Mergers have captivated many headlines of late, as a series of deals have been announced to further consolidate industry control in healthcare, media, and retail, sending a fervor of energy and anticipation through the markets, despite obvious reservations and anticipated hold ups and hang ups, one thing is for sure, the allure of the mighty merger is huge.
Two years following its $48 billion acquisition of DirectTV, AT&T aims to transform itself from ‘the phone company’ into a media giant, with an $85 billion play for TimeWarner.
CVS has set its intention to acquire Aetna for $66 billion uniting organizations and operations from very different corners of the health-care ecosystem
The ‘deal rationale’ tends to be mostly financial when first analyzing a combination. We look at all the numbers on costs, customers, locations, people, products, assets, loans. The cost savings can be extraordinary when buying a direct competitor and the analysis focuses on eliminating redundancies and consolidating duplication.
The growth opportunity is enormous when you buy customers, buy geographic footprint and service contracts, etc. However soon after the numbers prove the business case, the business merger integration team begins its planning with all the anticipation of the challenges and opportunities that these deal present for their employees, customers, technology and operations, not to mention products, services capabilities and the all-important customer experience, and that’s where the real long-term gains are for this powerful strategic play.
These deals don’t come cheap, and the risk is high; (Historically reported figures state that more than 50% of mergers fail: fail to ROI, fail operationally, fail employees and ultimately fail customers and shareholders) so how can companies justify throwing that kind of cash on a gamble?
The Big Deal is a High Risk/ High Reward value proposition. Merger Integration specialists know how to ensure that all important Customer Experience doesn’t suffer at the hand of an acquisition and that the 2 (or more organizations) transform into a cohesive merged entity having achieved its intended outcomes. Alongside teams working each of the operational change implications due integration activities, a Customer Experience team carries the torch of the customer’s perspective through all the process, service and experience touches and ensures consistency and simplicity and understandability, a logical flow and order, capturing relevant data points and measuring and monitoring any anomalies outside of the normal expected distribution, so that corrective action can be taken.
Following the issue of a letter of intent to acquire, the deal’s rationale and objectives are translated into much more detailed plans. As information emerges, these plans crystalize under the leadership of integration office that leads all integration activities with tight collaboration with executive leadership. Chartering an Integration Office to lead the entire enterprise through a successful integration imbeds a more formal and repeatable structure using a comprehensive playbook as a tool to guide, plan, and track activities and define the end to end process to handle everything from setting up the appropriate structures to manage, govern and drive the initial discovery stage through all data and information gathering activities, through operational plans for all impacted business functions and units, to ultimately going live and doing business as a single united company, obtaining final sign offs, documenting lessons learned, and adding knowledge capital to the Enterprise to leverage for future deals.
With target state clearly outlined and documented, processes and tools understood and a compelling vision set of what ‘business as usual’ looks like as a combined entity, we are ready to operationalize our plan. This is the step where the Change Management activities throughout the project yield their fruit. Having the people who will eventually own target state be a part of its creation, ensures that a successful handover is usually a non-impact event. Yes, there are sometimes bumps along the way when new processes, rules and technology roll out, but having the owners involved early and often mitigates the impact’s force.
With multi-billion/million dollars at stake, a solid Merger Integration office is the lynchpin to successfully combining companies. Mergers and acquisitions are usually on tight timeframes to achieve the desired business case or results. Additionally, for companies that are in acquisition mode, several mergers may happen in parallel. The integration must be done effectively to minimize the impact to customers, operations or employees and maximize the deal’s intended value. How you manage the integration process has a big impact on success. For companies who intend to make multiple acquisitions and/or divestitures, a playbook standardizes the approach, so team members know how to do what they need to do to drive success.
The Integration Office plays a key role starting with creating the framework for pre-close Due Diligence activities, organizing all integrated workstream to make necessary changes and overseeing the entire program all the way through to project close procedures– officially signaling that ‘we’re done and now integrated’.
Business as usual now resumes for the new and improved fully integrated entity and the integration playbook fresh with its latest updates…Until it’s time for the next deal.
MCG brings industry-leading experience, expertise, and tools that have successfully supported merger and acquisition integration (M&A), program and change management and new business strategies across the Financial Services industry. We have been fortunate to lead successful integration programs for numerous leading organizations using a highly collaborative, data driven approach, a proven methodology and reusable PMO Integration Playbook that can be tailored to any size deal, and we welcome the opportunity to help you achieve deal success in your next M&A project.