Delivering Synergies in M&A Integration Like a Pro
Delivering on the projected synergies in a transaction is how the success or failure of a deal will be measured. Here are some post-merger integration tips.
13 May 2016
In this series, Intralinks has partnered with Danny A. Davis, an expert in post-merger integration. Danny is a director, writer and speaker whose book “M&A Integration: How to Do It. Planning and delivering M&A integration for business success” is used by business schools and companies around the world. In this third installment, Danny discusses the challenges of delivering synergies in post-merger integration.
In my last blog, I shared some tips around how to start mobilizing your post-merger integration (PMI) process for success. In this post, the final of our series, I’ll share best practices around delivering synergies in M&A integration.
Delivering on the projected synergies in a transaction is how the success or failure of a deal will ultimately be measured. The key is to have a team of experienced people on your side who can deliver on the synergy forecasts that were mapped out in the models produced by the corporate development team.
Many times, synergy estimates are based on imperfect information and guess work, but it doesn’t have to be that way. As I mentioned in my last post about mobilizing your PMI strategy, it all comes down to having the right people in place to make the assumptions a little closer to “perfect.” You need knowledgeable people on your cross-functional teams who have operational and PMI experience and can lead their respective groups to the projected milestones.
I recently spoke with a CIO who said, “We make the same mistake over and over again.” Don’t let this happen to you. Take advantage of the experience your team has and learn from your mistakes so you can make better assessments in the future.
There’s a logical sequence to synergy mapping that must to be followed. For instance, if you need to change an IT system, there’s other synergies that are tied to it which must happen first — so make sure changes happen in the right order.
Delivering Bad News
After your team completes its work estimating the potential synergies, you need to turn your high level integration synergies and strategic goals into detailed and executable plans. One head of M&A recently remarked to me, “We plan on removing 15% of our headcount post-deal; how should we do that?” The fact is, there’s no perfect answer to that question and few people find restructuring to be an enjoyable exercise. But, in PMI, restructuring and cutting headcount is simply something that may need to be done to achieve desired synergies.
If you find yourself in this situation, start by outlining how many people will be affected. Then, plan your strategy by country, division, business unit and function.
After making conscious decisions in terms of your strategy, speak with all of the department leads and inform them of the situation and proposed plan for restructuring. Then, ask for their feedback. Clear communication and decisive action are critical during the restructuring process (as is confidentiality) so it’s best to share information and gather input early as possible so that the key employees you want to retain are not left wondering about their status.
Speed of Delivery
Everyone knows that the faster you deliver synergies, the more value you realize. Time is money after all. In M&A integration, we have deadlines to hit and accelerating when you achieve them allows you to realize synergies ahead of schedule. To increase the odds of accelerated synergy realization, consider including on your PMI staff a team of experienced project managers who can manage the process carefully so that employees from both sides remain on track for key deliverables.
I also recommend providing integration teams with a structured set of tools to assist in facilitation of information exchange. Ideally, you want to be able to manage all of your information in a centralized repository that’s secure, with access to files provided on an as-needed basis. The tool you pick should capture all communications and documentation around a deal (so that you don’t have multiple spreadsheets/files laying around) and enable you to maintain a compliance archive throughout the deal lifecycle.
By now you should have all of the tips you need to deliver growth, mobilization and synergies as part of your post-merger integration. Thanks for reading this series.
Danny A. Davis
Danny A. Davis is a director, writer and speaker. Throughout his career, his experiences have included pre-deal integration planning on a 50,000 person purchase of a 25,000 person company a $6bn global deal running the European side across 30 countries, 250 business units, 26 functions, training over 100 companies on M&A integration and coaching a global telco through all its deals.