Paul J. Siegenthaler

Lessons Learnt : The Benefit of Experience


"To rectify past blunders is impossible, but we might profit by the experience of them". (George Washington)

Integration vs. daily business

M&A can be an accelerator of growth, but it can also lead to the demise of a business if badly executed. It matters to get things right the first time. Integrating all aspects of two companies until they blend into a seamless organisation is not “business as usual”, but it is an exciting venture and one can understand why many business leaders and entrepreneurs are keen to dig their own teeth into a programme that will transform their company. The problem is that this can lead to a dangerous lack of focus on the underlying commercial and financial performance of the business which could adversely affect its results. Any dip in on-going performance will cause all hands to be called back on deck, to the detriment of the integration effort. Losing the integration’s momentum will cause it to drag on, increase its cost and most probably end in failure as personal energies wear out.

The majority of mergers and acquisitions fail to deliver the business case they had promised when the shareholders approved the deal, thereby jeopardizing the company's growth strategy. A study by McKinsey estimates the failure rate to be as high as 80%. And yet, companies that could be classified as “serial acquirers” repeatedly achieve a successful integration – this proves that these companies are doing something which failing first-timers seem to overlook. My involvement in numerous post-M&A integrations has revealed the extent to which most companies ignore how much preparation can take place before the close of the deal, how much and what type of resource is needed to carry out the task, how to organise the integration programme and, above all, how to manage the dual focus of integration work versus day-to-day ongoing business.
 
Strong leadership at the helm of the organisation and a clear segregation of duties between the integration effort and daily business are the two most single important factor of success in the companies I have integrated.

The Art of business integration

I consider business integration to be an art, because it requires the combination of skill and talent. The “skill” element relates to the techniques, tools and experience which contribute towards a coherent integration process. The “talent” relates to leadership skills : the ability to rapidly grasp the big picture and consequences of a particular business situation, to draw conclusions and make decisions rather than remain paralysed in analysis, and very importantly the ability to communicate effectively and “walk the talk”.
 
The skill set required to run a successful business is partly different to that needed to drive an effective post-M&A integration. I specialise in the latter, as a result of an evolution that saw me focus exclusively on large scale M&A integration and business transformation initiatives since 1997, after having managed successful business during the previous 17 years including two successful turn-arounds. Whilst my passion and key ability are now anchored in the M&A integration space, I understand the imperatives and reality with which business leaders are confronted, and therefore adopt a pragmatic and results-oriented approach to my work rather than force academic models onto a business.
 
More resource and effort than one would think at first …

Many integrations fail because the effort and resources that are required for a successful implementation are usually underestimated. Companies that are about to merge or make a significant acquisition receive abundant advice from hordes of consultants, each of them urging their Client to take on a large number of additional resources to cope with the forthcoming surge in everyone’s workload. This is viewed by many companies as a ploy to maximise the advisors’ earnings, and consequently their recommendations will often be dismissed. The only way to minimise the need for additional resources is to set ruthless priorities and define precisely the scope of the integration programme, failing which it will tend to sprawl and consume more resources or last longer – both of which will result in far higher costs than initially anticipated.
 
The main impact of being short on resources is that people run out of time : time to plan, time to prepare communications, time to re-think the company’s ways of working time to explain and time to listen to feedback and ideas.
 
Other causes of failed business integrations stem from poor cross-functional cooperation, but this is usually due to the way the project teams are organised. There are very effective ways of overcoming this problem, which I have tested a number of times.
 
And finally, the key source of failure is that integrating two merging businesses is a new experience for most people : they do not know what to expect, they have no sense of where the hurdles lie, they cannot diagnose problems that are beginning to surface before it’s too late. That is why repeated experience of such situations can be of great value – it provides you with that crucial foresight and thereby avoids so many bitter regrets in hindsight : that so important “if only I’d known before”.

My role : providing the expertise and experience where it is needed

This is the value I can bring to company integrations during mergers or significant acquisitions on an national or international scale. I have been there before – a great number of times. I can help people prepare and plan for the forthcoming integration, steer them through the implementation, organise them in a way that will allow effective cross-functional collaboration and enable a thorough re-thinking of the company’s processes and ways of working, set-up effective communication and stakeholder management, and act as an effective interface between the Company and the external consultants assigned to specific aspects of the integration.
 
Crucially, my focus on the integration process allows my Client’s management team to concentrate primarily on running the day-to-day business and protects it from most of the disruption many companies suffer during a merger or acquisition.
 
Defining success

The desired outcome is reached when in addition to delivering the business case, the integration can have taken place in an orderly manner that has retained knowledge and key staff, has provided a number of people in the organisation with an opportunity for self-development, and more broadly has given the organisation a level of comfort in executing the integration that generates an appetite for future similar acquisitions and a continued acceleration of their growth.

I would be glad to discuss this in further depth with you, exchange notes and ideas, just because I am passionate about this topic. Or we may even decide to embark on the journey together.      
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