According to Thomson Reuters, 2015 has established a record of sorts with $4.7 trillion in announced mergers and acquisitions (M&A), a 42% increment over 2014. However, research shows that most of these M&A initiatives fail—only 47% of all deals produce a positive relative total shareholder return, within one year after the transaction date.
Most of these failures are due to the organizations’ inability to integrate and leverage the other’s strengths—coupled with poor leadership, limited integration, burgeoning complexity, difficult cultural fit, and a lack of synergies. Market conditions in the current age are intrinsically dynamic, and poor planning often leads to a lack of strategic flexibility and operational rigor, post-merger.
Then, how can organizations ensure a well-designed and post-merger integration?
Preparing Well with a Playbook
A well-defined playbook is one of the most important tools a company can deploy to shape and realize benefits from its integration efforts. It offers a plethora of benefits that eventually yield tangible business outcomes.
Some of its distinctive features are:
Functions both as a business plan and as a how-to field guide—keeping the integration team focused on creating value while providing step-by-step guidance for tactical implementation.
Sets the speed of execution, consistency of approach, visibility, transparency, timely communication, and accountability for performance.
Formalizes the game plan for each deal, making it far more likely to achieve consistent results that can be repeatedly delivered.
M&A integration teams need a resource to help them work quickly, coordinate efforts, and see the entire picture—from the overall business goals to the smallest details of a transaction. A playbook can keep everyone on the same page and move forward effectively to deliver deal value.
Maintains business continuity with minimal disruptions.
Flexibility to support a variety of deal types.
Supports customization to support clients’ best past experiences and continuous process improvements.
Helps in documenting and giving due importance to every non-finance business functions, such as HR, IT, SCM etc.
The Strategic Value of People, Process, and Technology in M&A
A structured approach to creating an M&A playbook for all post-merger activities provides immense benefits to the enterprise by reducing the time-to-steady state, and significantly improving the chance of success. There are primarily three angles to this: People Integration, Process Integration and Technology Integration.
While a lot of attention is paid to the people angle — process and technology integration are still ad-hoc and reactive; an M&A process playbook and an M&A technology integration playbook is essential and extremely beneficial in proactively managing process and technology integration to drive successful execution of post-merger activities.
The process integration side involves validating activities against a pre-defined (and customizable) list of processes for each functional area. This involves determining the current state, targeted end state and success factors, establishing success metrics, creating a blueprint for the governance model, business integration plan, and process standardization templates.
Additionally, a well-defined playbook features the following:
Detailed process checklists to ensure inclusion of every single functional area.
A consolidation plan template which covers short, medium and long-term activities across the organization related to people, processes and policies.
Tools and technologies.
Manufacturing and supply chain strategies.
Product and customer channels.
On the technology front, a well-defined playbook enlists a post-merger integration plan, manages IT integration and rationalization, and creates a sustenance plan. The deliverables cover a diverse set of areas, including technology risks, integration costs, synergy scope, security assessment, transition framework, and a set of reports and timelines to monitor integration performance.
The Road Ahead: Creating Successful Mergers
M&A activities involve a lot of painstaking effort at a pre-merger stage to plan, and to finally get to a point where the business case is understood and applied. Creating a post-merger execution playbook for M&A provides organizations with a useful tool to significantly improve the chances of success through meticulous planning, extensive checklists, and rigorous program management.