Why Clarity is the most important factor in achieving M&A success
By Stefan Hofmeyer, Partner, Global PMI Partners
There is excitement and anticipation when an M&A Close date is set. As executive-level exuberance and dopamine levels fade, a sudden realization occurs about what needs to be done: the task of completing a flawless integration of two companies and the achievement of deal expectations.
Most often there is a lack of clarity and preparedness when it comes to M&A integration Coming from our GPMIP business experience, where in the United States alone in 2021 we helped 47 companies go through the M&A integration process, we have found that most businesses initially lack clarity and are not prepared for the level of effort needed to complete an integration. Bandwidth is a hard constraint for internal teams— Now they have integration work on top of their day jobs. Even more importantly, teams typically have no idea how to start to plan for an integration.
Governance, specifically an Integration Management Office (IMO), drives clarity and resulting success of a merger or acquisition Completing integration activities correctly and in the proper sequence is a life saver for businesses and their shareholders. False starts, inefficient process, and mixed communication have no place in a merger or acquisition. Clarity is required and this clarity is driven by proper governance executed via an Integration Management Office (IMO).
Governance realized through an IMO can initially be discounted, especially in lower to mid-market (LMM) organizations. Just like a Project Management Office (PMO), IMOs can be seen as governance overhead not contributing much to driving revenue or reducing cost within a business. However, what IMOs do drive is clarity of action both prior to and after Close, until the newly combined company is operating efficiently as one entity. This clarity is what drives success of a merger or acquisition. In the next section below we describe how governance, and specifically an IMO, works to drive clarity.
Driving clarity using an IMO IMOs can be aptly managed by experienced project managers, and/or team members that are Project Management Professional (PMP) certified. However, the secret sauce of the IMO is driven by the following competency that is related to, but necessarily in the skill set of, a typical project manager. If you have internal project managers or third-party consultants leading an IMO, compare what they are doing in their roles to the following bullet list, and determine if they are setup for success.
Critical activities of an IMO are to:
Understand the Deal Thesis: This establishes clarity in what is being accomplished by the merger or acquisition. If the deal thesis is not available or is nonspecific, the integration likely will not be successful. Start by asking what the deal is trying to achieve, and where possible, drill down to hard cost and revenue synergies to understand expectations.
Identify and Engage Integration Team Members: In addition to an IMO lead and a communications lead, select team members reporting up to the IMO to represent functional leadership integration tasks. This includes integration leads for Sales, Marketing, Finance, HR, IT, etc.
Establish Basic Integration Charters: Knowing the deal thesis, now task functional integration leads with establishing brief charters for their scope of effort during the integration. Charters will drive clarity. Charters can be reviewed together in the IMO so that all leads understand what other functions will be doing during the integration. Also, charters can be tested to see if scope of effort is enough to achieve deal thesis expectations.
Establish Integration Plans: From the charters, establish integration plans, and tie specific plan tasks to cost and revenue synergies. This helps ensure clarity is translated from the deal thesis to the charters, work plans, and ultimately to the actual work.
Complete Comprehensive Communication: Prior to Close and knowing what needs to be done, now establish employee resources guides, FAQs, external customer and supplier communications, etc. in order to drive clarity as to what is happening. This is critical, as any gaps in communication or inconsistent communication will cause confusion, and audiences will think in worst case scenarios. To underscore, comprehensive communication is vital as part of governance activity to drive clarity.
Establish Recurring IMO Meetings and Closed-loop Reporting: Strong governance will maintain a cadence, typically weekly, of reporting up to the IMO, and then on to a steering committee, and the corporate board. This reporting not only provides status of task completion progress, but also closed-loop synergy realization progress. This closed-loop approach will continue to drive clarity of action and help make adjustments in activities to optimize synergies.
Transition to Ongoing Company Operations: All integration governance should come to an end as quickly as possible, while maintaining quality delivery and achieving established integration goals. There will be long tail integration activity, like integrating or replacing ERP systems, that can be transitioned to enterprise projects. Other activity, because of the integration work, now can be handed off to operational teams. These operational teams, who have been engaged all along through functional integration leads in the IMO, have clarity in understanding what synergies are tied to their goals. They can fully execute operationally to achieve these goals.
The knowing versus doing gap
For me this was an easy article to write – at record time in under an hour. The reason for this is, at Global PMI Partners, driving clarity is the core of what we do. For over a decade we’ve repeated this approach across many hundreds for clients and deals.
If you’d like to know more about how we accomplish these efforts through a more detailed review of integration governance, process, technology, and tools and templates, we are happy to share our approach that can be implemented on your next merger or acquisition -- the “do” part of an integration. May your next merger or acquisition be successful!
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