Jumpstarting the M&A Integration Process
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The document outlines essential strategies for successful mergers and acquisitions (M&A) integration, emphasizing early planning to streamline processes and mitigate challenges. It presents an integration framework that addresses common obstacles and details the critical success factors necessary for achieving M&A goals. Additionally, ScottMadden offers a comprehensive suite of services to support organizations throughout the M&A journey, from deal development to post-transaction integration.
Jumpstarting the M&A Integration Process
- 1. Copyright © 2015 ScottMadden, Inc. All rights reserved. Report _2015 Jumpstarting the M&A Integration Process Overcoming M&A Integration Challenges August 2015
- 2. Copyright © 2015 by ScottMadden, Inc. All rights reserved. Planning the Integration for Your M&A Transaction Early integration planning is critical for successfully implementing your M&A transaction ￭ Mergers and acquisitions can create immediate value opportunities and provide a solid foundation for growth ￭ Typical value opportunities include, but are not limited to, the following: • Combined, streamlined corporate and operations functions can improve service delivery, reduce costs, and save customers money • Access to new markets can create market-share growth opportunities and increase earnings • Increased earnings, in turn, can provide growth capital for new investment opportunities • Access to each company’s best practices can allow achievement of even higher levels of operational excellence ￭ However, a key challenge for any merger or acquisition is to quickly integrate operations using the same employees who are required to run the day-to-day business • ScottMadden believes quick integration is a key to merger success; we do not subscribe to the theory that the merging firms should engage in an elaborate mapping of all their processes, dragging out the integration ￭ Early planning, e.g., even prior to having a deal in place, will help you jumpstart the M&A integration process and can minimize employee distraction and workload ￭ This document provides an overview of the steps that you can take to prepare for your merger or acquisition and successfully overcome these challenges 1
- 3. Copyright © 2015 by ScottMadden, Inc. All rights reserved. Addressing the Integration Challenges Large or small, all companies face similar integration challenges that need to be addressed. 2 Continued Focus on the Business and Customers Planning and Executing the Integration Optimizing the Combined Business An integration framework can help you address these challenges by providing vision clarity, structure, and the basis for a rapid, but thoughtful, integration process Operating in New Markets ￭ Preparing the organizations and securing integration resources ￭ Establishing an integration management structure and processes ￭ Executing pre-closing legal and regulatory activities ￭ Prioritizing and planning closing (Day 1) and post- closing integration requirements ￭ Creating and documenting a replicable acquisition model ￭ Aligning company leadership ￭ Engaging employees and maintaining morale and productivity ￭ Adapting to cultural and business model differences ￭ Maintaining customer relationships while coordinating sales forces ￭ Standardizing and optimizing programs, policies, processes, and procedures ￭ Sharing and implementing operational expertise and best practices ￭ Consolidating suppliers and systems ￭ Evaluating alternative business models, e.g., shared services ￭ Capturing acquisition revenue and cost synergies ￭ Extending a combined products and services portfolio ￭ Adapting to new legal and regulatory environments
- 4. Copyright © 2015 by ScottMadden, Inc. All rights reserved. “Putting the Pieces Together” to Achieve M&A Goals An integration framework establishes the foundation to achieve M&A goals. 3 Integration Management Structure and Roles ￭ Clearly defines roles and responsibilities for all integration participants ￭ Establishes the decision-making structure ￭ Defines the interfaces of various resources and efforts within the integration process Integration Critical Success Factors and Principles ￭ Defines the basis for integration success and what principles are to be followed during the integration process ￭ Communicates an understanding of organizational values, beliefs, and philosophies Integration Objectives ￭ Describes the desired outcome of the integration ￭ Provides clear understanding of integration objectives to employees, customers, and other stakeholders ￭ Clearly identifies organizational priorities Integration Timeline ￭ Establishes the high-level expectations for completing the integration ￭ Identifies and brings together key transaction and integration milestones ￭ Sets the pace and cadence for the integration process Decisions Already Made ￭ Communicates key organization, operations, and infrastructure decisions that have already been made ￭ Provides clarity for integration participants during integration plan development Day 1 “Must Haves” and Post-Day 1 Critical Milestones ￭ Describes leadership’s expectations of what must be in place on the day the transaction is closed ￭ Identifies key functional integration milestones for post-Day 1 completion Decisions Already Made Integration Timeline Day 1 “Must Haves” and Post-Day 1 Critical Milestones Integration Management Structure and Roles Integration Objectives Integration Critical Success Factors and Principles
