What challenge(s) do our clients face?
The Post-Merger integration period is characterized by a high number of strategic decisions with a low level of information, that must consider many technical and human impacts, in a context of little information and a pressurized timeline
M&A is a common growth strategy across sectors and organization sizes – from startups to major multinational corporations. From our experience we have seen that there are many different drivers for pursuing inorganic growth:
- To acquire specific knowledge or technology
- To grow market share on an specific market or region
- To increase, complement or revolutionize the value proposition to the customer
- To launch a new product or service
- To gain scale
- To expand into new countries or regions
- To refresh cultural characteristics
- To test a strategic thesis on a limited and controlled scale
- To mitigate risk through differentiation of revenue streams
Whatever the reason – M&A is always a high-stakes strategy, with high impact challenges throughout the process from target identification to closing. Even after the right target has been identified, there are often challenges in accurately assessing financial health and operations, reaching a fair valuation, negotiating between stakeholders and defining the strategic drivers, within a complex legal environment.
Following closing, the challenge of Post-Merger Integration begins. This is a very complex environment – and commonly underestimated – where the success relies on guaranteeing strong foundations for execution:
- Defining the most suitable integration strategy, respecting key milestones: Coordinating multiple workfronts across both organizations, to agree activities, timelines, roles and responsibilities, and risks, to generate the critical path
- Monitoring execution: Designing and implementing an appropriate governance structure to monitor execution, enable flexibility to change and bring speed to decision making, in accordance with legal guidelines (e.g. restrictions around TSA, TLA, license transfer)
- Communicating effectively: Guaranteeing a clear strategy, actions and materials to drive aligned communications to the wider team from Day One
- Capturing financial synergies: Updating the business case and analysis based on real information, and building the plan with roles, timelines, and investments needed to capture synergies, connected to the integration plan
- Addressing human impacts and change management: Understanding cultural differences between organizations and defining the new culture, retaining key employees and ensuring the necessary trainings are in place for teams to begin operating from Day One
- Redesigning the organizational structure: Defining an Organizational structure which maximizes talent from both organizations, while capturing overhead synergies
- Integrating strategies, models and internal processes: Agreeing the extent to which strategies should be integrated, and as a result, defining the changes that need to take place to enable the transition (system integrations, processes, governance) with minimal customer disruption
Looking at these challenges across the Post-Merger Integration journey, it is not hard to understand why so many deals fail to deliver against the investment thesis or business case.
How do we help?
Integration has supported many companies through the Post-Merger Integration process, in different geographies, industries, contexts, and varying complexity – across Mergers, Acquisitions and Carve-Outs.
We work with our clients to tackle challenges in each of the three major milestones: initial integration planning, integration execution and business optimization.
At all stages, we guarantee the main pillars for a successful PMI:
- Preparation and Execution
- Culture and Leadership; and
- Business Strategy
What are the benefits?
Investing in a robust Post-Merger Implementation approach brings tangible benefits:
- Connect strategy, planning and execution: ensuring coherence and preventing deviations from business case/investment thesis
- On-time delivery: on-time execution of activities, respecting key deadlines while adjusting to uncertainties
- Full team engagement: promotion of a collaborative environment throughout the integration process
- Protect base business: optimize resource time to maintain base business in parallel to the integration, while closely tracking interdependencies
- Increase diligence & unbiased challenge: use of a clean team, unbiased and compliant with regulatory guidelines, to bring relevant challenges and simplify access to confidential information
- Capture synergies: robust synergy capture plan with close monitoring against deal goals
- Aligned communication: manage communication actions across the business in line with strategy
- Decrease resistance: full impact analysis of human impacts and cultural transition plan
How does it work?
Integration’s way of working through a PMI addresses the challenges common to this environment, through a collaborative and tailor-made approach, considering both the needs of the business, and of the wider team. We follow 4 essential steps:
- Understand the business context: Interview the C-level of the involved organizations to understand the rationale and objectives of the deal, the context of the two entities and the market, and to analyze the defined goals.
- Define the integration strategy & roadmap: With a clear vision of the business goals, we define the integration strategy, identify the main milestones of the roadmap and organize the work fronts needed during the PMI together with the Leadership. We translate this strategy to the reality by facilitating the key decisions to enable the team to deliver (e.g. changes in organizational structure, brand definition).
- Plan the takeover, initial integration & communication: We prepare and connect the plans for synergy capture, integration execution and communication (Day One and first phase) based on inputs from workfront Leaders and diagnosis of team needs and concerns.
- Manage the takeover, initial integration & communication: Guarantee timely execution of all activities, ensure visibility of project progress to Leadership and teams of both organizations through a robust governance, and facilitate decision making to mitigate risks and adjust to changes as needed, documenting and communicating to ensure alignment.
