I’ll be the first to admit that I am in desperate need of a new hobby. But this weekend, I spent some time analyzing data from our recent survey, the State of M&A Integration Effectiveness, related to synergies. My purpose was to bring to light additional insights regarding what specific integration practices executives can focus on to ensure they are driving maximum synergies in their post-deal integration efforts.
We’ve been gradually exploring more and more elements of the data over the last several weeks and are very grateful to those of you who have contributed to this important project. We’ve also included a detailed analysis of the straight “frequency data” in the latest edition of our book, The Complete Guide to Mergers & Acquisitions: Process Tools to Support M&A Integration at Every Level, Third Edition, Jossey-Bass, 2014. But truth be told, there’s a great deal of very important data here, and based on the comprehensive regression analysis, best-practices trend analysis and predictive modeling we’ve recently completed, we chose to take our time in publishing the final survey report, the State of M&A Integration Effectiveness™ 2014.
"Charts show the percentage increase in successful business outcomes linked to the use of each integration best practice."
For today, however, let’s do a quick deep-dive into those specific integration practices proven to have a direct correlation to achieving both revenue synergies and cost synergies. Take a look at this week’s downloadable resource, Integration Practices That Drive Maximum Synergies, and let’s see what observations jump off the page.
To learn more about the entire survey design, objectives, methodology, etc., I need to refer you to the webinar overview deck linked below. But let’s clarify what you are looking at in the charts attached in this week’s download. For each of the 40 integration practices and 12 major business result outcomes we analyzed in our study, we conducted a regression analysis on each best practice to each business result outcome to determine which best practices made the biggest impact on business results. While these particular charts show only the “top ten” integration practices most effective at driving business results, many of the other integration practices had a very strong statistical correlation and will be referenced in future blog posts or survey reports.
The next thing to keep in mind is that these charts compare “success to success” as the best measure of impact that can be attributed to the specific integration practice. For example, we first isolated the response data where a successful business outcome was reported. Next, we reviewed each individual respondent’s data to determine which, if any, of the integration practices in our study were used in accomplishing that successful business outcome. Finally, we calculated the percentage differential between those who accomplished the successful business outcome with integration best practices vs. those who still accomplished a successful business outcome, but did so without the use of our specific integration best practices.
In other words, the results data in today’s bar charts show the percentage increase in successful business outcomes linked to the use of each integration best practice. Now, on to the data for two of our 12 major business result outcomes, revenue and cost synergy capture:
Integration Practices Common to Both Revenue and Cost Synergy Capture
In this data set, there are four integration practices that appear in the top ten list for driving both revenue and cost synergy capture. These include:
- Q8b: Having a senior-level executive appointed as “deal sponsor” and who is responsible for the day-to-day tasks of achieving both business results within the acquired company, and for integration of the business. Not surprisingly, this is one of several “governance and leadership” integration practices proven to have a substantive impact on successful outcomes. As we routinely state in our training workshops with the M&A Leadership Council, you’ve got to get the governance model right. More importantly, you must remember that M&A integration success is far more dependent on effective leadership than on tools, templates, brute force, having great advisors or any number of other important success factors.
- Q18i: Clarity, focus and on-time accomplishment of the essential objectives required to declare “integration complete.” Many of you have heard my true story of the non-client who called one time and insisted that I review their integration project so I could advise them on why they were stuck in the mud and not nearly completed with integration after over 18 months of work. I reluctantly agreed, and when the project plan arrived, it was obvious that this was a true work of project planning art, consisting of over 5,000 major milestones, complex dependencies, budgets, Gantt charts and hundreds of pages of task-level detail. Conspicuously missing, however, were any sort of value-drivers, core strategic or business objectives, or as we sometimes say, “integration complete” conditions. For this, we typically advise articulating 5–6 of the major integration and business combination value-drivers that clearly accomplish the primary vision of the deal, attached, of course, with sufficient value-driver plans, metrics, dashboards and communications. The research data confirms these as fundamental elements for synergy accomplishment.
- Q19d: The discipline and capability that enables culture to be carefully compared, “flashpoints” avoided, and both organizations focused on high-performance cultural attributes. I know this should not be a surprise to us or any experienced M&A executives out there. After all, culture has only been identified as a critical success factor (and/or principal deal failure factor) by nearly every major M&A study since the beginning of time. But, quite frankly, we were still surprised by this finding. Conceptually, we get it and have said so in our prior work and current engagements. Financially and strategically, however, this can only be seen as yet one more haunting validation of the core principle – culture counts – and we have to get that right at every stage of the transaction process in order to ensure we achieve the deal’s most important stated objectives!
- Q18e and Q18l: The overall effectiveness of the entire integration process. While slightly different, both of these questions essentially reference whether or not there is a high level of effectiveness (timely, well-coordinated, able to resolve issues, etc.) in the integration process itself. One question/best practice made the top ten list of one type of synergy, and correspondingly, the other appeared on the other top ten list. We have combined them for this analysis. In our view, this validates the extreme importance of building internal M&A integration capabilities; of investing in adequate integration staff/advisor resources to enable effective planning and execution; and of relentlessly identifying, capturing and applying solutions, processes, skills and key learning for effective integration projects to come.