Post-Merger Integration, Part I

Integration Process
Michael H. Grote

January 2020
M&A LL.M.

©Frankfurt–School.de

schedule

 Post-merger integration prepared with BCG‘s Norbert Gittfried, (then)

EY‘s Samy Walleyo, (then) Deekeling Arndt Advisors‘ Sebastian Krämer-
Bach, and others

©Frankfurt–School.de 1

1
 Most mergers and acquisitions fail to realize their value

Most M&A transactions destroy value: … in line with empirical findings and
results of recent BCG study academic studies' results

% of deals analyzed Transaction itself absorbs most of the company’s energy:

80 CEO and organization focused on consummating the
Announcement effect1
deal, not on making it work
64
Value is created not in the transaction itself but in
60
successful implementation: catastrophic failures are rare,
but failing to realize the potential value of the merger is
common
40 36
"Many studies of mergers, stretching back to the last
century have shown that, despite some successes, the
20 overall record is decidedly unimpressive"
The Economist

0 "In 57% of these merged companies, return to

Value destroyed Value created shareholders lagged behind the average for their
industries"
The Harvard Business Review

1. Performance Index from five days before announcement to five days after compared to market average
Note: Sample size = 277
Source: VM research system; SDC; Compustat; BCG study "Winning through mergers in lean times"
2

There are several drivers for mergers &

acquisitions
Focus on core
Scale Scope Skill Market
business

► Cost degression ► Extension of ►Enlargement of ► Market leadership ► Separation of

► Clearing of cost product portfolio know-how basis ► Avoidance of a units for the
overlaps ► Geographical - New company takeover purpose of
coverage competencies business focusing
► Securing of - Knowledge ► Prevention of a
investment pursuit ► Risk diversification bundling competitor‘s
► Optimization of market entry
►Access to
capital structure
- limited resources
► Critical mass
- established client
base
- working
infrastructure

Successful Transaction

Increase Market Share Improvement of Corporate Management Risk Diversification

Increase Company Value Efficient Production Platform …

3
3

2
Four fundamentally different objectives need to
be managed to achieve a successful integration

Successful integration

Value creation of combined company > what both parts could

achieve as independent firms

1. Ensure expected 2. Design and build 3. Convince 4. Continue day-to-

"synergies" and the new employees and day business
value creation organization bind key people
opportunities are
realized

Systematic process critical for successful integration

Source: BCG
4

A typical merger challenge

Merger carried out … but the immediate effect

to increase value… will be to reduce value
Near-term, improve earnings by For employees of both companies, the
• Cutting costs merger initiates a period of insecurity
• Increasing revenue • Preoccupation with merger greatly reduces
productivity
Long-term, improve earnings by • Fear of the unknown causes demotivation,
• Increasing scale/market position defensiveness, exit
• Revised strategies • Obvious for cost-related synergies
• Building the capabilities required to pursue
the chosen strategy The same is likely to be true of customers
and suppliers

Value-creating PMI management needs to ensure targets

are met whilst addressing the broader challenges

3
 A successful post-merger integration depends on key
levers

Ability to think • Horizontal extensions

strategically • Vertical integration

Objectivity in setting targets • Economies of scale

for rationalization • Asset restructuring
• Re-organization

Attention to outlying businesses

• Key decisions for businesses away
and geographies
from centre

• Functional platforms
• Communication
Experience with integration basics • Use of teams
• Management of human dimension
While optimum approach requires a custom emphasis and blending of these
levers, the tasks underpinning each lever have much in common

Source: BCG
6

The complexity, the synergy potential and the potential

integration gap strongly depend on the integration level

None Selective Full

A/B
Integration
A B A B A/B
level

A/B

► No change in business ► No change in business ► Alignment/Integration of

strategies strategies business strategies
► No change in organizational ► Minor changes in ► Full integration of
structure organizational structure organizational structure
Key ► All core business functions ► All core business functions ► All core business functions
characteristics remain stand-alone remain stand-alone integrated
► All support functions remain ► Selected overhead and back ► All overhead and back office
stand-alone office functions integrated functions integrated

Complexity
Low Medium High
level

Synergy
Low Medium High
potential

7
7

4
Anticipate and manage change to achieve results
Be proactive about predictable bumps along the journey

Copyright © Jeanie Daniel Duck 2001

Source: BCG
8

There are 12 imperatives for PMI success

1 Define first principles—the objectives and philosophy of the

merger—and design the PMI to reflect them
2 Manage the PMI as a discrete process, separate from the day-to-day
running of the business
Set the direction
3 Organize PMI teams to mirror the value drivers of the merger—and
staff them with the best people
4 Insist on senior leadership that is active, committed, and highly
visible

5 Maximize cost synergies but plan for revenue synergies as well

Define explicit cost and revenue targets and revisit them continually
Set the direction 6 throughout the PMI

7 Retain current customers by making them an integral part of the PMI

process

Manage talent—by selecting, retaining, and developing the best

8
people for the new organization
9 Design a workable organization structure for the combined company
Recognize that PMI is an exercise in change management
Set the direction 10
Assume that it is better to have "too much" communication than too
11 little
Manage the integration of organization culture with the same
12
discipline and rigor as the operational and financial integration
Source: BCG analysis
9

5
 1 First principles
Define first principles – the objectives and philosophy of
the merger using the 5 S's

STRATEGIC LOGIC
of the deal

Long term ("strategic") Short term ("operational")

SPEED SPIRIT SYSTEMS/PROCESSES

of integration of integration to be chosen
"non-
"Take "Time is "Merger "nego-
"Takeover" nego-
your time" money" of equals" tiable"
tiable"

SCOPE
of integration
"Few
"All at
units or
once"
none"

Source: BCG analysis

10

2 Process

Manage the PMI as a discrete process

Integration
Data gathering
design and
Setup and opportunity
implementation Implementation
validation
planning

• Establish team structure

Integrate the • Define preliminary • Build detailed • Implement changes to
• Define integration logic
business integration plans integration plans the business
and approach

Design and
• Launch project • Start integration • Validate complete • Track and measure
manage the PMI management office planning process integration plans implementation
program

