Paul J. Siegenthaler
Getting the right deal at the right price - and what about the subsequent integration ?
The above question might sound a little absurd,
and yet when it comes to Mergers and Acquisitions, all too often the focus until the deal is signed is exclusively on the deal itself,
to the detriment of the subsequent business integration process. Clearly, paying the right price for an acquisition and having the
appropriate warranties attached to the deal are absolutely key factors that determine the potential value which can be created by
combining the businesses, and therefore the return on investment which shareholders can expect to receive from the transaction. However,
not allocating time and resources ahead of the closing of the deal into preparing the business integration is a huge wasted opportunity
and is often the consequence of ignorance.
Integrating companies is like pulling out teeth
you can do it quick and painful -
or slow and painful. We shall do it quick and painful. Such were the words Jack Keenan told a startled audience of country managers
when Guinness and GrandMet merged to form Diageo in 1997. Having led large scale PMIs in his successful career, he knew well how crucial
speed and sustained momentum are when it comes to integrating two businesses, and the Diageo merger has turned out to be a huge success.
Speed (pace, rather than race) can only be achieved through thorough preparation, but many business leaders are unclear as to what
they can and should prepare. Most of them are only aware of the fact that any exchange of commercially sensitive information prior
to the closing of the deal can have catastrophic legal consequences; but what about all the information which is not deemed commercially
sensitive, and what else can one prepare and organise in the absence of that information?
There is a clear need for Client companies
to be informed and educated on the benefits of sound preparation and on the breadth of topics that can be addressed during that preparation
phase. Here again focus, resources and experience are key in knowing how best to prepare to get a head start on Day One and maintain
the thrust and energy throughout the integration process.
The steering wheel is inside a vehicle
I have witnessed M&As in which
senior management clearly saw the need for advanced preparation but delegated almost all of that work to external advisors. This is
unlikely to achieve much traction, because in the absence of any internal single-minded focus on the planning and preparation, the
managerial bandwidth of the Client company will be fully absorbed in negotiating the M&A transaction and maintaining day-to-day
business on course until the deal closes.
Regardless of the number and quality of external consultants available to provide guidance
and support with planning, process re-design and analysis during the pre-close period, there need to be an efficient interface and
clear priorities set for the corresponding internal resources in charge of the preparation. The role of the Integration Director -
a senior internal individual, or senior interim acting and perceived as an insider - should therefore commence several months before
the close of the deal, whereas in too many instances this role is appointed or brought into the organisation only when the integration
is about to kick off, thereby setting the integration journey on a bad course.