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M&A success: Using an integration playbook to make your deal work

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Grant Thornton LLP
Grant Thornton LLP

The document discusses how using an integration playbook can help mergers and acquisitions succeed where often they fail. It notes that only about 50% of M&A deals achieve their financial goals. An integration playbook establishes a repeatable process for integrating acquisitions based on past lessons learned. It identifies key risks to address such as retaining employees, aligning cultures, and realizing synergies. Having an experienced leader execute the playbook with input from past deals can help mergers integrate functions smoothly and achieve their strategic objectives.

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M&A success Using an integration playbook to make your deal work grantthornton.com/Playbook
Only about 50% of mergers or acquisitions will succeed And even when deals go through, the newly created company may not deliver the hoped-for financial results. 2 Will your deal succeed?
Why integrations don't work Even companies who regularly do acquisitions tend to go through it as if it were their first time. They: • Create an entirely new process each time • Overplan • Impose too much structure • Don't build in enough agility 3
75% to 80% of integration tasks are repeatable But success isn't as simple as having a checklist or a process template. It also takes: Common sense The ability to prioritize tasks 4 The goal? A sustainable, repeatable process
Integration playbooks can make the difference An integration playbook : leverages past lessons learned Harnesses intellectual capital Includes proven tools from past integrations 5 Want to learn more? Read the full article>
Humans are required People with actual integration experience are still required to execute the playbook: • It takes experienced insights to align the vision of the transaction with the integration process • It also takes experience to accurately perform the risk assessment 6 Common sense trumps a checklist every time.
The integration framework What areas will you integrate? • Accounting? • Financial reporting? • Tax? • Treasury? • ERP platform? • HR? 7 Merged companies often end up integrating 75% or more of functions. • Employee benefits and insurance programs? • Safety policies? • Sales? • Operations? • R&D?
Choosing an integration leader Key integration leader attributes:  From the business unit sponsoring the transaction  Member of acquiring company’s leadership development program  Strong interpersonal and conflict-resolution skills  The respect of management  Hands-on business experience 8 The No. 1 challenge to creating a repeatable, sustainable process is the retention of the knowledge gained through experience.
Identifying risks Risk assessment is a critical component of the process, setting the stage for mitigation plans and the resulting tasks/checklists. Next up, 6 key risks that acquirers need to identify and address. 9 Want to get the big picture? Read the full article>
Risk #1: Infrastructure Supporting continuous financial/operations tracking while evaluating, designing, implementing and migrating to a long-term recommendation. Key areas of concern: • IT systems • Accounting processes • Internal controls 10
Risk #2: Synergy realization Finding synergies can mean saving money post- acquisition. Ignoring synergies can mean higher risk of process breakdowns and money lost. Take these actions: • Develop capture plans for identified sources of value (targeted cost reductions, process improvements, changes) • Improve operating margins by rationalizing core and noncore functions and businesses • Rationalize noncore operations 11
Risk #3: Organizational alignment It starts with aligning operating policies so that the merged company can hit the ground running on Day One. Design an organizational structure that: • Enhances the combined organization's value • Maintains focus on revenue enhancement, cost reduction and cost avoidance 12
Risk #4: Customer retention Retaining your external relationships is an important determinant for the merged entity's future success. Do this now: • Identify key customer, prospect and strategic relationships • Identify key opportunities for revenue growth • Stabilize operations 13
Risk #5: Key employee retention In most businesses, core employees carry key institutional knowledge and relationships. Reduce risk by: • Identifying and retaining employees key to commercial relationships and business continuity • Reducing productivity decline • Addressing potential lapses in safety during transition 14
Risk #6: Cultural alignment Merged companies usually have different cultures and values. Develop a new, combined culture: • Align behaviors to achieve the desired strategic objective • Leverage commonality, addressing the differences • Recommend an end-to-end solution to reduce productivity decline risks 15 Read the full article for insights and best practices>
Integration playbook benefits • A sustainable, repeatable process • Provides the necessary intellectual capital • Improves with continued lessons learned • Links transaction value drivers and vision to the overall integration process • Identifies critical risks 16
Ed Kleinguetl Managing Director Transaction Advisory Services Grant Thornton LLP 832.476.3760 ed.kleinguetl@us.gt.com Daniel Galante National Managing Partner Transaction Advisory Services Grant Thornton LLP 312.602.8290 daniel.galante@us.gt.com Information Contacts Eileen Hwang Manager Transaction Advisory Services Grant Thornton LLP 312.602.8507 eileen.hwang@us.gt.com 17

