Paul J. Siegenthaler
Looking beyond due diligence
Carrying out a thorough due diligence and negotiating fair terms for the deal with robust legal warranties
is obviously a fundamental prerequisite of any successful deal : anything less is bound to result in bitter disappointment, failure
and/or legal battles. Securing a fair and robust deal is the corner stone of the future business, but the construction of that future
integrated business has yet to take place.
Whilst fully absorbed by the due diligence and deal negotiation process, the senior
management of most companies omit to maintain any bandwidth to consider and prepare the integration which will follow. When a merger
or acquisition calls for regulatory approval, which can drag on for several months, precious time is wasted during which detailed
planning and preparation could have taken place.
When Grand Met and Guinness merged in 1997, deputy CEO Jack Keenan warned his
startled team of senior executives: merging is like pulling out teeth you can do it slow and painful
or quick and painful; we
shall do it quick and painful. Speed matters: the precondition for realising a fast and successful business integration is a precise
diagnosis of what needs to be achieved, and a carefully laid out implementation plan.
Thorough preparation to achieve speed
here means far more than a project plan and list of Day One tasks. The objective is to lay the ground for a fast and effective integration
and pre-digest as much of the work as possible so as to hit the ground running on Day One. Failure to carry out this preparation will
otherwise result in many weeks or months of apparent inactivity following the exciting news of the deals completion, leading to anxiety
among the staff, impatience among the shareholders, both of which increase the companys vulnerability on the market.
detailed planning, some of the key topics which warrant thorough preparation ahead of Day One are :
- Integration programme organisation
- Optimal resourcing of the integration team, structure of the workstreams, definition of clear deliverables and
- A detailed communication plan with key messages articulated in ways that address the needs of each internal
and external audience not one size fits all
- Integration team environment : where they will work, how they will share data,
house rules applicable to the members of the integration team during their assignment
- Principles that will be applied to
the redeployment of the members of the integration team when their assignment is completed; if those principles are not defined from
the onset, the best candidates within the company will be unwilling to join the project team from fear of not being offered a suitable
position in the future organisation
- Standardised data definitions, allowing data to be compared and analyzed on a like-with-like
basis after Day One; this includes all financial data, but also manufacturing data, customer and supplier data etc. Restating existing
data in the newly defined common categories is a time-consuming exercise; doing this ahead of Day One allows the integration work
to commence immediately and therefore saving several weeks or months.
- Agreed decision rules : defined criteria by which decisions
will be made when the relevant data becomes available. This covers the selection and appointments process (so there is clarity from
the onset as to the criteria by which individuals will be selected for positions in the new organisation), but can also cover a number
of other key decision processes such as the integration of the product portfolio, office locations, systems selection, manufacturing
So how much preparation is enough ?
The answer to that question is necessarily subjective, but generally it is
far more than most companies anticipate, primarily because they are generally unaware of the extent of what can be prepared and how
much this will help them achieve a successful integration; but also because if they do reach that realisation, it is often too late
to release and mobilise the resources required to carry out this work.
Companies that have some repeated experience of integrating
acquisitions have a feel for the amount of effort that was required each time and pre-empt this for the next acquisition, making the
whole exercise gradually easier and more successful.
But theres always a first time. Given how much is at stake when a company makes
a major acquisition or merges with another firm, it is surprising that so many first-timers embark on a journey into uncharted territory
when the required experience and guidance is available on the market. Just feel free to contact me to discuss this further
if you wish.