A top player in the Brazilian Health Sector (open capital, with more than 4m members and+20 hospitals), with strong background in M&A, acquired one of their main competitors – increasing members by 25%, and the network by one large hospital and ~20 medical centers. Although the client was experienced in acquisitions, the integration was complex – incorporating a family-owned company, with a different integration strategy, and different business model, from which synergies and best practices needed to be identified. The target of the integration was to increase revenue by ~$250m/year and capture ~$56m in synergies in a 2-year horizon.
We supported the integration of the two organizations by coordinating specialist teams to identify business models’ differentials and best practices, managing internal expectations to speed-up results without putting the main strategy at risk, implementing a clear decision making governance, and mapping talents from the acquired company to ensure retention. After the take over and initial integration, our client’s decision was to accelerate the full integration by 2 years, to be completed by the end of year 1. We worked with the client’s team from the takeover preparation and execution of the first 100 days’ integration, to supporting targeted, strategic projects which enabled synergy capture.
Full Integration achieved in year 1 – with first year results in Revenue and EBITDA achieved – retention of key employees, successful management of the network optimization (consolidation of 3 key hospitals across networks, becoming one of the top 5 hospitals in Brazil following process and infrastructure improvements), merge of call centre operations into a third party, and merge of clients and members.
A global food organization acquired a family-owned Brazilian business as part of its expansion into emerging markets. The strength of the acquired business portfolio, including sales and distribution, combined with the know-how and capabilities of the global organization, created an opportunity for business expansion in Brazil.
The focus of the PMI was on the human aspects of the integration: the strategy was to integrate the companies, taking advantage of best practices and synergies, while preserving the strengths and culture of the family-owned business.
Integration’s approach was based on defining a clear end-state vision from which the longer-term roadmap was built, designing the new organizational structure, understanding cultural differences and incorporating them in communication, creating a customized talent and retention package and implementing an effective stakeholder-management process throughout the integration.
Successful communication to more than 3,500 employees, zero negative impacts to clients or the market, new organizational governance and structure launched on Day One and structured integration roadmap with a clear path to combining the strengths of both business units.
An organization specializing in prepaid corporate services, and operating across 42 countries, made a strategic alliance with one of the largest players in Brazil to become the market leader in fleet management of light trucks and cars. This joint venture represented the largest investment in the history of the organization, turning Brazil into a hugely important operation for the group.
The project challenge was to make the JV operational from Day One, considering two simultaneous spin offs and mergers.
Integration worked as a Clean Team to design the operational model, commercial strategies, remuneration equalization drivers, synergies identification, internal and external communication management and organized the closing preparation.
Given the confidentiality, size of the deal, legal criticality (evaluated by the Competitions Agency), and the cultural differences between the two organizations, we created a unique project governance and workfront arrangement that involved more than 30 consultants and 50 top executives across the two clients. Due to the importance of systems integration (not under Integration responsibility) we ensured as a PMO that all work fronts were closely aligned with the system needs/architecture to protect full service continuity.
As result the organization was able to operate JV from Day One, without sales disruption, with a minimum approval period process from the antitrust regulators and with no restrictions – credited by legal advisors as the result of an efficient Clean Team with knowledge and respect of legal regulations during the process.
We achieved an operational integration in record time – two months for core finance processes, accounting and systems interfaces, and synergies which would increment % profitability by more than 5p.p were confirmed, with clear implementation leaders.
As a result of well-planned external communications, client attrition was reduced to lower than expected levels and brand image recognition improved.
Our client, a multinational toy retailer, had been focused on sustaining growth in home markets (UKI) when an opportunity arose to acquire the Central European divisions of a key competitor. This was the first acquisition the client had made, and roughly doubled their revenue and number of stores.
Integration was asked to support several challenges the client was facing after execution had already begun – uncertainty among leadership on the progress towards key milestones, a 4 month delay in a major IT go-live, a lack of project plan and structure, misalignment between teams, a clash in organizational cultures and a tight timeline for go-lives and TSA exit.
Integration worked closely with key employees from both sides of the business to understand the most critical issues and needs, providing Program Management support to the execution, to accelerate progress towards key milestones and drive complex changes to deliver exit-TSA commitments under an extremely tight timeline.
In parallel, we brought change management support to help in the initial period of the integration between both businesses, running a program focused on codifying and embedding a new corporate culture.
Our support enabled a smooth and swift transition which delivered:
- Successful on-time critical go-lives e.g. SAP, WMS, new e-commerce;
- full store rebranding;
- store hardware change;
- back-end system autonomy prior to TSA exit deadline;
- significant progress in deployment of business model (changes in stores and multiple core functions);
- new organizational structure to reflect new culture and ways of working; and
- effective communication leading to much greater collaboration across teams.