Lessons Learned The 10 Most Common Post Merger

Lessons Learned The 10 Most Common Post Merger Integration Problems

Lessons Learned # 1: Lack of Pre-Planning When integrations fall short of their objectives, inadequate pre-close planning contributes to the failures more than half of the time. Symptoms and Signs Potential Outcomes § No formal integration oversight authority established § Integration starts off slow § Early wins not achieved § Limited or no risk assessment activities § Integration teams veer off on tangents § Weak due diligence § Planning begins after close § Energy is spent on extinguishing one fire after the next § Unclear objectives § Acquirer loses credibility How to Avoid § Determine leadership structure § Establish Integration Management Office (IMO) at least 60 days prior to deal close § Draft integration strategy to help prioritize workstreams § Complete operational, cultural, and risk assessments § Secure access to due diligence documents § Draft integration charter and confirm governance (IMO should report to C-suite committee) www. Merger. Integration. com 800 -992 -5922 2

# 2: No Formal Integration Strategy Lessons Learned Acquirers should define a clear integration strategy early and before their teams begin to develop plans. Symptoms and Signs Potential Outcomes § Operating model in flux or undefined § Internal disagreements about priorities and direction of integration § Integration goals unclear § No end-state defined for integration § Integration efforts incongruent with deal thesis § Integration takes longer than expected § Lack of clarity frustrates integration team members § Synergy targets are missed How to Avoid § Develop integration strategy strawman to communicate direction and secure buy-in from executives § Assess the risks of integration strategy § Create integration workstream prioritization framework § Establish Steering Committee and Integration Management Office (IMO) www. Merger. Integration. com 800 -992 -5922 3

# 3: Failure to Prioritize Workstreams Lessons Learned Without prioritization, every workstream will be considered as important as the next, and it will be difficult to maintain focus on actions that will deliver the most value. Symptoms and Signs Potential Outcomes § Integration workload is overwhelming § “Low-value” workstreams absorb too much attention § Functional leads make repeated requests for direction § Synergies are not pursued aggressively § Senior management anxious about slow progress of integration § Tremendous effort is expended to make little progress § Synergy targets carry no more importance than all other goals § Integration teams lose faith in the deal How to Avoid § Communicate integration strategy, objectives, and timetables § Create integration workstream prioritization framework for use by functional leads § Assign synergies to high-priority workstreams § Make sure IMO reporting focuses on high-priority workstreams § Deprioritize medium-priority workstreams if workload become too heavy § Have IMO assist functional workstreams www. Merger. Integration. com 800 -992 -5922 4

Lessons Learned # 4: Senior Leadership Void The Integration Management Office (IMO) should report to a Steering Committee of C-level executives so integration work receives its due attention and unresolved issues have a defined escalation path. Symptoms and Signs Potential Outcomes § IMO reports into a single function like HR or Finance § Functional integration teams work in silos without regard for dependencies § Confusion over who “owns” the integration work § Integration work is deemed unimportant § No sense of urgency among integration leads § Integration under-resourced § Integration problems requiring top-level input go unresolved § Employees question whether leadership cares about the success of the deal How to Avoid § Announce new leadership structure as quickly as possible § Establish charter and governance § Set up IMO as a transparent extension of designated C-level executives § Create issue escalation and decision-making framework for senior executive team to ensure high-priority issues get “moved up the chain” quickly www. Merger. Integration. com 800 -992 -5922 5

# 5: Weak Communication Planning Lessons Learned Communication is usually the worst managed aspect of integrations. People are often left out of the loop or receive mixed messages. Symptoms and Signs Potential Outcomes § Communications are reactive, not proactive § Little risk assessment prework to determine high-priority communication needs § The uncertainty harms employee morale and productivity § The rumor mill runs wild § Information sharing on an “as needed basis” § Leadership is perceived to be uncaring and out of touch § No process established for answering questions § “A” players jump ship How to Avoid § Craft key messages for each key stakeholder audience in advance of Day 0 § Create communication plan matrix for Day 0 thru 90 days § Establish communication channels, and if needed, create new ones § Draft memos for senior executives for their approval in order to accelerate communications § Create “rolling FAQ log” that can be updated weekly and shared with affected employees www. Merger. Integration. com 800 -992 -5922 6

