A Checklist for a Smoother Transition to Integration
By Jim Jeffries
Too often companies under-perform their responsibilities for what the deal requires before passing the baton to the Integration team. Due diligence is not just about numbers and validating the correctness and completeness of the seller’s books and other “current state” features of the business. If you are looking for a due diligence checklist, then how about this one that should be required by the management team before a transition can occur between due diligence and Integration?
- Acquisition Strategy & Rationale is Validated: Confirmation and sign-off that the target will meet or exceed the original objectives for the combination
- Point-of-View on the “End State” Concept of Integration: What will “integration complete” look like? How will we be operating as one company (locations, products, markets, etc.)? What will we integrate and when? What will stand alone?
- Preliminary Sources of Value and Risks: What are the must-have sources of value (the big buckets)? And, what are the big risks or potential risks that need immediate discovery, clarification, decisions and actions?
- Deal Synergies (Cost, Revenue, Performance) to be Validated, Planned for and Captured: In synergy-dependent deals, we recommend that Synergy Action Teams (SATs) be formed for a concentrated formal role within the IMO
- Deliver the Business Model SWOT (Strengths, Weaknesses, Opportunities, Threats) Assessment Findings: Not only what is discovered regarding the target’s business model and its effectiveness in a stand-alone environment, but how the combined business models will work together
- List of Key Areas for Deeper Probes: In most cases, when the deal announcement is made, there is a wider availability for deeper diligence. The Diligence team should be able to outline the specific areas for confirmatory diligence by priority
- Cultural Observations and Preliminary Identification of “Flashpoints”: Never discount what the early Diligence team can learn from public domain information, interactive discussions and just plain walking the floor of the headquarters and other facilities. Though full access is usually not granted prior to announcement and beyond, what we have learned is that many of the initial assumptions regarding culture are later found to be spot-on
- Key Management and Talent Assumptions: The target leader/s should have strong opinions of the go-forward and duplicative members, and sometimes the weaker resources. In any case, the DD team should attempt to build a straw model to be validated post-announcement
- Preliminary Budget: This also is very important and often not considered this early in the game. Deals are notoriously under-budget in the integration phase. One of the key learnings at our “Art of M&A Integration” executive training workshops is the set of considerations that need to be made and budgeted for as well as the iterative process for budgeting during the deal life cycle
There are many other details that must be discovered to have a comprehensive hand-off between diligence and integration. If your organization is striving to get better at due diligence, you're invited to The Art of M&A Due Diligence. In this unique workshop environment, you'll interact with M&A experts from firms like BDO, M&A Partners and Willis Towers Watson, who share their real-world insights and experiences. Learn more.