activities
• Hire “A list” of Company A experts who immediately join as regular Client X employees
• Immediately enter Company A products into Client X system and code onto Product delivery
system
• Hire “B list” of Company A employees for interim integration support
• Maintain appropriate Company A activities using new Client X team consisting of current Client X
employees and additional Company A employees
• Implement Client X policies and procedures
• Communicate reporting structure to Company A product release and M&D employees
• Understand and maintain third-party escrow process for Company A source code
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20. Integration Plan (High-Level)
Client X Confidential Page 54 WORKING DRAFT – For Integration Planning Purposes Only
Rationale
This approach is designed to:
• Ensure accounting is performed in accordance with GAAP
• Maintain operation of an effective system of internal control
• Mitigate risk of employee sabotage by establishing appropriate controls surrounding:
o Order management and collections
o Procurement
o Cash receipts and disbursements
o Treasury functions
• Quickly institute Client X’s financial policies, procedures, systems and reporting structure
• Minimize redundancy and take advantage of economies of scale
• Simplify reporting of consolidated financial reports
• Reduce costs associated with headcount and facilities
Synergy
Synergy in the Finance area will be derived from the following:
• Headcount reduction in duplicated Company A finance functions. Leverage and scale existing
Client X finance operations to accommodate increased transaction volumes
• Reduction in transaction cost by increasing volume through the current India SSC
• Elimination of redundant overhead costs
• Reduction of professional fees:
o Banking services (lock box, cash management)
o External audit (partially or fully offset by increased fees related to acquisition accounting and
additional reporting requirements)
o Local statutory filings (upon completion of legal entity consolidation)
Priorities for Day One
Day One priorities will be focused on ensuring that the necessary processes and systems are in place to:
• Quickly establish control of global financial operations
• Reduce fraud risk by:
o Gain control of cash accounts
o Imposing a strict disbursement authorization process
o Securing the receivables collection process
• Evaluate quality of balance sheet accounts
• Appropriate valuation of balance sheet items such as intangible assets
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21. Integration Plan (High-Level)
Client X Confidential Page 57 WORKING DRAFT – For Integration Planning Purposes Only
Rationale
The Company A tax function must exist intact and operate effectively immediately following the close of
the transaction, as there are immediate filing deadlines with significant penalties for non-compliance. The
current tax department of Client X is currently short staffed. Furthermore, it is unable to absorb the pre-
acquisition tax compliance and reporting associated with Company A , which will be due soon after the
acquisition. To the extent possible, the existing openings in Client X’s tax function can be filled by
qualified Company A tax personnel.
The integration of legacy Company A tax personnel into the Client X tax department will enhance
retention of institutional Company A tax knowledge. Integration of the department is unlikely to reduce
tax function operating costs. In the first and possibly the second post-acquisition year, operational costs
will probably increase as the combined department executes the legal entity consolidation plan and
resolves the Company A audits as quickly as possible.
Synergy
The Company A Tax department currently has five employees. The Client X tax department is currently
seven people under staffed after counting the three new hires who have not started or 20% under
headcount. Unless the qualified Company A tax personnel are retained, the company will incur additional
and higher contractor costs.
Priorities for Day One
Upon the transaction Close, Client X’s tax management will focus on stabilizing the Company A tax
function:
• The tax department will focus on continued compliance and reporting with regard to income, sales
and use, and value-added taxes
• The existing Company A tax department will report up through the current Company A head of
Tax (Company A VP) who in turn will report directly to the Client X Senior Vice President of Tax
• The Company A tax department immediately will adopt all Client X policies and processes
relevant to the tax department (check authorization, audit settlements, filing positions, internal
controls, etc.)
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22. Integration Plan (High-Level)
Client X Confidential Page 60 WORKING DRAFT – For Integration Planning Purposes Only
8.11 IT
Integrated End State
The integrated end state for Information Technology (IT) is characterized by two objectives:
• Migrate Company A IT applications, processes and infrastructure to Client X’s standards
• Separate Company A IT resources that are not aligned with Client X’s IT strategy.
IT will focus on the following areas during this acquisition:
IT Key Decisions and Timing:
IT Function Day One +30 End State
A Application Architecture
(F&A/AIT Ownership)
• Maintain existing application/
infrastructure architectures
• Review new architectures between
companies to ensure alignment going
forward
Single application architecture – modular
based, open systems
B Asset Management No change Day One +30 • Client X will retire all redundant and
unnecessary IT assets (laptops,
desktops, printers, faxes, copiers,
telephones, etc.)
