Mand a toolkit pmi theory

© 2007-2013 IES Development Ltd. All Rights Reserved

M&A TOOLKIT


Post Merger Integration:

PMI Theory


GENERAL “MOTHERHOOD” ADVICE• Create a plan before the deal closes• Plan communications to all stakeholders• Ringfence integration team and resources• Form combined team from both companies• Identify and retain key people• Retain customers

DEAL SPECIFIC PRIORITIES•What was the strategic rationale? What are the “crown

jewels” we have to protect in this deal?•What is the Value Hypothesis? What do we have to do to

realise the value?

Best Practice requires a focus on deal-specific priorities, while following general “motherhood” advice


Resources Processes Values

Integration tends to be complete and fast when resources are bought; partial and careful when values are important

Relatively easy to assess value

Easy to change, transfer and rationalise

Hard to assess value

Hard to change, reorganise and rationalise

Almost impossible to assess value

Almost impossible to change, transfer and rationalise

RESOURCE-PROCESSES-VALUES FRAMEWORK

FULLY INTEGRATEFast

LEAVE STAND-ALONECareful


• Identify the “crown jewels” that represent the value you bought the business for Resources – e.g. customers, top salespeople Processes – e.g. brand mgt Values – e.g. low-cost, entrepreneurial

• Make sure they are Monitored at senior levels Retention/Incentives put in place Not risked in the name of short term cost savings

Your first priority in merger integration is to do no harm

PROTECTING VALUE IS THE FIRST PRIORITY IN PMI


GEOGRAPHIC ROLL-UP

OVERCAPACITY

PRODUCT OR MARKET EXPANSION

INDUSTRY CONVERGENCE

R&D

Resources/Values

Mainly Resources

Often only Resources

Resources/Processes/Values

Infill Product: RNew Product Platform: P/VNew Market: P/V

What is bought? (R/P/V?) Integration Approach?

Complex; existing companies usually best left alone; leverage Resources to create Newco

Fast, bloody, high potential for culture clash

As product, depending on Infill or Platform

Infill: Immediate & full

Platform and Market: Careful; cross-selling only

Can take time, be win/win; keep local company intact; install key value-adding processes (that don’t mess with values)

Different types of M&A will have different M&A approaches


The key risk in merger integration is to destroy the Processes and Values of the target in the pursuit of cost savings

Pressure to deliver cost savings and

synergies fast

Patience needed to

understand acquisition

BALANCE IN MERGER INTEGRATION


Use analysis to determine the risk of culture clash

How far apart are the cultures?

How many people need to

change?

How great a change is required?

ASSESSING THE RISK OF CULTURE CLASH

Position:• IBM-Lenovo?• Framedia-Focus Media?• Snapple-Quaker Oats?• Gome China Paradise?


Strategy First Integration First

Fast and “good enough” Slow and careful

Acquirer driven Acquiree driven

Transfer best practice

Transform “best of both”

Integration “CEO”

Integration Process Manager

Fully staffed “Integration Office”

Lean Integration team

The acquirer will have to make key trade-offs in deciding their integration approach

KEY INTEGRATION DECISIONS

© 2007-2013 IES Development Ltd. All Rights ReservedUrgency

Relative Importance

First 100 days

Mission Critical

Low

First Year

Post Merger Integration issues can be prioritised by Importance and Urgency

CLASSIFYING PMI ISSUES

3 Years

Important


One of the most important integration decisions is leadership

MANAGEMENT CHOICES FOR ACQUIRED COMPANY

Who is going to run the acquired company?

Existing management

Hire new management

Parachute in your own management

Why is the acquisition of a company that has to be turned round so difficult?

Pros and cons of each?

Which is the easiest choice?

Don’t do an acquisition if

you don’t know who will run it

afterwards


Identify what the post-merger integration model will look like

EXAMPLE: AIA/PRUDENTIAL DEAL

Source: Prudential Investor presentation

Post-integration organisationIntegrated:• One Country CEO• All Middle Office functions• All Back Office functions

Left separate:• Agency salesforce• Bankassurance

relationships

Why did they select this structure?

Mand a toolkit pmi theory

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