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Post Acquisition
Integration Framework
  Approach and Implementation

     Tejas Oza
                            April 2012
“There will be hunters and hunted, winners and
losers. What counts in global competition is the
          right strategy and success!”

              …….. Heinrich von Pierer
Post Acquisition
Integration – the what
• the phase, where the operations of the acquired entity are
  merged with the Buyer’s existing operations.

• the phase where the results of the Buyer's M&A strategy, and
  expectations for the closed deal, materialize.
Guiding principles for
acquisition integration
“Quick Win Synergies NOT captured in the first 12 months,
usually evaporate and are overshadowed by day-today
business”
Key Guiding principles for successful
post acquisition integration

     Strategy      • Get the Integration Strategy Right



                   • Design the integration program around
  Program Design     the benefit realisation


    Program        • Provide focus via outstanding program
   Management        management


                   • Manage the Risk to the business as
 Risk Management     well as the program


    People &       • Rapidly engage the people in both
  Communication      organisations
The Integration
Framework
“Companies spend their time pulling the deal off. They
often don’t put enough focus on the most important part,
the integration. The integration is the key to value. If you
don’t get the companies integrated, you will have paid too
much!”
Helicopter View – Integration Framework



             Structure, Resources, Process & Tools


                Integration of Corporate Functions


                Transition to Line Responsibility


             Review and Learning
Integration Implementation Structure
                                                                     3 years
                                                                     • cultural change,
                                                                     • Optimum Benefit
                                                  12 to 18 months      Realisation
                                                  • changes are
                                                    implemented
                           First 100 days         • Quick wins are
                                                    realised
                           • “Takeover Period”
                           • decisions are made
Day 1                        and priorities set
• first day after Change   • organizational
  of Ownership               structure to be
                             finalized
Day 1 The First Day after Change of Ownership

 Communication                           Operating Management              Systems & Controls



                                                                             Continuation of Financial & Revenue
   Welcome letter of individual emails     What continues a before
                                                                             Reporting

   New Managers                            What changes immediately          Clear instructions, ready forms and
                                                                             templates and time-table
                                           What near-term changes are
   How to contact and FAQs                                                   Temporary Management Systems &
                                           expected and when
                                                                             Controls IF Operational Structures
                                           Where more information can be     are not finalised
                                           found
Day 1 - Operating Structures, Systems & Controls
 • Early, should be part of the       • Key Managers should not be      • Top Level Structure is decided
   Acquisition Process or Day 1         lost before or after the          by Acquirers Leadership
                                        Integration
 • If MD is from acquired entity,                                       • Operating - Many times
   buyer should nominate their        • If not met with all the key       Operating Structure is Project
   own CFO/Controller for               managers prior to Day 1, use      Owner/Steering Group
   smooth Financial integration         100 days to decide              • Statutory – if acquirer has an
                                                                          entity in the same country,
                                                                          legal merger to be considered

                                                                        Agree on
 Appointment of
                                      Decision on Key                   Operating &
 Managing
                                      Managers                          Statutory
 Director
                                                                        Structures



 • Similar type of Governance to      • Who can approve documents       • Consider possibility to
   the Acquirer‟s entity                – (sales orders, purchase         physically consolidate
                                        orders, employment contracts,     locations
 • Do‟s and Don‟ts                      etc.)
   • New Hiring & Redundancies,                                         • Estimate any renovations,
     Salaries & Benefits              • Delegations and approval          moving, selling, buying of old
   • Approval of Costs                  limits                            premises as part of the study
                                                                          and agree upon
   • Reports (Travels, Visits etc.)
   • Investments & Funding

                                      Agree on
 Governance &                                                           Agree on Office
                                      Authorising
 Guidelines                                                             and Locations
                                      Officers
First 100 Days - Integration Period Approach

       Typical Target Benefit Realisation - 20%-30% of Total
       Benefits. Realise Quick Wins

      Verify Due Diligence Data, Gather Additional
      Information, Prioritise, Change/create Plan, Implement