• Move to Client X AIMS
C Budgeting/Procurement
(F&A Ownership)
Separate procurement channels, but with
Client X oversight following Client X’s
procurement process
(Note: to be validated by Finance)
Client X procurement process and
budgeting process/system
D Business Recovery
(AIT Ownership/GIT
Support)
No change Day One +30 Use of Company A sites for business
recovery or adopt existing Client X sites,
based on evaluation
E Change Control Maintain separate change control
mechanism/tools, but with Client X
oversight
Single use of Client X change control
toolset and processes
F Corporate
Communications
TBD with Communications TBD with Communications
G Customer Service and
Support
No change Day One +30 TBD with Global Support for customer
facing
H Data Client X control and security of Company
A data
Migration of Company A data in Client
X’s data model
I Desktop No change Day One +30 • Deployment of single image and
replacement of Company A laptop
PCs with a standard Client X solution
• Standardized procurement of
desktops onto Client X standard
J E-mail
(ST OCS Ownership)
No change Day One +30 Adopt Client X’s e-mail service
K ERP
(AIT Ownership)
Dual ERP – Data feeds in place between
the systems to support business for Day
One +30
Single ERP – most likely Client X 12i –
adoption of Client X’s business
processes
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23. Integration Plan (High-Level)
Client X Confidential Page 63 WORKING DRAFT – For Integration Planning Purposes Only
In the “Time to Value” map below, XYZ has leveraged its expertise in previous engagements to show the
estimated work effort and value for each of the IT Functions listed in the “IT Key Decisions and Timing”
table above.
Integration Approach
While the primary objectives will be achieved through a combination of speed, discipline and
prioritization of projects through Client X’s IT Governance process, the focus will be on retention of data
pertaining to Company A customer base and mitigation of business disruption risks throughout the
acquisition. G&A functions will be integrated quickly while the Product Engineering, Support and
Development functions will follow a more methodical approach and require more than six months to
achieve the desired end state. Underlying this approach will be an unwavering emphasis on retaining top
IT talent, both at Client X and Company A , while leveraging the existing Client X IT strategies and
practices. This group will be evaluating existing Company A IT processes to determine their level of
adoption in Client X’s overall IT strategy.
Rationale
This approach is designed to:
• Obtain control of Company A customer database, associated infrastructure and administration for
Client X’s Lines of Business
A
CC
Time to Value
Value
Low
High
B
D
E
I
F
H
C
G
J
K
L
M
N
O
P
Q
S
T
W
VW
X
Y
ZAA
BB
EE
A – Application Architecture
B – Asset Management
C – Budgeting/Procurement
D – Business Recovery
E – Change Control
F – Corporate Communications
G – Customer Service and Support
H – Data
I – Desktop
J – E-Mail
K – ERP
L – Facilities (Data Centers)
M – Finance and Operations
N – Human Resources
O – Interfaces
P – IT Governance
Q – Legal
R – Marketing
S – Network
T – Outsourcing Service
U – Policies, Procedures and Standards
V – Portal
W – Project Management
X – Reporting
Y – Sales
Z – Security
AA – Service Delivery/Outage
Management
BB – Strategic Sourcing
CC – Telephony
DD – Training
EE – Web Services
U
Timing and Complexity
Fast/Easy Long/Hard
*Note: Bubble size does not represent a metric
DD
R
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24. Integration Plan (High-Level)
Client X Confidential Page 66 WORKING DRAFT – For Integration Planning Purposes Only
• By process and geography, determine Company A internal corporate real estate staffing,
capabilities and talent and select members to join Client X operation
Determine Optimal Operating Model
• Review industry best practices for delivery model
• Assess Client X’s costs (internal and external) and delivery levels to provide corporate real estate
services
• Review arrangements and costs of Company A outsourced model and contracts
• Compare risks and complexity of both models to economic benefits
• Select and implement risk-adjusted optimal solution (organization, operations, services and
vendors). Assumption is Client X’s technology platform will be retained, though integration
(likely also commercially) with Company A technology platform will be conducted over time
• Strategically source services, as determined from the final model
Rationale
The approach will be largely driven by gaining cost synergies from facilities rationalization and
operations cost reduction. The approach will be initially impacted by data gathering restrictions imposed
by the nature and type of deal; however, these limitations should quickly be overcome after Day One.
