Successfully Integrating a Newly Acquired Company

Jeff Ramsey – Geneva TradingSusan Dauber – Ogg Trading

Nicole Strothman – Ideal ImageDennis Unkovic - Meritas

2

• In-house counsel can add significant value by assisting business leads in the identification and resolution of possible integration issues:– Cultural considerations– Integration of senior leaders into different roles– Governance considerations– How to course correct

3

• Counsel’s (typically) unique position provides insight into issues that may arise as a deal progresses. By paying attention to the target company’s:– Negotiating style,– Control demands/issues– Due diligence materials, and– Interaction with employees, counsel can assist business leads to identify problems early in the acquisition process.

4

• Cultural issues – planned or unplanned, every company has a unique culture– Startup mentality vs. corporate environment– Layers of approval, titles (and importance thereof)– Communication methods

• Senior Leader Integration– Due diligence process can provide clues on how effectively

certain leaders operated in the past & quality of decision-making

– Important for in-house counsel to communicate their impressions to their business constituents

5

• Governance issues– Negotiation process should be used to educate target personnel

regarding governance expectations– Crucial to get everyone on board; getting this wrong can be extremely

disruptive and expensive• Post-deal integration and course correction

– Insist on an integration working group with IT, HR, and relevant business leads to keep regular tabs on what is working and where issues are surfacing

– Sharing information is key to identify common issues– Do not underestimate the importance of the “small” things – offices,

titles, etc.– Engage newly-integrated employees as much as possible

6

Target maintained as stand-alone company

Back office integration only

Target and Acquirer are combined

Target incorporated into Acquirer

7

FIRST STEPS:• Corporate Structure of Surviving Entity• Identify Business Priorities and Objectives

– Primary purpose of acquisition: • business growth • IP acquisition • Adoption of brand

– Prioritize Jurisdictions– Employee Org Chart

• Budget for anticipated costs• Set Milestones• Communications Plan• Designate Transition Team Lead

8

Integration Lead

Finance

Tax

Audit

HRLegal

Compliance

Risk

ITOperations

Facilities

Sales

Communications

9

• Successful Transition Team clearly delineates roles and responsibilities

• Team Lead:– Reports to Executive Leadership / Steering

Committee– Coordinates Activities among functional groups– Manages to Timeline– Manages Resources– Oversees internal and external messaging

10

• Designate Team Members

• Identify Internal Stakeholders– Union representatives

• Identify External Advisors– Tax– Accounting– Domestic and International

11

KICK-OFFDescribe Team Lead rolePrioritize Critical Goals: usually back office and risk

avoidance (HR, IT, Finance) Identify Cross-DependenciesOrganize Creation of Detailed Work Plans by Functional

GroupCreate Timeline and interim milestonesEstablish Integration Team Communication Process

Status reporting vs. Oversight

12

FINALIZE TRANSFER OF ASSETS AND LEGAL AGREEMENTS

Information Gathering Begins with Pre-Closing Due Diligence

• IP registration transfer

• Local laws – Requirements for real estate transfers– Tax implications

• Internal accounting

• Contracts

IP Counsel, Local Counsel, Internal Treasury, Tax and Accounting

13

• Contracts may need to be transferred to surviving entity

– Notice requirement– Consent requirement

• Changes to terms may be required

– Pre-existing contract– Dispute resolution – Regulatory concerns– Guaranty

Corporate Counsel, Vendor Management, Business Strategy and Sales team

14

ORGANIZATIONAL

• Subsidiaries to be integrated or wound down

• Share transfers– Stock transfer forms– Register with commercial registry– Register with regulatory body– Tax treatment for share transfers

• Constitutional Documents for subsidiary organizations – Change of management

Corporate counsel, local counsel, tax

15

COMPLIANCE

• Address Gaps Identified in Due Diligence– HR– Data / Privacy– IT

• Modify Or Replace Compliance Policies And Code Of Conduct• Establish Internal Audit Scope And Schedule• Regulatory Requirements

Counsel, Risk, Compliance, Internal Audit, HR, IT

16

TAX AND REAL ESTATE

Transfer of historic tax losses Real Estate Transfer Taxes

Lease Terminations Relocations Registrations in foreign jurisdictions

Corporate and Local Counsel, Tax, Facilities

17

DATA PRIVACY• Assess scope of historical data• Audit historical policies and practices• Review local laws• Considerations

– Financial Institution compliance with GLBA– Health information subject to HIPAA– Credit card payment information– BYOD– Subcontractors

Corporate and local counsel, Privacy Officer, IT

18

• Maintain Morale• Culture and Cultural

Issues• Communication• Retaining Talent• Redundancy

Counsel, HR, Benefits

• Unions• Changes to pensions

and benefits• Consents• Triggering Event for

bonuses, etc.• Commission plans• Leave Policies

HUMAN RESOURCES

19

BUILDING CULTURELeadership MessagingEventsStaffing IntegrationTraining and DevelopmentFacilitiesRecognition

HR, Facilities, Marketing

20

COMMUNICATION

CAN YOU HEAR ME NOW?

• Start integration process no later than when the deal is announced• Pick one culture• Communication Plan to employees / vendors

• Decide on timing• Who is the messenger• Main message• Decision and rationale• Timetable and process• Who will be involved• How employees / vendors will be affected• Mission and Values

21

TOP MESSAGING POINTSThe announcement is the first impression• When is the best time• Set realistic expectations • Don’t promise there won’t be change• Don’t over commit• Keep information flowing and have transparency• Admit mistakes• Ensure the messaging is understood• Continue showing respect• Relay the good and the bad news

22

TIPS FOR SUCCESS

100 days – these are the most important Have a Post-closing checklist

• Tracking indemnification obligations• Escrow accounts, notice of claims• Consents

Implement Post closing timelines – develop a time line for post closing deadlines, circulate as needed to integration team

Engage the talent and ensure motivation Consolidate economies of scale

• Staff• Law firms, vendors• Lease, equipment• Insurance coverages• HR and Payroll systems• IT• Values/ethics

Measure Results

23

Resources:Successfully Integrating a Newly Acquired Company – The International Challenges, Dennis Unkovic, Chairman Meritas Law Forms Worldwide. Copyright 2015 by Dennis Unkovic

Quick Integration Checklist

Infrastructure Component Questions to Considerhttp://www.pwc.com/en_US/us/transaction-services/publications/assets/pwc-ma-integration-playbooks.pdf

Buyer Beware: Merger-and-Acquisition Diligence Tips To Reduce Data Privacy & Security Risks. Privacy & Security Law Report, 13 PVLR 39, 10/06/2014. Copyright 2014 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com

Guidelines on Personally Identifiable Information Uses in Mergers, Acquisitions, Bankruptcies, Closures, and Dissolutions of Web Sites. www.steptoe.com/assets/attachments/832.doc

Acquisition Checklist (Human Resources). http://www.shrm.org/templatestools/samples/hrforms/articles/pages/1cms_022641.aspx

Post-Merger Integration of American and European Companies. ACC 2012 Annual Meeting.

Integration Handbookhttp://www.bakermckenzie.com/files/Uploads/Documents/Post%20Acquisition%20Integration%20Handbook%202011.pdf