Post Merger Integration

Transcription

1 Post Merger Integration Fatal Mistakes How to Avoid Them Steve Kaufman December 2, 2010 Copyright Stephen P. Kaufman 1

2 Symptoms of Failed Integrations 1. Cost synergies don t materialize 2. Incremental sales expectations don t materialize Customers don t want to buy (different jobs-to-be-done ) Sales force doesn t want to sell (incentives, risk aversion) Sales force synergies attrition (with their customers) Product/technology development stalls, atrophies, attrits 3. Core sales decline ( competitors eating our lunch ) 4. Turf wars break out destructive behavior staff flight 5. Integration of systems/processes faulty, slowing or immobilizing every-day-business Copyright Stephen P. Kaufman 2

3 Fatal Integration Mistakes How to Avoid Them Understand Your Specific Circumstances: 1. Be clear about underlying merger rationale and thesis 2. Unpack what is being acquired 3. Build a nuanced integration plan that treats the unpacked Rs, Ps, and Ps differentially Follow Certain Universal Truths : Copyright Stephen P. Kaufman 3

4 . Must Be Clear About Underlying Circumstances Consolidation for size and scale Extending the product line (or filling in a hole) Adding a channel or customer segment Adding a geography Adding a complementary product or technology Diversifying (balance cycles, build empires,???) Adding a new growth engine (RMM) Making serial acquisitions Relative sizes Copyright Stephen P. Kaufman 4

5 To Integrate or Not is Not An All or Nothing Issue RMM LBM Fully integrate Copyright Stephen P. Kaufman Stand alone 5

6 2. Must Unpack What s Really Being Acquired Resources are varied Customers Products Sales force Brand Technology (IP, patents, engineers, knowhow) Plants and facilities Supply chain Geography Processes Priorities (aka a new/different business model ) Copyright Stephen P. Kaufman 6

7 2. Must Unpack What s Really Being Acquired Resources Processes Product development process Customer acquisition Purchasing, inventory management, logistics systems Risk management system Recruiting, training, development, retention Project management process Priorities (aka a new/different business model ) Margin expectations Asset turnover expectations Moving the needle Copyright Stephen P. Kaufman 7

8 Arrow s acquisition of military specialist New growth engine Consolidate for scale Accounting Legal IT infrastructure Values/ethics Fully integrate Prez Risk tolerance QC mgr HR HQ Bldg Brand Sales force Purchasing Marketing Sales offices Hiring standards ERP system Arrow record keeping and metrics Their decision rules Copyright Stephen P. Kaufman Warehouse Stand alone Example 8

9 3. A Nuanced, Circumstance Specific Integration Plan is Necessary Consolidation rationale; big buys small Consolidation rationale; closer in size Serial acquirer One-off acquisition Same product but very different customer segment and buying practices Buying entry into new country Big mgmt team wins and selects limited # of small employees Best player wins; Mgmt top to bottom proportional to total Extra generous transition pckgs Normal packages Stand-alone HQ, brand, sales force, mkt g; Integrate mfg, and back office infrastructure Leave as is; infuse cash, products; retain leadership team & rel ns, Copyright Stephen P. Kaufman 9

10 Fatal Integration Mistakes How to Avoid Them Understand Your Specific Circumstances: 1. Be clear about underlying rationale and thesis 2. Unpack what is being acquired 3. Build a nuanced integration plan that treats the unpacked Rs, Ps, and Ps differentially Follow Certain Universal Truths : 6. Put sales and/or technology retention ahead of cost synergies Avoid the temptation to go for sales force synergies; usually leads to lost sales and customers Can always come back for another bite at cost, but lost sales and customers are very hard to recover 7. Remember what drives and motivates people Do I have a job? Who is my boss? How will I be paid? Speed and transparency are critical; nature abhors a vacuum 8. Big premiums are bad b/c they drive destructive synergies Fence out lawyers and acc ts; focus on the business, not Wall st. Copyright Stephen P. Kaufman