Merger Integration Advisors

Comment

Comment by Hugh Bowie III on December 23, 2009 at 1:28pm

Integration is almost an after thought for most of the folks in the room doing the deal (PE firms). When in actuality they need tech support. Goldman understands this and some bigger investment banks get it, but most of the PE firms I have presented to also have this sleepy eyed view of technology as a thing to be handled later. Corporate restructuring and change within an organization comes after the two parties agree on doing the deal.(Although with layoffs in this recession Corporate restructuring and change is very big) The bankers get the money, the lawyers get the money and now the employees get worried about pink slips. I did a (large conglomerate) Spin- off (name withheld) and they wanted exactly what the 250k employee company had in applications and services, but they had no infrastructure, data center, ERP, SCM, CRM, they were without any experienced folks whom have done a merger, and I think this is the sweet spot. Experience. (The deal was spun and the executives faced a tough reality). PE people want the deal done, the lawyers want fees to continue (by means of issue non-resolution) and the technology is part of the footprint. A firm with out of date technology is a liability not an asset. Pointing out most of the data is hand entered and not automated portends to possible fiduciary considerations. I always get calls after the deals happen they discover they have a hard to automate architecture and servers that are out of life (but contain 75% of revenue stream) create very bad deals.

I think it is up to those of us in this business to push harder at the money managers, the reality of technology-- and it is what makes the company go, the market share, products, or other IP is all supported by technology.
Happy Holidays- H Bowie

Comment by scott whitaker on November 13, 2009 at 11:32am

Members-
We have met with some fairly large PE firms in the past few months to network, and explain what we do relative to integration support. I find that the PE firms, even when you outline integration support needs for subsidiary acquisitions (aka "tuck ins"), struggle to understand why they would need such support. They are a tough sell, and I'm wondering if anyone has had any luck out there. Thx and have a great weekend.

Comment by scott whitaker on October 29, 2009 at 11:01am

W&CO_Charter09.docxAlexandra-
We try and make the "chartering process" as streamlined and efficient as possible, mainly trying to secure agreements on important things like budget, resource allocations and timing.
Attached is an example of a Charter we use, and as you will see it's pretty short and sweet.
Thx for your comment!
fyi-uploading a doc on this site is always an adventure. try me at scott@whitakercompany.com if it fails.

Comment by Alexandra Fenzl on October 28, 2009 at 2:32pm

You raise very valid points in your introduction and aiming at starting with / following some sort of Integration Charter.
I have now managed about 20 different integration / migration / consolidation and spin-off projects, typically in very short cycles due to turnaround situations with tight cashflows and need to quickly get the business back on solid grounds.
As always, I try and structure it as much as I ca, but in no case so far have been able to write up all sorts of documents that a full charter would require. And honestly - and I bet most of my peers would agree - no matter how complex the application and infrastructure environment - the people-factor will largely determine, how much rigidity and chartering you need.
Any thoughts on that?

Comment by scott whitaker on October 12, 2009 at 6:19pm

Hugh-
You make some great points below. One of the things I have always found puzzling on the IT side is the painfulness of implementing "adopt and go" type evaluation processes. IT folks seem to think that they are inextricably linked to the technology they support, and that tends to bias there evaluation. Truth is most of them are incredibly smart and could support whatever IT solution the organization decides on.

Comment by Hugh Bowie III on October 6, 2009 at 1:30pm

Hi Scott,
I have done 33 Technical integrations over the last 12 years and you are very correct in your post. An example I like is everybody in the beginning IMO/ PMO meetings of board directors are gung hoe about savings achievement and it really is a guess. In my expereince I have asked that the budgets get exposed for every dept that is represented. What I like to happen, not often, is a financial rep is assigned to each dept to go over hidden budget items. Intergration teams made up of Telecom, HR, Order entry have most of the IT use hidden in the IT budget for things like support, break fix, and those resources and budget all need deep review. Also is the selectionof technology, some teams have spent millions making certain applications "the" application for X dept. A deep dive of the technology which I coin and tradmarked as "current state analysis" looks at both sides of the properties technology ( won't bore you with the list) infrastructure to determine "out of life" applications and more robust similar applications worth saving. Another example of this was a Telecom deal I did where all HR data was stored, the mainframe application had zero outside support and was costing $1.5 million to preserve. It took over a year to get it decomissioned- which cost us savings they were expecting. To your point lost savings. Every deal is differnet, with savings and expectations. The main truth is in the budgets IT does not want to divulge.

Comment by scott whitaker on July 22, 2009 at 10:47am

Synergy Forecast Already a Bust-Try This Instead
We are always amazed at how many times we discover a synergy or “planned business benefit” forecast that is already a bust a few months into integration.

The typically symptoms of a plan off track are poor reporting, dispersed liability, and inflated numbers that no one really signed up for in the first place. Executives are quick to point out that the synergy numbers in the deal deck were “aggressive”, and that there was little done to stress test the forecast before it was declared final and communicated to the street or key stakeholders.
Ever wonder why companies fail to achieve forecasted synergies nearly 80% of the time-not hard to understand given the common instances above.

Make synergy realization a reality in your next acquisition by spending some extra time on the following:

Due Diligence Stress Test: Give your integration team (if you don’t have one-get one) a copy of the forecast and have them start analyzing the impact of the integration strategy and timing on the synergy forecast. If possible, have them explore some of the key assumptions and planned benefits to see if realization timeframes are well…realistic.

Tracking and Reporting: Synergy realization should rely on robust reporting that rolls up from each function, and includes cost to achieve budgets and a master spreadsheet that details timing and forecast variances. There should be a version of all this suitable for executive reporting so synergy tracking is visible and actionable.

Accountability: Probably the easiest but most often fumbled part of the process. Synergy targets need to be assigned to individuals, who are then help accountable thru regular reporting and forecast updates. Make sure each planned synergy or business benefit has an owner-and that the owner understands their deliverables.

Make Synergy Extraction part of the Integration Plan: Make synergy tracking and reporting a primary function of your IMO (Integration Management Office), and part of the overall integration plan. This will ensure it receives the proper amount of attention each week, and will allow you to address variances quickly for escalation.

What other methods have you tried that have worked here?

Scott Whitaker is President of Whitaker & Company, Inc., an Atlanta based consulting firm providing post merger integration expertise, tools, templates and playbooks for companies undertaking frequent mergers and acquisitions.

Email: scott@whitakercompany.com