      Setup Integration Team/s to Target all Key Corporate
      Functions & Business Areas Integration

      “Invest in Integration” Having or not having key full time
      Integration Resources within Teams would mean
      success or failure of an Integration Project. It should not
      be „Business As Usual‟
Top Management Alignment – Joint Meeting/s
   Everyone in management of the acquirer and acquired entities is to be
   committed to the same goals and communicates the same message.
   Discuss and agree on issues in series of meetings
   including:

   •   History
   •   The Separate Companies‟ Pre-deal Strategies
   •   Choices to be made
   •   Markets
   •   Technology Trends
   •   Competition
   •   Future Strategy
   •   Company Values
   •   Value Creation Potentials
   •   Costs And Risks
   •   Company Goals
   •   Competences
   •   Size And Structure Of Entity To Fulfil The Strategy
   •   Integration Goals
   •   Process and Resources
Integration Budget

  First estimates of integration costs should have been identified during the
  transaction / purchase phase.

  Integration Manager / team needs to review and refine these estimates

 Cover at least the following…

 1. Basic ICT infrastructure changes
 2. Changes in company identity / branding
 3. Legal and other costs to ensure compliance with local laws and the
    buyer‟s standards
 4. Costs to introduce buyer‟s risk management / insurance policies
 5. Costs related to management changes (search fees, redundancy costs)
 6. Integration Consultants/Advisor Costs (if applicable)
 7. Travel/Accommodation for the Team during the integration period
 8. Any other significant project-specific items need to be budgeted for.
Resources & Responsibilities



 Integration owner / Manager
 As in the transaction/purchase phase, the owner/sponsor is normally a
 member of the Buyer's Management team.

 The owner of the integration phase can be the same individual as in the
 transaction/purchase phase.
Resources & Responsibilities

     Integration Manager
 Is the project manager. Should be appointed already during transaction /purchase phase.

 As the reality on the ground, at the local market level, may well differ from the global view, it should
 be decided whether a local Integration Manager (reporting to the global Integration Manager) needs
 to be appointed to work more closely with a particular market or country operation.

 Role

 •   Main responsibility for day-to-day management of the integration effort
 •   Integration management work is hard to perform as a part-time activity, so the Buyer's
     management needs to carefully consider the importance of the task and allocate the time
     necessary
 •   Always made a “project assignment” with limited duration (typically from 3 months up to 18
     months)
Resources & Responsibilities
  Integration Manager
   Responsibilities

   •   During Due Diligence, to become acquainted with the Target‟s business
   •   Preparation and modification of the integration plan
   •   Work with team, HR and communications in order to get a positive start of integration
   •   Defining goals, resources and timetables for the integration project
   •   Bringing integration teams together
   •   Planning and running the kick-off meeting & follow-up meetings
   •   Guide and support the integration teams
   •   Coach and assist in problem solving
   •   Reporting and defining instructions and goals to/from the Integration Steering Group
   •   Monitor that the teams meet expectations in the given allotted (SPEED!)
   •   Make sure non-negotiable issues are understood and implemented
   •   Help personnel adjust to change
   •   Assist in identifying and reducing cultural barriers
   •   Ensure the tools and information sharing between the teams
   •   Develop learning methods
   •   Prepare reporting and reviews
   •   Hold summary discussions
Resources & Responsibilities

  Integration Steering Group
  The Integration Steering Group is the governing board of the integration phase.

  Role / Members

  •   Supervises the Integration Project Manager‟s and the integration team‟s work
  •   Should meet at least monthly
  •   Representatives from both Buyer‟s and the acquired entity
  •   May include individuals with specific expertise relevant to the project
  •   Normally 3-7 individuals to maximize the effectiveness of team work
  Responsibilities

  •   Selects the members of the Integration team (based on Integration Project Manager‟s
      proposal)
  •   Specifies the measures, goals/targets and reporting instructions for the Integration team
  •   Supervises and supports the Integration team‟s work
  •   Makes decisions on the more significant issues
  •   Monitors the project costs vs. budget and approves the expenses incurred by the integration
      teams
Resources & Responsibilities

    Integration Stream Team Manager
The members of the core team, often the same as the team / stream managers, are responsible
for identifying the issues to be addressed and developing the integration plan.

