Using functional work streams to implement M&A vision
By GPMIP
Mergers and acquisitions are tricky. They can bring your company to a higher level, but the statistics about failures call for prudence. A successful M&A needs two things:
– A clear M&A strategy
– A solid integration approach and execution
Successful mergers and acquisitions effectively blend the strategy, guidance and governance provided by top-down leadership with bottom-up planning and execution driven by functional workstreams, as well as a deep understanding of both companies and how to merge them.
The functional work streams play an important role in integration. How do you define functional work streams, and how do you optimize them?
At Global PMI Partners, GPMIP MobilizationSM provides a comprehensive platform that addresses these questions, enabling clients to plan and execute all facets of an M&A transaction, including acquisitions, integrations, carve-outs and internal capability builds.
Functional work streams can be seen as the third layer in the governance structure of an integration:
– An executive SteerCo (integration steering board) will show the way.
– The IMO (integration management office) manages the integration and defines the integration strategy.
– Functional work streams will implement the integration into every function of the company.
A merger or acquisition should lead to better solutions for clients, improved customer support for those clients, more rewarding careers for employees, more attractive returns for shareholders. To make sure this happens, relevant functional work streams have to be defined.
Workstreams
There are different kinds of work streams. We focus here on the functional work streams: HR, finance, IT, … that drive integration tasks.
In addition to functional work streams, there may also be a need for any number of specialized work streams:
- Geographical streams, for specific regions or territories that need more attention for some reason
- Mission-based work streams address a mission that impacts the whole company (supply chain, innovation, …) , mostly strategic business-related tasks
- Synergy work stream, that manages synergy capture as a central work stream to embed this effort within the respective functional streams. Synergies are an important goal in every M&A, the sum of two companies should be more than the results of the two parts. Looking for synergies in every stage of the integration is therefore a priority. This should thus be part of every functional work stream, but can also be a separate work stream. The decision to have one or not, depends on the scope and complexity of the integration, and on the experience of the organization with cross-functional projects and cooperation.
Functions
The number of functional work streams and the definition of each work stream depends on the specific situation of the companies and the integration. These are the typical ones:
- Finance: Accounting, treasury, tax, compliance, working capital optimization. Is legal part of this work stream or a separate one? Determine protocols for legal matters, such as contracts or intellectual property.
- Human Capital: Roles and responsibilities, compensation, headcount, retention, procedures, HR systems, unions, culture analysis. How do we keep the employees we need, how to align pay and benefit, create a common culture and facilitate the transition of the target company into the acquirer.
- Information and Communication Technology: ICT strategy and roadmap, organization, infrastructure, telecom, emails, systems.
- Product: Defining the high-level product direction for the combined organization that will achieve industry leadership. Linked to that is a possible work stream technology and operations. How do we organize this and what assets do we need?
- Operations: Products infrastructure analysis and roadmaps, tools, R&D, supply chain, logistics, quality. A first decision would be about the locations of the new entity.
- Marketing: Products, pricing, branding, PR, websites, go-to-market strategy.
- Sales: Bundling opportunities, two ways training, customer segmentation, sales support, channels, partnerships. Client retention is an important aspect: what clients do we want to keep and how do we do this?
Workstream Implementation
The integration management office (IMO) coordinates and manages the whole integration. In regular meetings with the IMO, the work stream leads provide updates on delivery performance, recent activities, upcoming activities, active issues, issues where help is needed, risks, necessary budget, etc.
To do this successfully, the work streams should be properly organized and equipped. A work stream should be led by two heads, one from the target company, one from the acquirer, and include members from both acquiring and target organizations. The leaders should determine the needed resources, build and manage the team, ensuring needed expertise and knowledge are assembled.
For such a team to achieve optimal results, common sense conditions have to be fulfilled. There should be clear goals. These goals should be accompanied by a timing for implementation. Team leaders and members should have enough time to do what they need to do. Internal and external resources and support should be offered. Synergies should be identified and defined and allocated to specific work streams. All tasks and requirements should be detailed by work stream so that each responsible person takes ownership of the deliverables set out in the integration plan.
It’s useful to work with a charter. Work stream charters clarify the roles and responsibilities of each functional work stream, what is part of the integration, anticipated resource requirements, key interdependencies with other functions, and an initial set of Day One milestones to close the transaction. The chartering process enables work streams to crystallize integration objectives, setting the stage for detailed work plan development and execution.
In this way, work stream efforts are clearly linked with integration objectives and deal value drivers from the start, ensuring work streams are focused on the tasks that will drive realization of deal rationale and synergies.
IMO governance, work stream composition and chartering are three vital components of setting up functional work streams for success, maximizing contributions and results, while minimizing frustration and wasted effort. The GPMIP Mobilization process guides clients through each step of this process, ensuring efforts are clearly aligned with deal value drivers and synergy targets.
It’s clear that the whole process of work streams demands work, discussion and control. But this work certainly is not in vain: it helps to clarify your vision and goals concerning the merger, and the way to get there. The better this work is done, the better it’s tailored to your situation, the better the final result will be.
