Over the past two decades, arguably no area of M&A has been transformed as dramatically as that of the post merger integration (PMI) phase.
This is in part due to a recognition as an important value driver in transactions, but also the emergence of the Integration Management Office (IMO), a specialist ‘crack team’ put together by the acquiring company to ensure that the integration is as successful as possible.
The arrival of IMOs has seen integration times for deals from 3-4 years to around 18-24 months, often amounting to millions of dollars in synergies (not to mention, saving acquisitive CEOs from the chopping block).
This article looks at how to achieve the right integration team structure.
Readers may also find a previous DealRoom article that addresses the people challenges that arise at the integration phase worthwhile reading in tandem.
DealRoom helps dozens of companies organize their integration process and here we’ll show something that could be useful for you as well.
Why create an integration management office?
Having reached the end of due diligence for a transaction, the last thing most owner managers will want is the prospect of a further several months of intense transaction-related work.
In crude terms, many will want to ‘get down to business’ as soon as the ink on the share purchase agreement is dry.
We have news for these go-getters: Integration is a key part of ‘getting down to business’ and it begins with putting the right people in place to implement it.
There are several benefits to putting this integration crack team in place, including:
- An efficient, well-organized IMO maximizes your company’s chances of delivering the transaction’s projected synergies within a reduced timeframe.
- An IMO is responsible for creating a structured overall integration plan, including the projects that constitute the integration, and how to communicate it to the relevant stakeholders.
- Closely related to the above, the IMO defines processes such as the functional work plan reviews, cross-department collaborations, and more.
- The IMO puts targets and controls in place that allow your company to track and measure improvements, as well as address areas of weakness in the post-merger period.
The people on your M&A integration team
Before talking about who should be on your M&A integration team, it’s important to note that the autonomy you provide this group is almost as important as its constituent members.
An integration team is only as good as the access it has to different functions within the business.
To this end, for every member of the IMO working on the integration, there has to be a corresponding member in the functional area that acquires the documents, data, and information they’re searching for.
Once the IMO’s autonomy and access has been established, you begin to put together the team, each of which should have clearly defined targets and responsibilities.
The team is usually composed most of, if not all of the following:
- IMO Manager: This may be a hired consultant who has successfully overseen previous integration projects.
- Industry Specialist: If the transaction has involved two teams from different industries (or industry segments), it’s worthwhile having an in-house expert to answer questions to bounce questions off.
- Legal Counsel: Although most of the heavy lifting has been performed by the integration phase, several legal issues will arise (not least around dismissals), meaning it’s a good idea to keep expert legal counsel within touching distance of the process.
- Functional Team Leads: These typically include some combination of leads representing Finance, Legal, Sales, and Operations.
The roles of each IMO team member
Although it appears a catch-all answer, the role of each IMO team member will differ depending on the transaction.
By way of example, in his/her role in the integration phase of one transaction, the IT function lead may have to ensure that two totally different IT systems are properly integrated; on another transaction, the systems may be the same, but the issue is deciding how many seats the new organization should have, or which parts of the IT department are overlapping.
In general terms, each IMO team member should:
- Develop a work plan to achieve agreed upon goals of the integration for a specific function
- Coordinate with their point of contact within the functional area
- Coordinate with other members of the IMO team on cross-functional areas (e.g. finance technology, legal aspects of HR function, etc.)
- Collaborates with the IMO team to achieve wider goals (particularly on timelines, delivery, and communication).
- Address unforeseen issues that arise in their functional area as soon as they arise.
Measuring the success of integration in M&A
Put simply, the measure of a successful integration phase is a transaction that achieves the targets that were set out when the acquisition was first agreed to by the buyer.
This includes everything from revenue and cost synergies, to growth, enhanced quality of earnings, and of course, a harmonious cultural evolution for both companies involved in the transaction.
Good merger integration management practice is to use KPIs to track this progress. Useful KPIs here include:
- Key customer retention
- Key employee retention
- Employee satisfaction index (based on surveys)
- Actual vs. Budget (across all functions)
- Cost synergy savings 850
How DealRoom helps to organize the integration process
As the previous paragraphs have outlined, the integration process demands a high level of organization, which is why specialized teams are charged with its implementation.
With several members to a typical integration team, each bringing data and findings from a myriad of different sources, it’s important to use a tool like DealRoom to manage the post-merger integration process.
Among its other benefits that are custom-made for integration, DealRoom:
- Jump-starts the process with pre-built integration playbooks, providing teams with roadmaps for how to conduct their integration process, removing several hours of planning in the process.
- Enables integration teams to build on existing integration playbooks with their built-in preferences or begin from scratch on new acquisitions,
- Incorporates easy-to-use functions that allow integration participants to plan step-by-step, assign responsibilities, and track the ongoing status of tasks and projects.
- Includes GANTT charts for successful project management.
- Syncs with Slack to provide an enhanced level of collaboration unavailable on any M&A integration tool
The team that you assemble for the integration phase is every bit as important as your M&A deal team.
Putting together the IMO during the due diligence phase ensures that they can begin planning how to seamlessly integrate the two entities as efficiently as possible.
Make the integration team as involved in your transaction as possible and watch the value that it adds to your transaction play out over time.