Let’s pick up where we left off last week in our discussion about the Business Impact of Integration Project Staffing.
As reported in that post, based on our recent survey, The State of M&A Integration Effectiveness 2014, integration project staffing was cited as both the #1 “most important breakthrough or best practice with integration,” and simultaneously listed as the #1 “greatest remaining obstacle to overcome for more consistent integration success.”
There are plenty of reasons for this finding. It’s hard. Every acquirer struggles with this issue. Most don’t have an adequate understanding of the true costs of integration, nor an accurate view of the true requirements of integration. Add to these factors the sheer practical difficulty of allocating your best resources to the integration effort. It’s tempting for executives to assign junior resources and use integration as “OJT.” But when you’ve got hundreds of millions or potentially billions of dollars on the line, much less the very real and present risks to customers, talent and partners…in all due respect, this is no time to learn on the job!
Acquirers have to find a better way, so let’s start with some baseline assumptions, then get into some specific recommendations to help you think through potential integration project staffing solutions.
"...in all due respect, this is not time to learn on the job!"
First, build basic M&A readiness by establishing your end-to-end M&A process, implementing functional playbooks and providing training to the cadre of folks most likely to be called on at “game time.” Without this core element, you’ll constantly be attempting to “change a tire on a moving truck.”
Second, review and rationalize all current or planned organizational initiatives. We like to think about the “DART” method of project rationalization. For example, what projects can now be DELAYED until integration or perhaps blended into the overall integration process? What projects are close to completion, or perhaps less intensive, that can quickly be ACCELERATED to completion to free up valuable resources? What projects now should be RUN in parallel with, and in tight coordination to, the overall integration process for maximum efficiencies, rather than through a potentially overlapping or conflicting project approach? Finally, what projects are no longer necessary in light of the integration and can be TERMINATED outright?
Third, you simply must be ruthless about setting priorities for you team and resources as you prepare to launch or sustain a successful integration. One of the most frequently cited challenges for any integrator is the constant “priority drift” that distracts, delays and disrupts integration efforts once underway.
But what can you do specifically to upgrade the integration process staffing model? Fortunately, as illustrated in M&A Resourcing Model for a Frequent Acquirer, you can do a lot. It will never be easy, but these strategies are proven in our experience, and now in our research data, to make a significant percentage improvement in the ability to achieve business results through integration.
There’s no one-size-fits-all integration staffing model, but see if one or more of these suggestions might work for you.
Corporate Development / M&A Department
Extend the role at least one corporate development team member to include full M&A lifecycle responsibilities including integration. Staff continuity in this role is key to making a successful handoff from due diligence to integration. No one in your shop will know a live target company better than your strategy and corporate development team, so instead of letting them pass the baton when the definitive agreement is signed, make sure there’s a designated corporate development sponsor who has direct responsibility through the integration strategy development, integration launch and steady-state operations phase.
The point of transition back to the deal sponsor, business owner, integration leader or integration management office (IMO) can vary with deal size, complexity, risk issues, other deals in the pipeline, etc. The ultimate goal is to align and incentivize everyone not just on completing a transaction, but also on preserving and capturing full deal value by stabilizing the performance of the acquired business, and linking accountability all the way through to “integration complete.”
Dedicated M&A Function Leaders
If you do M&A deals more than “once in a blue moon,” it’s probably time to consider this important step. Within the three to five core functions most directly responsible for driving integration success in your organization (e.g. HR, IT, Finance, Supply Chain, etc.), designate your senior-most M&A functional expert as a full-time, dedicated M&A track lead. In many frequent acquirer organizations, this role has proven to be an essential lynch pin that ensures success throughout the deal lifecycle.
Ideally, these full-time, M&A function leaders support Corporate Development as dedicated team members for target screening, leading the actual due diligence from their respective function, ensuring an effective hand-off / ramp-up to integration, and directly leading the functional integration at least to a meaningful transition point to other skilled resources at designated project milestones. The M&A Function Leader role also supports resourcing, budgeting, synergy planning and business modeling inputs with respect to their function’s essential requirements to ensure the Corporate Development team fully understands and incorporates these needs into the overall deal economics. In addition, the M&A Function Leader is the principal contact for training, knowledge capture and continued development of functional playbooks and processes.
Temporary Duty Assignments
We advocate training an appropriately sized cadre of functional and business unit managers and team members who can be resourced on a temporary duty basis on either due diligence or integration projects as needed. We sometimes see two resource pools established within larger functions: first, those who would step up to specific M&A track team roles, and second, more junior resources who may be called on for day-to-day backfill duty on an interim basis.
Advisors & External Support
Let me stand on my soap-box for this one. I’m a team player and M&A is a “team sport” requiring multiple skill sets and a variety of external advisors. Yet, at least part of the typical confusion and chaos experienced during many M&A projects can be attributed to overlapping, redundant or potentially conflicting approaches among and between advisors. Instead, we suggest standardizing your own internal processes and capabilities and coordinating advisors through your process vs. the other way around. In addition to executive advisory for integration strategy framework development and turn-key support on issues like integration management, don’t forget to reach out for pure staff augmentation roles in large projects, critical risk areas or to reduce internal capability gaps.