# 6: Poor Synergy Program Management Lessons Learned Synergies should be validated, and then rigorously tracked and reported. Symptoms and Signs Potential Outcomes § Synergy estimates too optimistic § Costs to achieve (CTA) badly estimated § Cost overruns occur due to poor CTA projections § No formal owners of synergy targets § No corrective action is taken on synergies in danger of being missed § No connection between synergy goals and integration workstreams § Accountability for synergies is widely disbursed § Progress, or lack thereof, unreported § Deal fails to deliver on anticipated value How to Avoid § “Stress test” synergy targets during due diligence to confirm projections, and then adjust if necessary § Validate cost to achieve (CTA) of synergies § Confirm frequency and source of synergy reporting updates § Assign synergies to owners. § Ensure synergy-related workstreams are marked as a high priority www. Merger. Integration. com 800 -992 -5922 7

Lessons Learned # 7: Inadequate Resourcing Poorly resourced integrations take longer, cost more, delay synergy realization, and often burn people out. Symptoms and Signs Potential Outcomes § No formal scope or governance to guide resource planning § Integration work treated as “second priority, ” behind everyone’s “day job” § No “air cover” from senior executives for needed resources § Talented people avoid integration work § Integration completion is delayed § Functional integration leads are overworked § Team members become frustrated and resentful § Baseline of resourcing requirements for next integration are not established § Synergy goals are not achieved How to Avoid § Create integration charter that defines functional resource expectations and timing § Create job description summaries for functional leads § Scope and prioritize integration workstreams so functional leaders have a clear understanding of the level of effort and time required to complete integration work § Secure external resources to offload special projects and other integration work § Reduce number of non-integration, nonessential, “in-flight” initiatives www. Merger. Integration. com 800 -992 -5922 8

Lessons Learned # 8: No End-State Transition The process for handing off integration work (when the end state is reached) should be well defined and communicated. Symptoms and Signs Potential Outcomes § End state unclear and difficult to define because integration and regular work are intermingled § Integration drags on and on § No formal targeted date for conclusion of the bulk of integration activity § “Long tail” integration tasks are orphaned when integration teams disband § No exit strategy communicated § Remaining integration tasks are never completed § The scope of the integration creeps How to Avoid § Define end state for each function prior to plan development § Run the integration as a separate project, apart from day-to-day operations § Develop formal end-state transition process with clear roles and responsibilities § Determine deliverables associated with remaining open items § Communicate what open items have to be done, by when, and by whom § Document the hand-offs of open items to functional leads www. Merger. Integration. com 800 -992 -5922 9

# 9: Slow Organizational Planning Lessons Learned Slow decision-making on organizational design leaves employees in limbo, and damages productivity and morale. Potential Outcomes Symptoms and Signs § Competing business models and priorities § Too many executives and key leaders unsure of their roles and responsibilities § Little communication to rank and file regarding new leadership structure § Employees play politics and jockey for position instead of doing their jobs § The organization begins to drift without a clear direction § Employee morale suffers and productivity declines due to the uncertainty and confusion How to Avoid § Clarify New. Co business strategy and operating principles as soon as possible § Communicate when the announcements of leaders will be made § Accelerate the “naming” of key executives and their reports—make it a high priority § Expedite any reduction in force so remaining employees can quickly return to focusing on their work www. Merger. Integration. com 800 -992 -5922 10

Lessons Learned # 10: No Formal Feedback from stakeholder groups should be captured to improve the integration process. Symptoms and Signs § Information on previous integrations confusing, hard to locate, and/or nonexistent § “Feedback” is via only rumor mill and informal communication channels § No established process to address and correct poor practices Potential Outcomes § Competency in M&A integration does not improve and may even get worse § Employees become passive because they have no say in making improvements § Acquirer obtains bad reputation for being insensitive and unresponsive to its stakeholders How to Avoid § At day 100, initiate a formal process to collect feedback § Conduct an employee survey developed and administered through HR § Obtain additional feedback from senior management, integration team members, and consultants involved in the integration project § Facilitate a “Lessons Learned” meeting with integration team members and functional leads www. Merger. Integration. com 800 -992 -5922 11