At a fundamental level, M&A integration involves simultaneous change in all business functions, with many cross-functional dependencies and an impact that cuts across what was previously two separate organisations.
There are also many different perspectives on functional impact and this can be simplified as follows:
Environment (geography, compliance, legal and statutory requirement);
Assets (IT systems, IPR, methods, KM, training materials);
Processes (aligning, adapting and transforming);
Structure (reorganisation, outsourcing, 3rd party vendors);
Functional Resource (culture, roles, responsibilities, competencies and skills);
Linkages (cross-functional and with 3rd parties);
In-order to identify functional synergy opportunities, the integration team should clearly understand the existing business environment of both the target and the acquirer and how best to 'maximise value contributions' from both organisations.
They also need to:
Define functional revenue enhancing and cost-saving target synergy opportunities. A "prioritisation exercise" should be performed with the initial focus not only on immediate tactical concerns, but also 'quick wins' and high value creating interventions;
Provide blueprints for the before and after functional integration;
Complete an assessment of the functional and cross-functional integration impact;
Translates the vision of the integrated function into actionable steps;
This all must be executed with a high degree of clarity and an understanding of the propagative effects ignited by each intervention. The objective of which is to 'resonate' functional change in a pragmatic manner, such that it maximises outcomes and minimises the applied effort.
The next stage is then to translate these changes into an integration roadmap and plan that will:
Minimise integration costs and timescales;
Efficiently engage the business;
Mitigates the risks of business disruption &;
Delivers on synergy targets;
Although there are many ways in which to approach an M&A integration initiative, the statistics show that few (6%), do it well enough to deliver on growth targets and yield true competitive edge.
M&A Integration PLANNING
The M&A integration plan itself must cover all the enterprise-wide integration activities for the combined company. It must accurately capture the full scope of cross-functional, integration partner(s) and third party dependencies, as well as satisfy, business, legal, statutory and compliance requirements. Integration risk mitigation activities should also be included in the plan, particularly those concerned with protecting the business operations and avoidance of dis-synergies.
Other key sections of the integration plan, include establishing and executing the integration governance, change management process, communications activities, synergy capture and stakeholder management.
The management activities associated with transitional service agreements should also be delineated and their cessation aligned with the activation of replacement services and prior to the agreed TSA longstop dates.
The integration plan will most likely involve leveraging a multitude of methods and frameworks that cut-across different internal functions, service providers, integration partners, system vendors and other third parties. This should include the time taken to establish commercial arrangements, mobilise resource and accommodate procurement timescales.
It’s also common for inexperienced integration team members and key business stakeholders to require significant mentoring in performing their integration responsibilities. However, for certain key integration roles, which mandate deep experience and the highest level of competencies and skills, this approach should be avoided.
It’s not hard to see that the more you drill into the integration plan, the more complex it becomes. Combined with the high level of schedule compression associated with the typical M&A integration and the high expectation on synergy value creation, there's simply no room for error.
Unfortunately, due to the scale and complexity of M&A integration and 'real world' integration team resourcing models, the integration plan contain serious structural issues, underestimates of functional integration complexity, missed cross-functional and external dependencies and critical gaps in delivery accountabilities. Other issues include misalignment with actual business capacity, key decision making delays and insufficient management of integration barriers.
This is all compounded by integration consulting partners who seek to minimise their commercial exposure, maximise profit and as a result don't provide the business with the support it really needs.
The near-term result is integration cost overruns, timescale slippage and lost synergy value realisation. The longer-term outcomes are no better, with an underwhelming impact on corporate portfolio performance and in turn shareholder value.