• Validate initial synergy • Track delivery of

Deliver financial • Set top-down synergy estimates by teams • Define bottom-up
synergies against
impact targets synergy plans
targets

• Define entire
Manage people • Design a strategy for • Define top-level • Implement HR
organization structure
transition managing talent organization structure processes
in deatail

• Create a communications
• Launch communications
Communicate plan for internal and
activity
Communicate, communicate, communicate
external stakeholders

11

6
Six modules have to be set up to efficiently
steer an integration project

►Steering
committee
Overall and staffing
project
►Streams/work
structure
groups and
►Master and staffing
milestone
planning
Project ►Activity
planning
►Detail-level
Project controlling and controlling
planning of
planning streams/work and ►Project status
groups Project Management reporting reporting
►Work group Office
charter Project
Management
Office(s) ►Synergy/Cost
(PMO) controlling
process
Communi-
►Communication/ Synergy/
change master ►Mapping,
cation and Cost
plan evaluation
change ma- controlling and
nagement ►Communication/ and documentation
change tools reporting of measures
►Reporting

►PMO structure structure

Setup of the
Project ►PMO core
Manage- processes
ment ►Methods,
Office templates, tools

12
12

The role of a PMO needs to be clearly defined and

communicated to and accepted by the overall project

Project structure Roles and responsibilities

Steering Committee
► Definition of overall objectives
► Key decisions
► Acceptance of results
► Board for escalations
Project Management Office (PMO)
► Coordination of project procedure
► Coaching/moderation of chosen work streams
► Steering of topics in regards of content
► Reporting and risk management
► Communication
Functional Teams (2-6)
► Conducting analysis
► Working out concepts/solutions
► Bringing in company details/ specifics (structure/
products)

► Clear definition of project organization ► Different levels in the project organization have
► Identification of steering committee, project different responsibilities
management, stream leads and team ► Definition of steering competencies of each
members level
► Key people as driver for the streams ► Taking cultural aspects into account
13
13

7
Important part of the project governance is
clear project structure
Definition of the PMO structure Definition of core processes Methods, tools, templates

Definition der Projektmanagement-Office-Struktur Definition der Kernprozesse

• Statusberichte Board/Kon-
Zentrales PMO Zentrales PMO • Risiko, Issue- und Monatlich, zern
Change-Berichter- Quartalsweise
A
A stattung
• Lösungs- Lenkungs- #
1
Activities
Organisation
Priority D ecision Location Who When Deadline Status

Zwei- ausschuss #
1 .1
Activities
1 ..2
D evelo p interim org aniza ti on
D efine rul es, ro les and resp onsi bili ti es for in te rim organ ization Priority Decision Location Who When D eadline Status

B C vorschläge wöchentlich
1
1 .1
1 ..2
1 .3 OrganisD

1 .5 D efine rul
ation
1 .4 D evelo pCinterim
Eva
evelo p and imp leme nt rep orting syste m for in te rim so lution
ommun
es,luate
orga
icate
rol esstructu
nizatio n org ani za ti on
interim
and respo re ofnsib ilitiess
b usine s for interim org ani za ti on
u nits
1 .3 D evelo p and imp lemen t repo rti ng system for interim sol ution

• Pläne
1 .4 2 C ommun icate interim
Infras tructur e org anizatio n
1 .5 2 .1 Eval uateDstru efinectuacce
re o fss buosiness
f entitleun its for the syste ms
ment
2 .2 C heck pro cess o f trip admi nistration a nd if n ecessary ada pt the pro cess

• Entscheidungen
2 Infras
2 .3 truc tur eC ontribu te the ad aption o f the tri p organ ization
2 .1 2 .4 D efine acce C heck ss ofal lentitleme
p rovide rnt cofor th e systems
ntracts
2 .2 C heck proce ss o f tri p admi nistration an d i f ne cessary a dap t th e process

Lokale PMO (s)

2 .3 C ontribu
Hum anteRthe ad aption
ces of th e trip o rgani zati on

Übergreifende
3 ecour

• Leitplanken
2 .4 3 .1 C heck allApdminis rovide rtration
con tra cts
3 .1 .1 D etermin e H R stru cture /re porting

Projekte Wöchentlich
3 Hum
3 .1 .2an Re cour Orgaces nize hum an resou rce d ata base an d a rchive

Projekte Lokale PMOs und Zentrale

3 .1 3 .1 .3 Administr
3 .1 .1 3 .1 .4 D etermine
ation re/softwa re requi remen ts?
H ardwa
H R structure/rep
C ompa ti bili ty with WITCOorting data?

• Standards 3 .1 .2 3 .1 .5 Orga nizeChuma

3 .1 .3 3 .1 .6 H ardwa re/softwa
ompl eten resource
R esol ve ire
H R datada
re qui
ssue
ta b ase and arch ive
base
ofrements?
tran sfe r o f perso nnel re cords from WITCO

lokale Projekte Projekte 3 .1 .4 3 .1 .7 C ompa tib

3 .1 .5 3 .1 .8 C ompl eteInde
Cililea
ty nwith
sl ate
H Rmnity
WITCO
d ata ibase
ve rsusd ata
ssu es
?
constructive know ledg e?

• Prinzipien
3 .1 .6 3 .1 .9 R esolve C i ssue
reateofadd transfer of person
ress/merge nelnreco
li st of rds from
ew empl oyeesWITC O
3 .1 .7 3 .1 .1 0C lean sl ateSe nd ve rsus
out emplco nstructi ve knowl
oyee data sheeedge
t/emp ? loyment app licatio n
3 .1 .8 3 .1 .1 1Indem nity issu etion
C ompl es an d re tu rn of emp loyee d ata sh eet/a ppl ication

Projekte
3 .1 .9 3 .1 .1 2C reate add Ideress/me
ntify conrge tactlist of n ew
person foremplo
HR ad yees
mini stra tive i ssues/que stio ns
3 .1 .1 0 3 .1 .1 3Se nd outCemploommun yeicate
e data andsheet/empl
po st HR oymentcontactanumbeppl ication
rs/a ddresse s a t sites