Best results can be achieved when team members are experienced individuals from the Buyer
and the acquired entity. In the case of integrating support functions (HR, ICT, finance and legal),
it is recommended to recruit members who have previous experience of integration projects.

   The key Integration team manager tasks :

   •   Being the team builder
   •   Introducing the team members to one another
   •   Seeing that the team members have all information/tools needed for the task
   •   Clarifying the goals/targets/times tables/reporting etc.
   •   Ensuring everyone in the team understands the goals the same way and is committed
   •   Manage and encourage team to progress
   •   Sees that the team keeps the schedules and prepares reports
   •   Being the source of assistance and guidance, when needed
Resources & Responsibilities
 Market / country integration
 Operative :When integration covers multiple countries, it is important to clarify which global
 guidelines, rules and tasks can be applied at the local level, and where country-specific exceptions
 need to be made.

 Statutory:
 • Level of integration – retain separate legal entities or merge
 • Ordering, invoicing etc., to be made under which company name.



 Coach / facilitator
 If the Buyer has limited integration experience or none, an integration coach can be appointed to
 assist the Integration Steering Group and/or Integration Manager. The coach or a meeting facilitator
 can also be useful in the kick-off meeting and when considering specific team issues, like HR
Integration Team – Single Acquisition




                                        Adopted from „M&A Integration‟ (David M. Schweiger)
Integration Team – Multiple Acquisitions




                                    Adopted from „M&A Integration‟ (David M. Schweiger)
Integration of Corporate Functions
                           Cultural Integration

                                        Systems &
   Finance &
                      HR               Information         Legal
    Control
                                       Technology



                   Sales &             After Sales /    Supply Chain
 Communications
                  Marketing           Client Services   Management




                  Production/
                                           R&D
                  Operations


                      Synergies & Value Creation
Integration – Finance & Control

       Finance           Statutory         Management
       Organisation      Reporting         Reporting
       Integration       Integration       Integration



       Accounting        Performance       Treasury Policy
       Policies          Measurement &
       Standardisation   Controls



                Consumer          Tax Integration
                Financing
Integration – Human Resources

      Org. Structure &   HR Practices        Compensation &
      Top Management,    Alignment           Benefits
      Key Managers
      Evaluation


      Payroll            Pension &           HR Information
                         Superannuation,     Systems
                         Insurances          Compatibility



                HR Organisation   Plan for
                & Competence      Relocation of
                                  Personnel
                                  (if need be)
Integration – Systems & Information Technology



    Standard             Central Services &   Application/Business
    Infrastructure       Team                 Systems Integration




    IT Security Policy   IT Standards         Local IT/Systems
                                              Teams Competency
Integration – Legal


   Follow-up Memo –   Follow-up Due        Employee
   SPA or APA         Diligence Findings   Participation/Unio
                                           n Agreements




   Risk Management    Intellectual         Legal Personnel
   & Assurance        Property Rights      Training
Integration – Communications

        Integration       Review of        Review/Alignm
        Communication     Internal         ent of External
        , Process &       Communication    Communication
        Tools

        Corporate         Corporate        Web & Social
        Identity &        Culture          Media
        Branding                           Presence
        Alignment                          Integration

                 Intranet         Printed
                 Integration      Materials in
                                  Sales &
                                  Services
Integration – Sales & Marketing

      Integration &    Customers/         Revenue
      Process Review   Stakeholder        Protection Plan
                       communication



      Med to Long      Commercial         Sales &
      Term Revenue     Contracts Review   Marketing
      Strategy                            Support Material



                       Brand
                       Alignment/Strate
                       gy/ Awareness
Integration – Supply Chain & Sourcing


