Mergers and acquisitions are great opportunities for growth, but they are among the most challenging activities companies can undertake. Failures are frequent and risks are high, and research over the years demonstrates that the majority of mergers do not create shareholder returns, and some do not work at all. In many cases the challenges faced by merged companies relate to difficulties in the merger-integration process, rather than to the underlying strategic rationale.
The PMI process is a complex one, and often a cause of frustration for management, shareholders, customers and employees. In addition, it often takes place under severe time pressure and in parallel to running the core business — making it one of the most challenging initiatives senior managers will ever undertake.
The vast number of issues which surface require strong priority setting, planning, implementation and follow-up. The key to success is to focus on the strategic objectives of the deal, accelerate synergies, and build a high-performance organisation.
Henderton’s post-merger integration (PMI) advisors provide strategic integration planning across whole merger process. We carefully map out requirements, including timing, risks, and deal objectives. We have detailed, proprietary methods and tools to help align people, organisational cultures, and processes to business and deal strategies.
Our advisors have experience developing and executing integration plans across the whole organisation. In addition, they can draw on deep functional expertise where needed, in areas such as Sales, Marketing, Operations, Finance and Accounting, and Information Technology.
The international component of a merger or an acquisition often proves to be one which can potentially pose a risk to a smooth transition. Differences in culture, employee compensation, and local regulations are just a few of the issues facing an integration. Henderton’s international network means we have resources in place and on the ground with local knowledge and experience in overcoming these potential issues.
Some of the common questions we hear from our clients are:
How should we go about developing an integration plan?
How do we prioritise, sequence and govern cross-functional activities?
How will our business run when merged with another company?
What is our target operating model which will guide integration planning?
How will we identify, assess and track critical Day One tasks early on to confirm a smooth transition?
Is a clean team needed to accelerate value capture?
How can we avoid a culture clash during a merger?
Which key executives and members of management must be retained?
How can we align leaders and employees to create a seamless on-boarding experience and impactful communications?
A clean team which is legally separate from the acquirer and target can provide benefits in terms of minimising the risks and ensuring that the deal creates value.
With experience and track record of supporting companies in mergers, acquisitions and alliances, we help our clients manage post-merger integration in line with specific industry and company requirements.
Henderton accompanies its clients across the post-merger acquisition process. This includes defining new corporate and business strategies, proposing new organisational structures, ensuring functional and applicative convergence and facilitating stable change management. We support our clients in the definition of value-creating action plans, from the design and definition of primary tasks to their execution at the operational level.
Any large transaction takes detailed planning to ensure it will be a success. It can take about 18 months or more to get a business ready for sale, and a 500-day exit plan offers a detailed road map which can ensure the divestiture goes smoothly. Planning early allows time to identify and correct any issues which might dissuade a potential buyer. There are, of course, many ways in which exits can go wrong, but most problems can be avoided by closely managing the exit process.
Strategic objectives and operating model: clear articulation of the deal rationale and objectives, including the definition of the future state business model at Day 1, during integration and after.
Integration management office (IMO): definition and set-up of the IMO, creating of the steering committee and project management office, and integration teams as required to support the clean team or different functional areas.
Clean team: establishment of a team which is legally separate from the acquirer and the target, with access to both parties’ data, before the deal is closed. The team can pinpoint, analyse, and quantify potential synergies to set provisional targets and to prepare a preliminary plan to realise those targets.
Identification of synergies: quantification of cost synergies in areas of highest priority, including manufacturing, sales, procurement, supply chain, and back-office processes, combined with revenue and growth strategies for the combined entity.
Financial benchmarks: comparison of the company’s performance against best practice metrics such as growth, margin, return on capital employed, and a plan to improve the business.
Strategic and risk review: potential issues for a buyer including competitive position versus industry trends, sources of competitive advantage, macroeconomic exposure, and other risks and contingency opportunities.
Prioritisation of initiatives: identification of improvement initiatives which affect financial metrics, bottom and top line, and prioritisation of these by impact and ease of implementation.
Implementation of initiatives: implementation of selected initiatives before the sale, while leaving some value potential for the prospective buyer.
Master planning: creation of a comprehensive plan to manage key risks and interdependencies, speed integration activities, and achieve the aspirations of the deal.
Organisational design: shaping the organisational structure and operating model to support their strategies and retain key talent during integration and after close.
Target operating model: to reflect the strategic objectives of the new company and the primary value drivers of the deal, and cascading of the new structure to all levels of the organisation.
Communication: change management for all parties involved to reassure stakeholders, and build optimism about the new company’s prospects.
Integration across functions: across all functional areas, including commercial (for example, sales, R&D, and product development), operations (such as manufacturing, supply chain, and procurement), and enabling functions (for instance, technology).
Technology: creation of a blueprint for the IT end state and design and build of digital solutions and capabilities which turn technology into a true source of value.
Value capture: definition of a comparable financial baseline, synergy targets, and value-capture initiatives.
The 100-day plan outlines the most urgent value-creation steps which companies can take as soon as the deal closes. The objective is to identify key value drivers and create a roadmap to make improvements in those areas.
Smooth Day 1 transition: planned, monitored, and managed process covering all planning and tracking activities to create a seamless Day 1 transition for all functions, business units, and regions.
Quick wins: identification of a series of initiatives for short-term cash generation to fund growth.
Implementation roadmap: creation of a detailed roadmap which clearly defines measures and targets so all stakeholders have something concrete to work towards. This covers:
Revenue growth: market and channel strategies, contract bidding and management, pricing and product, customer and channel profitability, sales force effectiveness.
Cash and working capital management: cash forecasting and liquidity management, working capital reduction, CAPEX effectiveness, business plan development, refinancing support and balance sheet restructuring.
Organisational effectiveness: leadership effectiveness and organisation design, talent strategy and evaluation, culture transformation assessment, risk and compliance management.
Profit optimisation: operational facility performance and network improvements, procurement optimisation, innovation and new product or process introduction, overhead and support functions.
Post-deal review: carried out after 6 to 12 months to assess whether objectives are being met and if not, how to get them back on track.
If you would like to learn more about our experience, please contact our Transaction Advisory practice team.
As part of our M&A experience, we have been involved a number of post-merger programmes internationally:
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