• Programm- 3 .1 .1 1
3 .1 .1 2
C ompl eti on and re turn o f emp loyee da ta she et/ap plica ti on
Ide nti fy contact person for HR adm inistrative issue s/q uestion s
3 .1 .1 3 3 .2 C ommunPolic icateiesanda po nd stPrHR contact
oc edure s n umbers/ad dresses at si te s

Meilensteine 3 .2
3 .2 .1
3 .2 .2

3 .2 .1 3 .2 .4 R eview Gold
R eview Gol dschmid t new h ire proce dures
Ph ysi cal exami nation ?
3 .2 .3 PoliciesDarug nd Pr oce dure
screen
schmidt
? s
newng? hi re proced ures
Orie ntati on/traini
3 .2 .2 3 .2 .5 Ph ysi calCexami ond uct nation
comp ? arison b etween WITC O an d Gol dschmi idt p olici es and pro cedure s
3 .2 .3 3 .2 .6 D rug screen C ompl ? iance w ith Pu rchase Agree ment
3 .2 .4 Orie nta ti on/tra ini ng?
3 .2 .5 C ondu ct comp arison be tw een WITC O and Gold schmiid t po licie s an d proced ures
3 .2 .6 C ompl iance wi th Purch ase Agreem ent

► Alignment of the PMO structure ► Definition of the core processes ► Communication of the
with the project structure and for reporting cycles and operational approach for
circumstances on site (national- structures integration (e.g. PMI
international) ► Escalation mechanisms handbook)
► Steering competencies of the ► Risk/issue handling ► Definition of consistent
individual PMOs in relation to the standards for the integration
streams/work groups, especially ► Level of involvement in relation to project (activities log,
for cross-sectional topics content (moderator, coach, …) presentation, minutes, etc.)
► Staffing (skills and capacity) ► Global availability of data and
information and access from
various sites (web-bases
Project Office)

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14

Project planning and the definition of deliverables form the

basis for the management of activities
Detail-level planning of
Master and milestone plan Work group charter
streams/work groups
Produktions-
Teilprojekt Arbeitsgruppe Konstruktion AG-Leiter Dr. Senf
bereich 1
Jan. 06 Feb. 06 Mar. 06 Apr. 06 Mai 06 Jun. 06 Jul. 06 Aug. 06 Sep. 06 Okt. 06 2006
Vorstandssitzung Zielsetzung Arbeitsgruppen-Mitglieder (Kernteam)
zu PMI Aktivitäten/Meilensteine Jan Feb Mär Q2 2. Hj
05.01. • Verständigung auf einen Produktionsprozess mit den entsprechenden 1 Dr. Senf 6 Hr. Janßen
• Engineering KW 01 02 03 04 05 06 07 08 09 10 11 12 13 Apr Mai Jun Jul Aug Sep Okt Nov Dez
Integration • Engineering Wöchentliche 1-2 wöchentliche Regelwerken 2 Dr. Kock 7
• Projektmgmt. • Projektmgmt. • Schaffung eindeutiger Verantwortungen und eindeutiger Schnittstellen 3 Hr. Burenius 8
Produktions- Sitzungen • Kalkulation/ PC Sitzungen • Abstimmung und Aufsetzen der Arbeitsgruppen
bereich 1 • Kalkulation/ PC ~50 Workshops • Divisionsplanung ~40 Workshops Projekt Planung/ • RI- und FI Konstruktionsaufgaben sicherstellen 4 Hr. Steimert 9
• Divisionsplanung 31.03. • Angebotsmanagement (AGs)
Controlling • Aufgabenteilung an/zwischen den Standorten definieren 5 Hr. Maatze 10
• Erarbeiten der Maßnahmen
Integration • Vertrieb Wöchentliche • Vertrieb • HAT Team Ansatz 1-2 wöchentliche • Einholung der Ist-Organisationsstrukturen und
Produktions- • Konstruktion Sitzungen • Konstruktion • Optimierung Sitzungen Personalzahlen Nr. Aufgaben Methoden / Daten
bereich 2 • Fertigung ~50 Workshops 15.04. • Fertigung Arbeitsvorbereitung ~30 Workshops • Vergleich der Organisationsstrukturen
• Schaffung einer einheitlichen Personal und 1 Abstimmung Produktionsprozess X und Y; Prüfung des vorhandenen Workshop, vorhandene Prozessdokumente
IT Ablaufes unter wirtschaftlichen Gesichtspunkten
Synergieziel-Basis
Konzern-/ • Controlling / ReWe • Recht • Nutzenbewertung der Maßnahmen
• Finanzen Claim Management ~15 Workshops • Verabschiedung der Maßnahmen 2 Detaillierung der Aufgabeninhalte für Neukonstruktion/Prototyp inkl. Workshops, Dokumente, Arbeitsbeschreibungen, etc.
Segment- • Versicherung
integration • Steuern und Zoll
druckfesten Wänden und Vergleich Bewertung hinsichtlich Synergien
• Umsetzungsplanung der Maßnahmen und der
Einkauf Personalmigration 3 Standortbezogene Aufgabenteilung festlegen, primär auf der Grundlage der Workshop, Auftrags-/Kapazitätenplanung
25.04. • Entscheidung über weiteres Vorgehen Fertigungsteilung (Grundsatz: konstruieren, was am Standort gebaut wird)
Industr. Konzepte Projekt HKD • Personalmigration
weitere Bereiche • Umsetzung der Maßnahmen 4 Sichtung, Prüfung und weitgehende Vereinheitlichung von Regelwerken Dokumente, Standards, Regelwerke, ggf. Workshop
Info Messe Info Messe Info Messe (QS-Anweisungen, Standards, Richtlinien, etc.)
Partner- Stimmungs- Partner-
Stimmungs . • Laufendes Synergiecontrolling
Leader- Ship’s- Partner- Partner- barometer
ship No. 1 barometer ship No. 2 ship Circle log ship No. 3 ship No. 4 5 Aufnahme und Abstimmung der Konstruktionswerkzeuge (SAP, CAD, KDB, (Schriftliche) Aufstellung Werkzeuge, Workshop,
Kulturelles Ship’s-
Kommunikation/ Fokus Fokus Implementierung der Transformation Map
Change Manage- Interviews Zielbild Interviews (z.B. Teamcoaching) log
• PMI Sitzung (jeweils Mo) KaNKo, etc.) Dokumente IT-Architektur
ment
Day 1
Ausrichtung der Divisionen Teamcoaching - Welche Systeme / Tools werden eingesetzt
• Vorstandssitzung (Mo alle 2 Wochen)
Integration Integration Mgr.- Integration Mgr.- Integration Mgr.- Integration Mgr.- Integration Mgr.- - Aufgabenteilung IT und Fachbereich
Manager Sitzung Sitzung Sitzung Sitzung Sitzung
Kick off = Meilenstein 6 Abgleich der Kalkulationsprozesse (Konstruktionsstunden) der Standorte Meeting Verantwortliche, Prozessdokumente
Integrierte Perso- 7 Arbeitsgruppen “Integrated HR”
nalarbeit
Emden und Kiel und Definition eines einheitlichen Prozesses

