Driving for post-deal success: 10 tips for acquirers

(Conclusion)

To drive for post-deal success, every responsible acquirer should be considering (in earnest) the following recommendations from the KPMG survey:

Perform robust analysis of synergy and performance targets. Be confident about what is achievable before including them in the purchase price. Given the trend for competitive auctions, take more seriously the "in-deal" synergy analysis in order to reduce the risk for paying for an unrealistic target in the price.

Identify and investigate post deal issues prior to completion – these issues could be deal breakers. This is the benefit of starting your post-deal planning early enough.

Use the regulatory period – start post deal management work prior to completion.

Set up a dedicated team to manage the post deal work. The team will drive the integration process and must be backed by executive support.

Obtain control over the finance and reporting systems as early as possible after close. Sufficiently understand them and meet reporting deadlines both internally and externally.

Identify the cultural differences early and plan how to overcome them. Perform additional cultural due diligence owing to the significance of people and cultural issues in every M&A. Understand and overcome the cultural differences identified between the two companies. Establish a plan for addressing potential cultural differences.

Anticipate and plan for management and leadership issues early, then monitor them closely after completion.

Balance focus on delivering incremental value with the need to keep an eye on the day-to-day business performance. You will need to develop a tactical plan for the first 100 days of the new entity’s operations.

Plan to exceed the original synergy and performance improvement targets. Your ability to integrate two organizations into an effective and streamlined operation is where transactions ultimately succeed ÃƒÂ¢Ã¢â€šÂ¬Ã¢â‚¬Å“ or fail ÃƒÂ¢Ã¢â€šÂ¬Ã¢â‚¬Å“ to deliver the much-anticipated synergies.

Track the value being delivered from the deal and honestly assess the success or otherwise of the post-deal work. You will need to create a tracking mechanism to measure how well you are succeeding.

Integrating the Human Capital and Combining Cultures

Research has shown that some of the most critical issues that arise in post-merger integration are in the area of culture. Cultural integration has been a critical factor in most successful M&As.

When you have two organizations coming together, the challenge is to create, intentionally, a new culture that reflects the best of the two organizations. Cultural integration in a merger situation is about understanding and melding what can be two very different "shared lives," and growing a new one in the process.

Indeed, one of the hopes of merger is a new organization, with a new culture that is synergistic (i.e., more than the sum of its parts). Given this, acquirers need to know the impact of organizational culture on the merger process and on the newly created entity.

Those who are tasked with the cultural due diligence should be able to address questions such as: What are the most compatible elements of our former organizations’ cultures? What are the elements that suggest the greatest potential conflict? How would we like the new organization’s culture to look like? What will be some indicators of successful cultural integration in our new organization?

Through a deliberate and comprehensive process of considering and discussing these issues, the new organization can build trust, camaraderie, and the beginnings of a new culture that will develop and evolve over the new organization’s future. This can be the most challenging and, in many ways, the most rewarding work of post-merger integration.

(John S. Bala is Partner in the Business and Financial Advisory Services of Manabat & Sanagustin & Co., CPAs, a member firm of KPMG International, a Swiss Cooperative.. This article is for general information only and is not intended to be, nor is it a substitute for, informed professional advice. While due care was exercised to ensure the quality of the information contained in this article, readers should carefully evaluate its accuracy, completeness and relevance for their purposes, and should obtain any appropriate professional advice relevant to their particular circumstances. For comments or inquiries, please email [email protected] or [email protected])