- 5. Copyright © 2015 by ScottMadden, Inc. All rights reserved. How We Can Help: The M&A Journey ScottMadden can assist you in all three phases of a merger and acquisition. 4 Development of the Deal Case Integration Planning Integration Transition ￭ Reorganize ￭ Implement integration plans ￭ Execute change management and communications ￭ Track progress against plans and targets ￭ What are we expected to achieve? ￭ How fast and how far? ￭ How will the integration be structured and managed? ￭ What is the current state? ￭ How are we different? ￭ What are the opportunities? ￭ What will we look like? ￭ How will we operate? ￭ What have we committed to do? ￭ What actions must be taken to get us there? ￭ Have we considered all constraints and dependencies? Step 1 Step 2 Step 3 Step 4 Phase 1 Phase 3Phase 2 DesignAnalysisPreparation Implementation Planning ￭ Due diligence (initial high-level gap analysis) ￭ Synergy targets established
- 6. Copyright © 2015 by ScottMadden, Inc. All rights reserved. Immediate (Preparing for Day 1) Prioritizing the Integration Process A prioritized integration process sets the stage for rapid value capture. 5 Priorities Actions Establish critical business controls and common corporate governance and oversight Analyze business performance and identify opportunities Establish business connectivity, communication, and performance monitoring ￭ Define the combined organizational structure and identify leadership ￭ Define critical business controls, governance, and oversight – e.g., corporate policy compliance (legal, regulatory, and business risk management) ￭ Implement common leadership meeting cadence ￭ Establish baselines staffing and cost ￭ Benchmark and assess operational performance ￭ Identify company best practices and synergy opportunities (cost and revenue) ￭ Set combined performance targets and specify gaps to be closed ￭ Develop preliminary post-Day 1 business plans to close performance gaps ￭ Establish Information, data sharing, and communication channels ￭ Implement consolidated financial and operational reporting processes ￭ Establish combined performance measurement, monitoring, and management Redefine and implement new business and operating models ￭ Refine/redefine the combined operating model (“management model”) ￭ Finalize post-Day 1 business plans to close performance gaps ￭ Design and implement common systems, processes, and company best practices ￭ Develop, implement, and track synergy initiatives
- 7. Copyright © 2015 by ScottMadden, Inc. All rights reserved. Jumpstarting the Planning Process 6 ScottMadden’s M&A Integration Planning Workshop ￭ Develop an integration framework which specifies the strategic objectives of an anticipated or announced transaction ￭ Establish a common philosophy and understanding of integration issues, expectations/priorities, process and critical success factors among the leadership team ￭ Establish company readiness to “jump start” the integration process Workshop Objectives ￭ Merger integration strategic objectives ￭ Potential integration issues associated with the anticipated or announced transaction ￭ Integration critical success factors, integration design principles, and approach ￭ High-level integration and transaction timeline and integration approach ￭ Integration management structure with defined roles and responsibilities ￭ Initial closing (Day 1) requirements or “must haves” ￭ First-cut, functional integration blueprints or roadmaps to support Day 1 and post-Day 1 requirements Workshop Outcomes and Deliverables
- 8. Copyright © 2015 by ScottMadden, Inc. All rights reserved. Functional Integration Blueprints Map the Course ScottMadden’s M&A Integration Planning Workshop (Cont’d) 7 Functional Scope Definition Functional Day 1 Requirements and Risks Potential Day 1 Operating Polices Value Capture Opportunity Areas Initial Functional Process Integration Matrix IT Systems and Applications Considerations Establishes the integration process scope for each functional area Identifies what must be in place on Day 1 for the functional area and associated risks Identifies policies to be in place immediately following the closing of the transaction (until permanent polices can be implemented) Identifies potential merger-related revenue enhancement or cost-saving opportunities for the functional area Defines preliminary functional area process integration guidance, value, risk, complexity, and systems dependencies Provides an initial inventory and assessment of functional area key systems/applications that will need to be addressed
- 9. Copyright © 2015 by ScottMadden, Inc. All rights reserved. Contact Us ScottMadden can help you plan and execute your M&A initiative ￭ Support for M&A initiatives has been one of the core competencies of ScottMadden since its founding in 1983 • We assist with candidate screening • We perform synergy analyses • We provide due diligence support • We manage integration and consolidation projects for transactions of all sizes • We manage post-close and value-capture tracking activities ￭ We have significant experience assisting companies to successfully design and implement integrated operating models ￭ We have conducted myriad executive-level leadership team M&A integration planning workshops ￭ Our functional expertise in the energy industry is deep, and our M&A consulting experience is broad—the combination we believe is unique in the consulting industry Contact us to discuss any questions you may have. 8 Dan Kohut Director ScottMadden, Inc. 3495 Piedmont Road Building 10, Suite 805 Atlanta, GA 30305 dkohut@scottmadden.com O: 404-814-0020