= Workshop/Presentation Vorstand/Div.-Vorstand = Sitzungen / Workshops / Events Gedruckte Medien

► Overview of all activities on ► Low-level planning of required ► Aligned objectives of the

the time axis activities on the time axis individual streams/work
► Definition of important ► Important milestones of groups
milestones streams/work groups ► Aligned deliverables and
► Dependencies between ► Aligned work modus (meetings, tasks of the streams/work
integration activities workshops) for streams/work groups

► Dates for steering committees groups ► Stream/work group members

and other bodies (e.g. works (availability!)
council information) for the ► Methods to be used and
next 3-6 months required data

15
15

8
Efficient management of the project must be warranted by a
consistent and continuous project reporting

Activity planning/controlling Project status reporting

Post Merger Integration Verantwortlich: Thema Status Ergebnisse Nächste Schritte/Entscheidungsbedarf

Fertigung • Erste Planung zu • Gemeinsame Informationsveranstaltung von
Teilprojekt: Produktionsbereich ! Arbeitsgruppe: Konstruktion
Informationsveranstaltung abgestimmt Fertigung und Konstruktion je Standort über
Nr. Teilthema Was Wer (Kunde) Wer (CG) Bis wann Status Priorität Arbeitsergebnisse durchführen

Synergien im Bereich QS auf Grund Wegfall der Aufgaben im HAT-Kernteam mit Herrn Hr. Gorgas 18. Mrz. Arbeits- • Potential aus Kapazitätsanpassung für X • Abstimmung Benchmark AV und
52 Albers aufnehmen offen vorbereitung ist ermittelt Führungsspannen mit X (singuläre Betrachtung
Durchsprechen der Maßnahmenblätter hinsichtlich erfasster Schnittstellenaufwände mit Hr. Gorgas 23. Mrz. von AV und Führungsspannen verzerrt das Bild) –
56 Herrn Maatz offen
• Potential durch Prozessverbesserung (z.
63 Papier zur weiteren Vorgehensweise bei dem Thema Archivierung Hr. Bußenius MGO 24. Mrz. offen B. Abstimmung von Änderungen mit der wichtig auch für den Workshop „Führungsspannen“
62 Koordinatoren im Organigramm ergänzen Hr. Gorgas MGO 24. Mrz. offen Konstruktion) ist ermittelt • Maßnahmen zur Umsetzung der Synergien in X
67 Verwaltung von Messmitteln – Informationen der Aufteilung Hr. Bußenius MGO 1. Apr. offen beschließen
64 Im Organigramm für die Hauptabteilung MK die Vertreter ergänzen Hr. Dr. Boch MGO 1. Apr. offen • Benchmark auf „richtiger“
66 Maßnahme Maschinenbau Ausfahrgeräte/Abgasleitung mit Herrn van der Wall die Synergiepotenziale
Hr. Dr. Boch ansprechen
MGO und entsprechend
1. Apr. offen in dem Maßnahmenblatt ergänzen Datengrundlage neu erstellt
65 Im Organigramm die Titel Dr.-Ing. ergänzen Hr. Maatz MGO 1. Apr. offen • Vorstellung der Vorgehensweise zur
76 Logistiker müssen die FI-Aufgabenteilung der anderen Bereiche kennen MGO 1. Apr. offen
74 Nächste AG-Sitzung des Kernteams am 04.04.05 um 14:00 Uhr Dr. Senf MGO 4. Apr. offen
Potentialermittlung HF in X erfolgt
Bereichscharter und Aufgabenprofile erstellen Hr. Burenius 4. Apr.
60 offen Best • Präsentation der Zwischenergebnisse ist • Transparenz des Bearbeitungsstandes in den
Prüfung der Rollenstruktur und Aufstellung der entsprechenden Kapazitäten für die Hr. Burenius 4. Apr. Practice erfolgt unterschiedlichen Themen herstellen
61 Standorte A/B offen
73 Aktuellen Stand zum Thema Regelwerke im Kernteam präsentieren Hr. Burenius MGO 4. Apr. offen • Gestraffter Zeitplan im Lenkungsaus- • Synergien ermitteln und
68 Abstimmung mit Dr. Meier zur Aufgabenteilung im Bereich Elektrotechnik Hr. Dr. Senf/Hr.MGO
Dr. Koch 4. Apr. offen schuss beschlossen Maßnahmenbewertungsblätter ausfüllen
72 Kapazitätsplanungen mit Herrn Dr. Senf aufnehmen Hr. Gorgas MGO 4. Apr. offen
• Präsentation der Maßnahmenblätter am Montag,
69 Das Thema ABC (Elektrotechnik) mit den Herren Dühring und Büchner ansprechen Hr. Steimer MGO 4. Apr. offen
71 Alternativmaßnahme W+K (Konzentration) bzgl. dem aufgezeigtem Einsparpotenzial weiter
Hr.detaillieren
Steimer MGO 4. Apr. offen
den 22. August, 12:00 Uhr in X
70 Maßnahmenblätter durchsehen und an Herrn Gorgas eventuelle Ergänzungen/Fragen zukommen
Kernteamlassen MGO 4. Apr. offen
44 Präsentation der Ergebnisse des Teilprojektes vor dem Vorstand der Division MGO 15. Apr. offen
58 Ansprechen des HAT-Teamansatzes Hr. Flucius KW 14 offen
Nutzung des nächsten Objektes zur Bewertung der Verbesserungen aufgrund der neuen
Erfolge und Highlights Probleme oder kritische Themen

