Serial acquirers and companies engaged in roll-up/build-up need to define the strategies upon which an M&A integration playbook is to be built. Let’s explore the 3 most impactful strategies:
- Leadership and key stakeholder alignment
- Focus on the value to be created by the acquisition
- Define an integration methodology that fits the rationale
Leadership and key stakeholder alignment
If you are contemplating an M&A integration playbook you have already crossed one bridge as lack of pre-planning is one of the top 10 integration mistakes.
“Good integrations are built top-down”
“Good integrations are built top down” is a mantra often repeated by us to our clients. Middle management who is often tasked with the core activities in an integration cannot effectively start analyzing or planning if the leadership and key stakeholders have not aligned and agreed on:
- A written down formal integration strategy
- The scope, objectives, and effort of the value creation activities
- What workstreams and key integration activities are to be prioritized and resourced?
- How is success to be measured in 6, 12 and 24 months?
The M&A integration playbook needs to have milestones early on in the integration that cannot be passed if the above alignment has not been met. What is needed in the playbook is for the leadership to spend time together discussing the business and the integration. The playbook should define the alignment that is needed and how it is to be facilitated and documented in the integration management office. The urgency of the alignment post signing/closing depends on the transaction, e.g. was it an auction, a public traded company and how much time have the leadership and key stakeholders had together. Key stakeholders could be owners, the board, key suppliers, key partners, managers and functions not represented in the leadership team. The middle management in acquiring and target will be empowered, enthused and engaged if this is done right.
The key is to do this alignment as quickly as possible without losing momentum in the business or in integration. The methods and tools used to achieve alignment could be strategy sessions, surveys, agreement on growing markets/opportunities, product and portfolio discussion, profitability/pricing and value chain assessment, access to talent, and so on. This alignment is not meant to achieve 100% clarity on these areas, but to focus the integration on where and how the leadership wants to create value and state what is out of scope. The alignment should also result in how much the leadership will spend on the integration with a plan and outline for how the organization will look like during the integration and in the end-state.
Focus on the value to be created by the acquisition
There are many internal and external events that can derail an integration. A focus on and agility in creating that value have to be built into an integration playbook.
“Focus on and agility in creating value”
The keys to success are:
- Value creation/synergy program management
- Formal measurements
A lot of actions in an integration falls in their correct place if you focus on the value and have a stringent structure to follow-up the synergies. The synergies need to be analyzed and validated by the line management according to the playbook at the acquirer and target. Resources allocated, cross-functional teams formed, and responsibility need to be assigned. This is all collected in a synergy program that is driven and tracked by the Integration Management Office. Sometimes you can call-out the synergy workstreams in your communication, e.g. Sales and Product Management.
The value expected from the acquisition and the importance of also deliver on the current business plans (BAU – business as usual) need to be communicated repeatedly. Celebration and communication of the value created in e.g. quick wins, milestones achieved and those responsible featured, are good ways of sustaining that focus on value. However, refrain from communicating about cost synergies and treat them as normal course of business.
The playbook should also include formal measurements that are consistent across all acquisitions and that are reported to board and owners at regular intervals. The baseline for the measurements is the acquisition business case, shareholder value created, the underlying business plans and the end-state that you are to deliver. Other good KPIs to track are employee churn and engagement, customer/partner satisfaction and engagement with extra surveys.
Define an integration methodology that fits the rationale
Last, the most impactful strategy in an integration playbook (and in Due Diligence and transaction) is that the methodology fits the deal rationale.
“Use a methodology that fits the deal rationale”
You might have two or more playbooks with different methodology depending on how you value employees, customers, suppliers, partners, products, services, culture, R&D or core IT, HR and finance infrastructure. Do not expect the integration team and the line management to be able to make a good call on which methods are best used on the fly. They might just use the actions and methods of previous acquisitions without reflecting. Plan and think through different integration scenarios ahead, discuss and use data at hand to formulate which key methods and guiding principles to use in your business and deal rationales.
Use lessons learned to improve the methodology after each integration.
In summary, align the leadership, focus on the value and use a methodology that fits the deal rationale in your integration playbook.
Michael Holm is a Partner at Global PMI Partners, an M&A integration consulting firm that helps mid-market companies around the world bring their operational, technical and cultural differences into alignment. Global PMI Partners has a reputation for delivering exceptional consistency, speed & customized execution on the complex operational, technical and cultural issues that are so critical to M&A success.