Any significant challenge requires the right preparation. Whether its the sport of performance yachting or a merger, acquisition or divestiture in the business world. The right preparation entails having real clarity and a deep understanding of the challenges that lie ahead. It also requires self-awareness and the experience and knowledge to know what works and what doesn't. Many acquirers are blind-sided by the influence of their own corporate culture and the effect this has on delivering complex change. What is a perfectly good approach for the running of the business, may not be suitable for delivering a complex acquisition or divestiture. The right preparation involves realistically sizing the challenge and adopting a suitable delivery approach. The wrong preparation will most certainly predicate the outcome.
UNDERESTIMATING THE COMPLEXITY
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"In the beginning it's too easy to over-simplify or over-complicate the integration. The real skill entails getting this right."
The complexity of an M&A integration is commonly underestimated in the beginning. There are a multitude of reasons why this is the case, however most important is the effect this has on the integration approach and resultant value creation. As more of the integration design work progresses, more of the underlying complexity is exposed. The tendency at this point is either to incur delays or vent the depth and breadth of integration. Quite often the later option is preferred and the efficacy of the integration is compromised and value creation opportunities rapidly decline.
DESTROYING VALUE
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"Value creation in a transaction, means doing many things very well. You can't afford to have a single weak link."
Any delivery approach can destroy value if applied in an inappropriate context. For example, many successful organisational cultures adopt a “just do it” or a very low disciplined approach inline with a fast paced, lean corporate environment. The natural tendency is therefore to adopt a similar approach to delivering complex M&A integrations or divestitures. This approach can be problematic and for the following reasons:
System change involving high levels of complex and tightly coupled dependencies that are not well suited to very low formality, iterative approaches;
Agile delivery practices require a high degree of collaboration across all impacted functions and organisations;
Less prescriptive approaches require a highly experienced integration team and a mature integration model;
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Co-location of integration team members is required to help mitigate the reduction in solution design formality and foster communication and collaboration;
Changing complex functionality and business rules requires great attention to detail and formal design.
Adopting an inappropriate integration approach is a key contributor to integration failure. It is typically mandated by the pervasive force of corporate culture and often results in a greatly underestimated and oversimplified view of the integration or separation challenges. To complicate and compound matters further, many acquirers insufficiently detail synergy targets and tracking measures are inadequate. The success of the integration then becomes open to intuitive argument and potential learning opportunities are lost. None the wiser, this integration approach is deployed again and again.
CREATING VALUE
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"No two deals are the same and each will have a distinct risk profile. Knowing where to focus is pivotal."
Creating M&A value is highly correlated with adopting a suitable approach to integration and possessing the right capabilities. Getting this preparation right is fundamental to achieving the right outcome. So what does getting it right look like? In our experience, this includes:
Embedding a holistic delivery approach that considers all the challenges. One which is proven and can be adapted to specific needs;
Dynamically aligning rigour with complexity. This will vary with the impact of integration on business functions, the level of cross-functional dependencies and the stage of execution;
Balancing business learning needs and capacity, with delivery acceleration and overall speed. The pace of an integration of separation will always be intense. However, too slow or too fast and you can easily destroy value and create dis-synergies;
Encapsulating the “nuts and bolts” integration complexity from the business. This involves only exposing those parts of the integration delivery that the leadership and key business stakeholders need to see. It doesn't mean over- simplifying the delivery approach, it means recognising perspectives and accountabilities.
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Enabling functional leadership to focus on the vision for value creation and its translation into action. This is critical to achieving the right outcome and can be best achieved my encapsulating the intricacies of the delivery mechanics and governance from the business. Its easy to see why, they will all have day jobs and will also be required to understand the acquired business, make tactical and strategic decisions, protect the business from adverse impacts and drive major change across the combined organisation.
When embarking on an M&A integration or separation, there are a number of options to resource the execution. These include using only existing in-house capabilities, outsourcing part of the delivery to a partner, augmenting in-house capabilities with independent contractors or securing support from specialists. Whichever route is adopted, the key is to deploy a small, highly capable integration team that has the experience, drive and energy to deliver high quality work under pressure and both manage and encapsulate the complexity.
With decades of consulting experience shaping, planning and executing high performance and complex initiatives, we can expertly support you in securing the right start.