22 Verbesserungen
Regelungen zur frühzeitigen Risikobewertung/-controlling – Erstellen der
Vorgehensweise zur Erfassung/Bewertung der Verbesserungen Dr. Senf MGO offen offen  Erste Zwischenpräsentation mit Divisionsvorstand  Einbindung weiterer Verantwortlicher zum Thema
57 Beschreibung der Rolle des Systemverantwortlichen (generell) Dr. Senf MGO offen Technik zu Arbeitsvorbereitung durchgeführt interne Kommunikation
Ergänzung der MA-Anzahl im Organigramm bei MHG durchführen Hr.
Burenius/
75 Hr. Maatz MGO offen
Aufgabeninhalte pro Fachgruppe gemäß dem bestehenden Aufgabenhandbuch wieder Hr. Burenius
77 aktualisieren MGO offen offen

► Breakdown of the stream/work group planning ► Status of the streams/work groups on an

to activities, including responsible lead and aggregated level with a focus on results, next
dates, to enable controlling steps and issues
► Qualification of team members for structuring ► Consistent reporting specifications for
and transparency streams/work groups
► Defined reporting cycles to warrant the overall
informational value for the integration

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16

Addressing the three key facets of change lead

integration processes to success

Emotional Rational

► Focus on the new the Vision, Mission, ► Address integration issues

Values, Principles, and Expected (e.g. site transfers) together
Behaviors with special attention to key with cultural issues
strengths
► Priority for customers and
► Clear messages for unpopular
partners vs. internal issues
decisions right from the beginning
► Consciously addressing typical ► Cultural integration seen as
hygiene factors (e.g. car allowances, opportunity to overcome
vacation policies, etc.) current weaknesses
► Finding the “right time” for people ► Acknowledge additional
issues (e.g. introducing new workload of integration team
performance appraisals) members and cultural change
facilitators
Political ► Realistic objectives and time
plans
► Identify and nominate key stakeholders as quickly as possible
(e.g. Core Team, Steering Group, Sounding Board, Change
Agents, etc.)
► Clarify roles and responsibilities and set individual objectives
accordingly
► Involve formal and informal leaders and institutions (e.g. works
council) early-on
► Tangible Quick Wins

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 2 Process

Clean teams accelerate pre-closure integration planning

Clean teams allow an acceleration of planning in areas where commercially sensitive data
cannot be shared between organizations prior to close
• Generally staffed by a third party
• Allows processing of competitively sensitive data
• Management defines the specific output needed from clean teams
• Synthesized analysis will be used to make early decisions (pre and post- close)

Scope of clean teams is developed jointly between integration leadership and legal
counsel. This varies across all deals based on
• Competitive overlap
• Regulatory scrutiny
• Companies risk threshold
• Sources of value

18

2 Process
Often consultants act as „Clean Team“ until regulatory
clearance - No information is passed on to the respective companies

Company A Company B

Consultant-
Customer data Clean-Team Customer data
Functions
• Collects relevant data
• Safe-guards data consistency
Supplier data and comparability Supplier data
• Analyses data and prepares
recommendationes
• Prepares fast data exchange
Other sensitive Other sensitive
after clearance
data data

Applicable in situations with

• High need to accelerate synergies pre-close
• Some existing/public knowledge of acquired
firm
• Limited time until close
• Low risk of non-approval

19

10
 2 Process
Clean teams “jump start” integration by processing
sensitive data before close

Output
Input Analysis
Prior closing Post closing

Clean Team
Company A
Sensitive
Sensitive
data
Data

Company B

Gather competitive Analyze consolidated Release sanitized Present full analysis

data from buyer and data: several levels of summary to buyer – and supporting data to
seller analysis possible, usually confirmation seller first day post-
ranging from of completeness of close; participate in
Activities completeness check data or top level follow-up meetings as
to generating firm estimates needed
recommendations for
integration

Source: BCG
20

2 Process
Constraints on information sharing require installation of
"clean team"

Sensitive information: Clean team Non-sensitive information: Open teams

Specific customers Job assignments and requirements

• Prices
• Volumes Administrative locations
• Terms
Customer service organization
Individual suppliers
• Prices Brand surveys
• Volumes
• Terms HR systems and policies

Individual product performance Financial reporting formats

Individual R&D projects IT systems

Individual plant/equipment performance Aggregated and generalized information about

customers, suppliers, products, R&D, manufacturing
Individual distribution center performance and distribution

BCG to integrate and analyze information Joint teams to work with information

Source: BCG experience

21

11
 3 Teams
Organize PMI teams to mirror the value drivers of the
merger

Special-issue teams Steering committee Special-issue teams

Financial baseline,
Branding
targeting, tracking

Customer retention HR processes

Project Communications
Strategy audit management office and change
(PMO) management

Business model Legal

Organization
Real estate
structure

Integration teams

Head-
Sales force/ Product
Procure- Manu- Supply quarters/
go-to- manage- R&D IT
ment factoring chain central
market ment
functions
North America Real estate
Europe Finance
Latin America Legal
Asia HR
22 22

3 Teams

Staff PMI teams with the best people – PMO example

1 Appoint a PMO leader who has deep understanding of the business

• A widely respected executive who knows how to navigate the organization

2 Establish the PMO as the eyes and ears of the Steering Committee
• Fully understand the committee's priorities and decision making processes

3 Task the PMO with leading the target setting process

• Define stretch goals for the integration teams based on real knowledge of the sources
of value

4 Make "prioritization" the watchword for the PMO

• Prioritization of risks, decisions, and opportunities based on the value agenda

5 PMO as an orchestrator, not a gatekeeper

• Make information flow and creating connections, not resolving all issues independently

23

12
 4 Leadership
Insist on senior leadership that is active, committed and
highly visible