The specific rationale includes the following assumptions:
• Predominant cost synergies will be from facilities rationalization
• Real estate service delivery will be integrated with the most cost-effective method of providing
corporate real estate services
Synergy
The primary synergies are:
• Reduced facilities-related overhead costs (65% to 70% of Company A present costs) associated
with Company A facilities and employees
• Reduced operating costs from an optimized operating model
Priorities for Day One
Following are the critical Real Estate-related activities in preparation for Day One:
• Obtain critical inputs from, plan and begin to address cross-functional interdependencies (HR, IT,
finance)
• Gather any critical data, not already obtained, to expedite facilities rationalization and service
delivery integration (substantial intelligence gathering can take place in advance of Day One)
• Understand the financial obligations and financial statement impact associated with Company A
vendor commitments and retain and dispose of space; determine triage
• Cover Company A signage
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25. Synergy Summary
Client X Confidential Page 69 WORKING DRAFT – For Integration Planning Purposes Only
9.0 Synergy Summary
Over the last 18 months, Client X developed and updated a preliminary, high-level estimate of revenue
and costs increases that may result from integrating Company A , primarily for determining the range of
offer prices that are financially reasonable. We have summarized that model, below.
Keep in mind, however, that these figures are rough and early estimates based on publicly-available data.
An important task of the integration planning teams will be to confirm, update – and ideally exceed –
these estimates.
Estimated Synergies
If the Company A acquisition closes in Client X’s third quarter, Client X estimates that the combined
annual operating costs (the annual run rate) can be reduced by $1.4 billion by May 31, Year 3. Client X
expects to achieve approximately 15% of that cost reduction in the current fiscal year, approximately 80%
of the target by the close of FYYear 2, and effectively the balance in FYYear 3.
Date
Estimated Annual Operating
Cost Reduction (Run Rate)
Portion
Achieved
May 31,Year 1 $210 M 15%
May 31, Year 2 $1,110 M 80%
May 31, Year 3 $1,380 M 97%
May 31, Year 3 $1,420 M 100%
However, Client X also estimates losses in legacy Company A revenue, primarily in the software
licensing and professional services segments. From a Company A trailing twelve-month revenue baseline
of $2.7 billion, Client X expects a loss in legacy Company A revenue of $620M, $1,230M, $1,340M, and
$1,330M in FY year 1, year 2, year 3, and year 4 respectively.
Taking into account these cost reductions and revenue losses, Client X anticipates that the net operating
cash flow impact to Client X of this acquisition to be ($330M), $320M, $270M, and $340M in FY year 1,
year 2, year 3, and year 4 respectively.
These cost reductions, revenue losses, and cash flows are summarized below:
Fiscal Year Cost Reductions ($M) Revenue Losses ($M) Net Cash Flow ($M)
Year 1 $210 $620 ($330)
Year 2 $1,110 $1,230 $320
Year 3 $1,380 $1,340 $270
Year 4 $1,420 $1,330 $340
Note 2: Figures in $ Millions
Because Client X does not yet have access to detailed Company A financial and operational data, these
estimates are based solely on publicly available information. Once the acquisition closes, Client X will
update its estimates.
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26. Success Metrics
Client X Confidential Page 72 WORKING DRAFT – For Integration Planning Purposes Only
10.0 Success Metrics
Integration Success
This integration is extremely high profile and all internal and external constituents will expect results.
Therefore, the success of this transaction will be tracked extensively. The program management office
will provide consistent updates to the executive management team to ensure integration is proceeding on
or above plan.
Integration functional teams and individuals will be held responsible for performing against these metrics.
In addition, Client X will appoint an overall champion to proactively drive performance against
expectations.
Success Metrics
Integration success is defined as achieving the following desired results:
• Realize synergy targets
• Retain key personnel
• Launch issue-free Day One, Two, Three
• Avoid invoking Company A Customer Assurance Program (CAP)
• Retain Company A revenue pipeline
• Retain target Company A customers
• Leverage cross-sell opportunities
• Increase Client X shareholder value
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27. Implementation Roadmap and Governance
Client X Confidential Page 75 WORKING DRAFT – For Integration Planning Purposes Only
o Executive and integration team status reporting
o Issue / risk management
o Synergy tracking
• Effective communications – The PMO, in conjunction with the Communications team, will report
key integration decisions early and often to ensure alignment with overall merger goals.
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