Best Practices In Merger Integration

Best Practices Summary

• Establish Strategic Framework for Decision Making

Dedicate Integration Resources

Frequently Assess Cultural Progress

Communicate Early and Often

— Spell out “Non-Negotiables” as early as Possible

Jointly formulate a 100 Day Integration Plan

Communicate to all Employees, Customers, Suppliers

• Measure Performance Versus Proforma

Focus on Priorities

Objectively and Systematically identify the highest priority Synergies

Those with Highest Value + Probability of Success

Move Quickly – everyone is expecting changes

Key Steps in Acquisition Integration

Align Strategy

• Understand Acquiror, Target and Deal Synergies

• Define Success

• Confirm Leadership Commitment

Identify Culture

• Assess Cultural Differences

• Identify “Keeps” and “Gives” for Both Organizations

Dedicate Resources

• Create A+ Teams to Lead Integration Initiatives

• Agree Roles & Responsibilities; Tie to Strategy

• Measure Team Performance and Task Completion

Initiatives/Action Plans

• Define and Prioritize Initiatives

• Develop Detailed Action Plans for Achieving Synergies

Execution

• Define Desired End State

• Set Metrics and Monitor Team Progress

• Transition to Operations

Manage Information

Aligning Strategy and People

Timeline

Figure 1: Timeline

The Wrong Way

Figure 2: The Wrong Way

The Right Way

Figure 3: The Right Way

Dedicating Resources

Figure 4: Dedicating Resources

Cultural Considerations

Cultural integration…

— Spans all functional areas

— Is not an event; it is an interactive, complex process

— Takes a long time

Commitment is critical to success

— 80% of integration problems relate to cultural issues

Teamwork is important throughout

When in doubt, err towards over-communicating

Ways to Reinforce and Create Culture

1. Rules and Policies

2. Goals and Measures

3. Rewards and Recognition

4. Staffing and Selection

5. Training and Development

6. Events

7. Leadership Behavior

8. Communications

9. Physical Environment

10. Organizational

Communication

Focus on formulating and telling the story

Consistency and frequency of communication is key

• Target personnel have often been disappointed by previous buyers

Introduction should start broad then narrow to functional information

Understand the impact of integration on the business – burnout is often an issue

Initiatives and Execution

Figure 5: Initiatives and Execution

Implications of Legal Documents

Definitive Agreement

Earnout structure and measurement

Revenue and gross margin versus EBITDA

Months, not years

Post-closing tax matters

Transition Services

Encourage and incentivize rapid decoupling of systems

Penalties for delays

Employment Agreements

Incentives – sales, stock-related compensation, bonuses

Address potential for departure, role shift

Signed by close of deal

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