Three vital dimensions to PMI leadership

Set the direction Articulate

of the and reinforce
integration integration
principles

Manage anxiety
and
expectations

24

5 Synergies
Maximize cost synergies but plan for revenue synergies as
well

Revenue synergies (MUSD)

2,400 ... and even more synergies to
exceed investor expectations
produced by positive reaction to
2,000 the deal
4
1,600

1
1,200
An
acquirer's
bid included 800
a 3.5B USD
premium
400

0
150 200 250 300 350 400 450 500
Cost synergies (MUSD)
2
But the announced cost synergies of 250M 3
USD were insufficient to achieve the value ... requiring additional cost and/or
promised to shareholders ... revenue synergies to justify the
premium ...
Note: Diagonal lines indicate net present value (NPV) of total expected synergies at a given acquisition premium
25

13
 6 Targets

Three levels of PMI targets

What you aspire to achieve to create exceptional value

3
Ambitious stretch targets communicated to PMI teams

What you are confident you can achieve

2
High confidence internal targets from
valuation during due diligence

What you need to achieve

1
Public estimates of
targets, just high enough
to make deal credible to
capital markets

26

7 Customers
Retain current customers by making them an integral
part of the PMI process

Risk

1
Which customers
are our highest Target groups
priority?

Value

Segment I Segment II Segment III

2 Measure I  
What is the action
plan for each Measure II  
customer Measure III  
segment? ...
Measure X  

3 Date 1 Date 2 Date 3

How will we track Segment I +/–% +/–% +/–%

progress? Segment II
Segment III

27

14
 7 Customers

PMI customer retention program : example

Four key objectives... ...Operationalized

Retain customer-centric culture of • Created a "Customer Focus" team with
target company representation on Steering Committee
• "Customer Focus" team first to readout at every
Steering Committee meeting, casts deciding "vote"
on tough decisions

Protect existing revenue sources • Systematically track and review quantitative

during integration (revenue, units) and qualitative (sales force input)
metrics at existing customers
• Build multi-format communication plan from deal
announcement through completion of integration

Solicit customer input to make • Interview customers to understand perspective on

integration decisions service quality, sales force, product offerings,
operational interfaces

Create rigorous plans for growth • Develop and track against account plans to achieve
specific growth targets on account by account basis

28

7 Customers

Capture the voice of the customer

Actively reach out to key customers

• Scripted message
• Demonstrate care and commitment

Get input to inform PMI decisions

• Customer perception of performance across many dimensions: products, service, sales
support, payment terms, technical support, personal relationships, brand
• Unmet needs and future expectations

Consider a "customer focus" team to represent the customer perspective

• Manages customer feedback process
• Carries the VoC in Steering Committee meetings for decision-making

29

15
 8 Talent

Manage talent by selecting and retaining the best people

Fast-track for individuals

with "high departure risk"
Ongoing
I II III IV
High potential
identification Talent Action plan
Action plan
and talent prioritization follow up
assessment

Input from senior Assessment of Define actions Monitoring of action

management incumbents unique plans plans
value and departure • Communication • Ensure follow up
Analysis of HR data risk • Involvement • Adjust plans as
• Performance • Financial needed
evaluations implications
• Succession • Contingency
plan planning

Working meetings
with key executives
• Cascading from
top levels

30

8 Talent

Segment your talent and approach each group differently

Description Retention goal

• High performers whom you want to • Retain for
have a role in future organization long term
• Segment both those who we know
Critic and those who we don’t know what
al positions they would occupy
talent
• Possess critical technical skills and • Retain at least for
company business knowledge specific time
• Difficult to replace, unique (during transition)
Specialist talent • Required to ensure smooth transition
and achieve synergies

• Rest of employees needed to keep • Minimize business

business continuity disruption
• Staff who may or may not be
All other employees retained post close

31

16
 9 Organization
Design a workable organization structure for the combined
company

CEO CEO

Sales and
Americas Asia-Pacific Europe R&D Operations
marketing

Combined company

CEO

? ? ?

32

9 Organization
Clarifying organization structure and senior leadership will
quickly stabilize the business and provide early benefits

Strategy-driven broad ...with quickly appointed senior

organization design... leadership

Key questions Early appointments set tempo of integration

• What are key sources of value and Allows senior leaders to credibly reach out
Define competitive advantage?
strategic • What is each company’s share and
to key staff
objectives growth potential?
Ideally provides best leadership from each
• What are org design options and organizations to model cooperation and
trade-offs? engagement
Define • Should we align and/or combine
org structure(s) org structures?
• Should we leave specific BUs
Enables alignment of line leadership with
separate? integration team leadership quickly

Understand • What are implications of org New management leads the integration
design selection to key leaders? teams and truly owns the output
leadership • Would you change aspects of org
implications • Higher level of accountability
design given this?
• Full responsibility for implementation of
synergies and recommendations
New org design aligned with new company’s
strategic objectives

33

17
 9 Organization

Organization design: rapid, systematic, layer-by-layer

Process steps Design elements

Always
• Role
Parts of the company with significant L1
mandates
change use a common process for Design • People
design; specifics customized to L2 capabilities
unique situations
• Design one layer at a time, as much Sometimes
as possible involving the managers L3 Screen • Structure
talent • Collaboration
that will have responsibilities for the
mechanisms
unit L4 • Spans and
• Determine structure first, following layers
from strategy and guiding principles Manage
• Next define role mandates, talent L5
change
needs and gaps
• Work with HR on the best approach L6
for talent assessment

34

10 Change management
Recognize that PMI is an exercise in change
management

1 Create the 2 Mobilize the 3 Hardwire 5 Sustain

change agenda organization change and reinvent
• Build a case for change • Prepare leadership to • Align organization model • Structure for ongoing
• Articulate desired vision, visibly embody change and accountabilities as learning
strategy, culture, and • Design cascade needed • Build and exploit change
behaviors • Set up activist • Adjust support capabilities
– translate vision into governance infrastructure and
manageable • Engage and excite performance
initiatives stakeholders management as needed
• Ensure leadership • Lock down commitments
alignment and and initiatives into
commitment roadmaps
• Establish human,
operational and financial
baselines
4 Manage for results
• Manage initiatives/programs with discipline and rigor
• Arm executives with forward-looking visibility to bottom-
line results
• Reinforce desired behaviors
• Promote self-discovery via cascade and feedback loops