   Review of Due        Plan to Leverage     Critical Supplies
   Diligence Findings   the Joint            Risk Management
                        Purchasing Power




              Key Supplier        Supplier Contracts
              Relationship        Review
              Management
Integration – Production & Operations


    Review of Due          Plan to Leverage the    Critical Supplies Risk
    Diligence Findings     Joint/ Centralised      Management
                           Production Capacity




                Key Supplier           Supplier Contracts
                Relationship           Review
                Management
Integration – Research & Development



   Review of Due     Research          R&D Resource    Testing and
   Diligence         Portfolio         Profile         Development
   Findings                                            facilities



   Design/Develop    Sub-contractors   Documentation
                                                       Leveraging Joint
   ment              and Other Key     Practice
                                                        R&D Scale and
   Applications in   Partners
                                                         Capabilities
   use
There are few certainties in life or mergers.
But with clarity around which factors
matter, we can make better informed
decisions and stack the odds in our favour.

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Post Acquisiton Integration Framework

  • 1. Post Acquisition Integration Framework Approach and Implementation Tejas Oza April 2012
  • 2. “There will be hunters and hunted, winners and losers. What counts in global competition is the right strategy and success!” …….. Heinrich von Pierer
  • 3. Post Acquisition Integration – the what • the phase, where the operations of the acquired entity are merged with the Buyer’s existing operations. • the phase where the results of the Buyer's M&A strategy, and expectations for the closed deal, materialize.
  • 4. Guiding principles for acquisition integration “Quick Win Synergies NOT captured in the first 12 months, usually evaporate and are overshadowed by day-today business”
  • 5. Key Guiding principles for successful post acquisition integration Strategy • Get the Integration Strategy Right • Design the integration program around Program Design the benefit realisation Program • Provide focus via outstanding program Management management • Manage the Risk to the business as Risk Management well as the program People & • Rapidly engage the people in both Communication organisations
  • 6. The Integration Framework “Companies spend their time pulling the deal off. They often don’t put enough focus on the most important part, the integration. The integration is the key to value. If you don’t get the companies integrated, you will have paid too much!”
  • 7. Helicopter View – Integration Framework Structure, Resources, Process & Tools Integration of Corporate Functions Transition to Line Responsibility Review and Learning
  • 8. Integration Implementation Structure 3 years • cultural change, • Optimum Benefit 12 to 18 months Realisation • changes are implemented First 100 days • Quick wins are realised • “Takeover Period” • decisions are made Day 1 and priorities set • first day after Change • organizational of Ownership structure to be finalized
  • 9. Day 1 The First Day after Change of Ownership Communication Operating Management Systems & Controls Continuation of Financial & Revenue Welcome letter of individual emails What continues a before Reporting New Managers What changes immediately Clear instructions, ready forms and templates and time-table What near-term changes are How to contact and FAQs Temporary Management Systems & expected and when Controls IF Operational Structures Where more information can be are not finalised found
  • 10. Day 1 - Operating Structures, Systems & Controls • Early, should be part of the • Key Managers should not be • Top Level Structure is decided Acquisition Process or Day 1 lost before or after the by Acquirers Leadership Integration • If MD is from acquired entity, • Operating - Many times buyer should nominate their • If not met with all the key Operating Structure is Project own CFO/Controller for managers prior to Day 1, use Owner/Steering Group smooth Financial integration 100 days to decide • Statutory – if acquirer has an entity in the same country, legal merger to be considered Agree on Appointment of Decision on Key Operating & Managing Managers Statutory Director Structures • Similar type of Governance to • Who can approve documents • Consider possibility to the Acquirer‟s entity – (sales orders, purchase physically consolidate orders, employment contracts, locations • Do‟s and Don‟ts etc.) • New Hiring & Redundancies, • Estimate any renovations, Salaries & Benefits • Delegations and approval moving, selling, buying of old • Approval of Costs limits premises as part of the study and agree upon • Reports (Travels, Visits etc.) • Investments & Funding Agree on Governance & Agree on Office Authorising Guidelines and Locations Officers
