Chairman's Message, September 2015
by Jim Jeffries, Chairman, M&A Leadership Council
The deal is not complete at close. It may not even be complete at the end of integration. To fully capture the value of the deal means going beyond integration to optimization and/or transformation.
POST-INTEGRATION OPTIMIZATION
How well do you know the stages that occur in the process of carrying out a merger or acquisition? In our public training events, we emphasize the critical phases of M&A: Strategy and Readiness; Transaction Management and Integration (Pre-announce, Pre-close, Post-close). However, there is another phase to total value creation that companies often fail to recognize and for which they fail to plan. Note: Integration is NOT Optimization and seldom should a company consider structuring optimization into the integration phase. Herein lie some nuance thoughts that have emerged recently from “better practices” communicated to us by some in the M&A community. The intent here is to challenge your traditional thinking and approach on M&A integration and take our training messages about Speed, Stability, and Synergies to the next level.
It seems that the emerging better practices will cause us to rethink integration more as a value-preservation-and-realization phase than a value-creation phase. In other words, let’s consider integration for the average, non-global mega-deal as an ambitious 4-6 month effort to reach an interim steady state, rather than a 12-to-18 month effort to reach a fully integrated/assimilated state.
After close we need to focus on stabilizing the stakeholders and the “new” business of the business to avoid value erosion. We need to get the newly combined businesses on the same platform, systems, organizational structure, and an aligned “newco” management team, etc. to deliver value to the customers and other stakeholders. This should be a shorter, very intense timeline than we have assumed in the past. The new integration phase is about getting everyone in one boat; keeping the boat upright and moving it in the right direction at the right speed with minimum turbulence. The idea behind this new short-cycle integration is to better equip the integration teams to focus on stability and delivery and maintain momentum towards a nearer term goal.
So, now the kicker …………. think of optimization and true value creation as a separate phase in the M&A life cycle. This phase may even entail new thoughts as to the skills and team construct for the effort. It may require a complete new governance and deployment model. The duration of optimization may be one, two, or even three years.
Council President, Jack Prouty, and I will expand the thoughts and practices for this emerging M&A model in subsequent issues of the M&A Monthly. In the meantime, I invite you to go to our blog at http://www.macouncil.org/blog and provide me your initial thoughts on this article. Let’s work it together and thank you in advance.