6 • Create, monitor and adjust ongoing communications

Communicate — strategically, consistently strategy
– Tailor messaging to specific stakeholder needs and risks
• Coach managers to be effective communicators

35

18
 10 Change management

Vital to take the pulse of the organization

Strongly negative Neutral Strongly positive
Category Questions
(2.5) (2.0) (1.5) (1.0) (0.5) 0 0.5 1.0 1.5 2.0 2.5

I have a clear vision of the integration goals

I am inspired by what the new company will be
Vision

I understand the reasons for the integration

The integration is a good thing for my legacy company
My leadership team supports the integration
I believe in the power of the new company business model

I am well informed
Communi-

Management clarifies my issues/concerns Common

cation

I receive consistent information weakness:

I am informed of PMI team findings/conclusions communications
I understand my tasks/goals after PMI “Phase I” ends

I believe we are making the right decisions

Integration

I understand the next steps/calendar

process

People from the two companies can work together

We are maintaining focus on day-to-day business
We are maintaining customer service
Legacy of acquired company is well integrated in my area

The integration is a good thing for me

Motivation/morale is high in my area
Morale

People are being treated in a fair/transparent way

My workload is manageable
I am confident the integration will succeed

Acquirer Acquired company

36

11 Communication
Short but regular pulse-checks throw light on morale and
spirit during integration: case example

First Opinion Leader Survey

Dear Opinion Leader First Opinion Leader Survey

Dear Opinion LeaderOver the last FirstfewOpin months, everyone

ion Leader has been hard at work integrating the operations of A and B. We would
Survey
like to solicit feedback fromyou on how well you believe the effort is going and what we can do to improve it.

"Readiness"
Over the last few Wemapprec
onths,iate it if you
everyone hascould
beentake a few
hard at wmorkinutes to answ
integrating er operations
the the followingofquestions.
A and B. W Wee are also very
would
Dear Opinion Leader
interested
like to solicit feedback fromin you
youron ideas
howhowwelltoyou
improve
believethetheintegration process.
effort is going and what we can do to improve it.
Over the last few Wemappreciate it if you
onths, everyone coul
has d tak
been e a few
hard minutes
at work to answer
integrating the the follow
Yes ing
operations ofquestions.
MoreAyes
andSome-
B. W Weew
Moreare alsNo
ould
no o very
interested 1. Do
in your youundersta
ideas nd where weintegrati
are inthe
like to solicit feedback from you on howhow toyou
wellproce
integration
im prove
believethe
ss?
ongoing
the effort is process.and what w than no dowhat
e can than
to improvyes
e it.
We appreciate it if you could take a fewminutes to answer the follYes owinM gorequestions.
yes Some-W e are
More noalso
Novery
interested in your1. Do youhow
ideas undetorstan
imd where
prove theweinategration
reinthe process. thanno what thanyes
integration pro Yes Moreyes Some- Moreno No
2.ceDo
ss?youunderstand your role in theintegration
than no what thanyes

Ø 2,0
Yes Moreyes Some- Moreno No
1. Do youunderstand where weareprocess?inthe than no what thanyes
integrationproce ss?youunderstand your role inthe integration Yes More yes Some- Moreno No
2. Do thanno what thanyes
Yes Moreyes Some- Moreno No

Consciousness of
process? 3. Areyou confident that the integrationprocess than no what thanyes
Yes Moreyes Some- Moreno No
2. Do youunderstand your role in the willintegration
succeed? than no what thanyes

Ø 0,7
Yes More yes Some- Moreno No
process? 3. Areyouconfident that theintegration process thanno what thanyes
Yes Moreyes Some- Moreno No
will succeed?4. Aresenior managers in your part of the than no what thanyes
ization visiblyYes Moreyes Some- Moreno No

need for change

organprocess
3. Areyou confident that the integration committed tomaking the
than no what thanyes
integration Yes More yes Some- Moreno No
will succeed?4. Aresenior manag ers in yourwork?
part of the thanno what thanyes
Yes More yes Some- Moreno No
organization visibly
5. Arecomm itted m
the board toembe
making the
rs in charge of your

-5 0 5
than no what thanyes
iners
tegration Yes Moreyes Some- Moreno No
4. Aresenior manag in yourwork?
partdivision
of the effectively commu nicating
than no with
what you yes
Yes than
More yes Some- Moreno No
organization visibly
5. Arecom
themitted
board metoabo ut th
makin
mbers ge in
the
in tegration?
charge of your thanno what thanyes
Yes More yes Some- Moreno No
integrationwork?

Comprehension Strategic Expected

divisioneffectively commu
6. Is the nicating
integratio withressin
n prog you g well in your part of than no what thanyes
Yes Moreyes Some- Moreno No
aboutrs
5. Arethe board membe the
inintegration?
charge the
oforganization?
your than no whatYes than
Moreyes
yes Some- Moreno No
divisioneffective lythe
6. Is commu nicating
integra withyou well in your part of
tion progressing thanno what thanyes
about the integration?
theorganization?
7. What obstacles doYes Moreyes Some- Moreno No
yousee for theintegration process?

fit
6. Is the integration progressing well in your part of than no what thanyes

expectations
________________________________________________________________
theorganization?

change
7. What obstacles ________________________________________________________________
do you seefor the integration process?
________________________________________________________________
8. What could improve the integrationprocess?
________________________________________________________________
7. What obstacles do youseefor theintegration process?
________________________________________________________________
________________________________________________________________
8. What could im________________________________________________________________
prove theintegration process?
________________________________________________________________

Comprehension Gravity of
________________________________________________________________
________________________________________________________________
8. What could improve the integrationprocess?
________________________________________________________________
________________________________________________________________

of own roles problems

Comprehension
of integration
goals First reaction
"Ability" "Willingness"
Comprehensio Change of
n of integration first reaction
Notion of capability to Degree of individual
handle the integration willingness to change
Quality of Change pers.
communication situation
Ø 1,7 Ø 2,0
Ø 0,6 Bias in Ø 0,2
-5 0 5 Commuication discussions -5 0 5
on time
Sufficient Collaboratio
communication n
Status 30 Sep Integration
Integration
Status 31 Aug success in
success own
general
unit

Source: BCG project experience

37

19
 11 Communication
Assume that it is better to have "too much" communication
than too little

Determine
Identify
communications
stakeholders
needs
Construct
customized
but consistent
messages

Monitor
stakeholders' Select
reactions to appropriate
integration format and
distribute

38

11 Communication

Ten common myths about communication in PMI

1. "We're in sync with our employees; we know what they're thinking."