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M&A success: Using an integration playbook to make your deal work

  • 1. M&A success Using an integration playbook to make your deal work grantthornton.com/Playbook
  • 2. Only about 50% of mergers or acquisitions will succeed And even when deals go through, the newly created company may not deliver the hoped-for financial results. 2 Will your deal succeed?
  • 3. Why integrations don't work Even companies who regularly do acquisitions tend to go through it as if it were their first time. They: • Create an entirely new process each time • Overplan • Impose too much structure • Don't build in enough agility 3
  • 4. 75% to 80% of integration tasks are repeatable But success isn't as simple as having a checklist or a process template. It also takes: Common sense The ability to prioritize tasks 4 The goal? A sustainable, repeatable process
  • 5. Integration playbooks can make the difference An integration playbook : leverages past lessons learned Harnesses intellectual capital Includes proven tools from past integrations 5 Want to learn more? Read the full article>
  • 6. Humans are required People with actual integration experience are still required to execute the playbook: • It takes experienced insights to align the vision of the transaction with the integration process • It also takes experience to accurately perform the risk assessment 6 Common sense trumps a checklist every time.
  • 7. The integration framework What areas will you integrate? • Accounting? • Financial reporting? • Tax? • Treasury? • ERP platform? • HR? 7 Merged companies often end up integrating 75% or more of functions. • Employee benefits and insurance programs? • Safety policies? • Sales? • Operations? • R&D?
  • 8. Choosing an integration leader Key integration leader attributes:  From the business unit sponsoring the transaction  Member of acquiring company’s leadership development program  Strong interpersonal and conflict-resolution skills  The respect of management  Hands-on business experience 8 The No. 1 challenge to creating a repeatable, sustainable process is the retention of the knowledge gained through experience.
  • 9. Identifying risks Risk assessment is a critical component of the process, setting the stage for mitigation plans and the resulting tasks/checklists. Next up, 6 key risks that acquirers need to identify and address. 9 Want to get the big picture? Read the full article>
  • 10. Risk #1: Infrastructure Supporting continuous financial/operations tracking while evaluating, designing, implementing and migrating to a long-term recommendation. Key areas of concern: • IT systems • Accounting processes • Internal controls 10
  • 11. Risk #2: Synergy realization Finding synergies can mean saving money post- acquisition. Ignoring synergies can mean higher risk of process breakdowns and money lost. Take these actions: • Develop capture plans for identified sources of value (targeted cost reductions, process improvements, changes) • Improve operating margins by rationalizing core and noncore functions and businesses • Rationalize noncore operations 11
  • 12. Risk #3: Organizational alignment It starts with aligning operating policies so that the merged company can hit the ground running on Day One. Design an organizational structure that: • Enhances the combined organization's value • Maintains focus on revenue enhancement, cost reduction and cost avoidance 12
  • 13. Risk #4: Customer retention Retaining your external relationships is an important determinant for the merged entity's future success. Do this now: • Identify key customer, prospect and strategic relationships • Identify key opportunities for revenue growth • Stabilize operations 13
  • 14. Risk #5: Key employee retention In most businesses, core employees carry key institutional knowledge and relationships. Reduce risk by: • Identifying and retaining employees key to commercial relationships and business continuity • Reducing productivity decline • Addressing potential lapses in safety during transition 14
  • 15. Risk #6: Cultural alignment Merged companies usually have different cultures and values. Develop a new, combined culture: • Align behaviors to achieve the desired strategic objective • Leverage commonality, addressing the differences • Recommend an end-to-end solution to reduce productivity decline risks 15 Read the full article for insights and best practices>
  • 16. Integration playbook benefits • A sustainable, repeatable process • Provides the necessary intellectual capital • Improves with continued lessons learned • Links transaction value drivers and vision to the overall integration process • Identifies critical risks 16
  • 17. Ed Kleinguetl Managing Director Transaction Advisory Services Grant Thornton LLP 832.476.3760 ed.kleinguetl@us.gt.com Daniel Galante National Managing Partner Transaction Advisory Services Grant Thornton LLP 312.602.8290 daniel.galante@us.gt.com Information Contacts Eileen Hwang Manager Transaction Advisory Services Grant Thornton LLP 312.602.8507 eileen.hwang@us.gt.com 17