  • 11. First 100 Days - Integration Period Approach Typical Target Benefit Realisation - 20%-30% of Total Benefits. Realise Quick Wins Verify Due Diligence Data, Gather Additional Information, Prioritise, Change/create Plan, Implement Setup Integration Team/s to Target all Key Corporate Functions & Business Areas Integration “Invest in Integration” Having or not having key full time Integration Resources within Teams would mean success or failure of an Integration Project. It should not be „Business As Usual‟
  • 12. Top Management Alignment – Joint Meeting/s Everyone in management of the acquirer and acquired entities is to be committed to the same goals and communicates the same message. Discuss and agree on issues in series of meetings including: • History • The Separate Companies‟ Pre-deal Strategies • Choices to be made • Markets • Technology Trends • Competition • Future Strategy • Company Values • Value Creation Potentials • Costs And Risks • Company Goals • Competences • Size And Structure Of Entity To Fulfil The Strategy • Integration Goals • Process and Resources
  • 13. Integration Budget First estimates of integration costs should have been identified during the transaction / purchase phase. Integration Manager / team needs to review and refine these estimates Cover at least the following… 1. Basic ICT infrastructure changes 2. Changes in company identity / branding 3. Legal and other costs to ensure compliance with local laws and the buyer‟s standards 4. Costs to introduce buyer‟s risk management / insurance policies 5. Costs related to management changes (search fees, redundancy costs) 6. Integration Consultants/Advisor Costs (if applicable) 7. Travel/Accommodation for the Team during the integration period 8. Any other significant project-specific items need to be budgeted for.
  • 14. Resources & Responsibilities Integration owner / Manager As in the transaction/purchase phase, the owner/sponsor is normally a member of the Buyer's Management team. The owner of the integration phase can be the same individual as in the transaction/purchase phase.
  • 15. Resources & Responsibilities Integration Manager Is the project manager. Should be appointed already during transaction /purchase phase. As the reality on the ground, at the local market level, may well differ from the global view, it should be decided whether a local Integration Manager (reporting to the global Integration Manager) needs to be appointed to work more closely with a particular market or country operation. Role • Main responsibility for day-to-day management of the integration effort • Integration management work is hard to perform as a part-time activity, so the Buyer's management needs to carefully consider the importance of the task and allocate the time necessary • Always made a “project assignment” with limited duration (typically from 3 months up to 18 months)
  • 16. Resources & Responsibilities Integration Manager Responsibilities • During Due Diligence, to become acquainted with the Target‟s business • Preparation and modification of the integration plan • Work with team, HR and communications in order to get a positive start of integration • Defining goals, resources and timetables for the integration project • Bringing integration teams together • Planning and running the kick-off meeting & follow-up meetings • Guide and support the integration teams • Coach and assist in problem solving • Reporting and defining instructions and goals to/from the Integration Steering Group • Monitor that the teams meet expectations in the given allotted (SPEED!) • Make sure non-negotiable issues are understood and implemented • Help personnel adjust to change • Assist in identifying and reducing cultural barriers • Ensure the tools and information sharing between the teams • Develop learning methods • Prepare reporting and reviews • Hold summary discussions
  • 17. Resources & Responsibilities Integration Steering Group The Integration Steering Group is the governing board of the integration phase. Role / Members • Supervises the Integration Project Manager‟s and the integration team‟s work • Should meet at least monthly • Representatives from both Buyer‟s and the acquired entity • May include individuals with specific expertise relevant to the project • Normally 3-7 individuals to maximize the effectiveness of team work Responsibilities • Selects the members of the Integration team (based on Integration Project Manager‟s proposal) • Specifies the measures, goals/targets and reporting instructions for the Integration team • Supervises and supports the Integration team‟s work • Makes decisions on the more significant issues • Monitors the project costs vs. budget and approves the expenses incurred by the integration teams