2. "Our high performers know who they are, where they stand, and why they should
stay."

3. "We can't start to communicate; we don't have all the answers yet."

4. "Why talk now? We haven't even closed the deal."

5. "We aren't communicating because we haven't done anything yet."

6. "The only people we need to talk to are the ones who are participating in the PMI right
now."

7. "It took us months to figure this out, but employees can get it by attending a
presentation."

8. "People will accept things as long as the decisions are logical."

9. "The survivors won't be affected by the way we treat the people who leave."

10. "Once we get the new organization in place, everything will go back to normal."

39

20
 12 Culture
Manage the integration of organization culture with the
same discipline and rigor as the operational integration

Role of center Integrated Decentralized

Hierarchy Formal Informal
Decision-making norms Structured and fast Consensual and slow
Meeting dynamics Structured Loose
Oral communications Direct Ambiguous
Written communications Short, to the point Long, highly detailed
Performance management Selective, short term Systematic, long term
Career management Selective, short term Comprehensive, long term
Engagement
• Management High Low
• Employees High Low
Unions Conflictual Collaborative

Company norms
• Focus Customer focused Product focused
• Innovation New ideas Proven methods
• Cost control Financials driven Accounting-control driven
• Growth Investment orientated Cost oriented
• Culture Global National
• Organization model Interconnected and Isolated silos
cross-functional
Company A Company B

40

12 Culture

Five truths about culture

Culture impacts change efforts in an organization, as well as how it operates in the longer
term – ignore at own peril

In acquisitions and mergers, culture rarely mixes except in standalone businesses or

geographies – the dominant culture wins out

But corporate cultures are often not homogenous

Culture is not created by workshops. It is created by who you fire, hire, promote,
measure, fund and who you make heroes
• Decisions made at the very start of change efforts speak the loudest

If firms track and measure culture, they had better be prepared to invest heavily on the
back end of doing something with the information
• Need to carefully balance what needs to be done with level of intervention

41

21
 Post PMI audit conducted several months after PMI
completion uncovers roots for lack of integration success

… indicating low acceptance

Case example shows lack of integration… of new processes

Product Customer
Purchasing Production Logistics Development Sales
management service 1 Resistance of strong
process-based
relationships within old
1
networks
Firm B

2 Horizontal coordination
within production and
development with high
quality
Centralized

3
functions

2 2 4
3 Vertical (across functions)
collaboration ties between
Firm A and B mostly weak
and of poor quality
Firm A

1 4 Additional problems in
relationship of Sales to
Green = good quality Production
Yellow = mixed quality
Red = bad quality
Note: Strength of tie = frequency and importance of collaboration Thickness = strength of tie
Source: BCG case experience
42

You'll know your PMI is a success when…

The synergies announced during preacquisition planning are achieved or

succeeded

The new organization is up and running without having lost key talent

The integration process has been perceived as fair and objective

The combined company is operating efficiently

There are no major problems with stakeholders: employees, customers,

suppliers, investors

The integration process has not lasted longer than expected

There are no substantial issues still pending

The motivation of employees is higher than before the acquisition

The combined company can accomplish things that the separate companies
could not do by themselves

43

22
 It‘s the communication!

©Frankfurt–School.de 44

11 Communication
Four key drivers can ensure communication achieves
impact during PMI

Effective change process

• Make the integration visible
• Reduce anxiety and rumors
• Manage shareholders expectations

Provide credible, Maintain share of voice Reinforce positive Establish two-way

timely and consistent throughout process signals dialog and collect
information feedback
• Work with content • Communicate • Prepare line • Highlight informal
modules to convey principles and managers from both communication
their messages process if content “sides” to • Use monthly “pulse
• Ensure consistency not yet ready communicate key check” surveys for
of messages from • Support senior messages company-wide
different sources management consistently feedback
• Standardize quality, prepare and deliver • Highlight examples • Leverage opinion
format and language communications of integration leaders/networkers
of communications success using real
employees • Use feedback to
target next round of
communications

Communication is the first lever to

make integration a reality
Source: BCG Project experience
45

23
 Spezial: Kommunikation

©Frankfurt–School.de 46

M&A vs. PMI in der Kommunikation

©Frankfurt–School.de 47

24
 Kaum Standards in der Länge der PMI

©Frankfurt–School.de 48

Kommunikation pro Phase der Transaktion

©Frankfurt–School.de 49

25
 Interne vs. externe Adressaten

©Frankfurt–School.de 50

Gewichtung über die Zeit

©Frankfurt–School.de 51

26
 Geschichten müssen zusammenpassen

©Frankfurt–School.de 52

Kultureller Stress während & nach der

Transaktion

©Frankfurt–School.de 53

27
 Zielgruppe Mitarbeiter

©Frankfurt–School.de 54

Zielgruppe Führungskräfte

©Frankfurt–School.de 55

28
 Zielgruppe Betriebsrat

©Frankfurt–School.de 56

Zielgruppe Geschäftspartner, Öffentlichkeit:

Kein Interesse an Nabelschau

©Frankfurt–School.de 57

29
 Fusionstyp und Kommunikation

©Frankfurt–School.de 58

Aufgaben Kommunikation & Führung

©Frankfurt–School.de 59

30
 Beispielhaft: Day 1 Kommunikation

©Frankfurt–School.de 60

Post Merger – Kommunikation vor Integration

©Frankfurt–School.de 61

31
 PMI – Phase II

©Frankfurt–School.de 62

PMI: Phase III

©Frankfurt–School.de 63

32
 Bottom line

©Frankfurt–School.de 64

33