  • 18. Resources & Responsibilities Integration Stream Team Manager The members of the core team, often the same as the team / stream managers, are responsible for identifying the issues to be addressed and developing the integration plan. Best results can be achieved when team members are experienced individuals from the Buyer and the acquired entity. In the case of integrating support functions (HR, ICT, finance and legal), it is recommended to recruit members who have previous experience of integration projects. The key Integration team manager tasks : • Being the team builder • Introducing the team members to one another • Seeing that the team members have all information/tools needed for the task • Clarifying the goals/targets/times tables/reporting etc. • Ensuring everyone in the team understands the goals the same way and is committed • Manage and encourage team to progress • Sees that the team keeps the schedules and prepares reports • Being the source of assistance and guidance, when needed
  • 19. Resources & Responsibilities Market / country integration Operative :When integration covers multiple countries, it is important to clarify which global guidelines, rules and tasks can be applied at the local level, and where country-specific exceptions need to be made. Statutory: • Level of integration – retain separate legal entities or merge • Ordering, invoicing etc., to be made under which company name. Coach / facilitator If the Buyer has limited integration experience or none, an integration coach can be appointed to assist the Integration Steering Group and/or Integration Manager. The coach or a meeting facilitator can also be useful in the kick-off meeting and when considering specific team issues, like HR
  • 20. Integration Team – Single Acquisition Adopted from „M&A Integration‟ (David M. Schweiger)
  • 21. Integration Team – Multiple Acquisitions Adopted from „M&A Integration‟ (David M. Schweiger)
  • 22. Integration of Corporate Functions Cultural Integration Systems & Finance & HR Information Legal Control Technology Sales & After Sales / Supply Chain Communications Marketing Client Services Management Production/ R&D Operations Synergies & Value Creation
  • 23. Integration – Finance & Control Finance Statutory Management Organisation Reporting Reporting Integration Integration Integration Accounting Performance Treasury Policy Policies Measurement & Standardisation Controls Consumer Tax Integration Financing
  • 24. Integration – Human Resources Org. Structure & HR Practices Compensation & Top Management, Alignment Benefits Key Managers Evaluation Payroll Pension & HR Information Superannuation, Systems Insurances Compatibility HR Organisation Plan for & Competence Relocation of Personnel (if need be)
  • 25. Integration – Systems & Information Technology Standard Central Services & Application/Business Infrastructure Team Systems Integration IT Security Policy IT Standards Local IT/Systems Teams Competency
  • 26. Integration – Legal Follow-up Memo – Follow-up Due Employee SPA or APA Diligence Findings Participation/Unio n Agreements Risk Management Intellectual Legal Personnel & Assurance Property Rights Training
  • 27. Integration – Communications Integration Review of Review/Alignm Communication Internal ent of External , Process & Communication Communication Tools Corporate Corporate Web & Social Identity & Culture Media Branding Presence Alignment Integration Intranet Printed Integration Materials in Sales & Services
  • 28. Integration – Sales & Marketing Integration & Customers/ Revenue Process Review Stakeholder Protection Plan communication Med to Long Commercial Sales & Term Revenue Contracts Review Marketing Strategy Support Material Brand Alignment/Strate gy/ Awareness
  • 29. Integration – Supply Chain & Sourcing Review of Due Plan to Leverage Critical Supplies Diligence Findings the Joint Risk Management Purchasing Power Key Supplier Supplier Contracts Relationship Review Management
  • 30. Integration – Production & Operations Review of Due Plan to Leverage the Critical Supplies Risk Diligence Findings Joint/ Centralised Management Production Capacity Key Supplier Supplier Contracts Relationship Review Management
  • 31. Integration – Research & Development Review of Due Research R&D Resource Testing and Diligence Portfolio Profile Development Findings facilities Design/Develop Sub-contractors Documentation Leveraging Joint ment and Other Key Practice R&D Scale and Applications in Partners Capabilities use
  • 32. There are few certainties in life or mergers. But with clarity around which factors matter, we can make better informed decisions and stack the odds in our favour.