A post-merger integration (PMI) project is among the most complex a corporation can undertake. So, proposing a timeline of 120 days may sound impossible, especially for larger M&A transactions. However, it is highly recommended to pursue this to realize the full potential of deal synergies, and to achieve a steady state for employees as quickly as possible.
Typically, an Integration Management Office (IMO) is set up to plan and manage the PMI. The IMO is most often staffed with an integration lead, a project manager, and a change management lead. The IMO directs overall activities, working with representatives of various workstreams such as Sales, Finance, and HR.
Completing a PMI project within 120 days means that the IMO superstructure can be retired within this timeframe, and that all remaining activities are completed within existing corporate frameworks — such as a Project Management Office (PMO) in a particular area. Certain activities may also be postponed until an opportune time in the future. For example, it may not be advised to integrate certain ERP systems if the use cases of the two companies are different and cost synergies are not significant.
Critical Ingredients for Success
1. Determine integration strategy ahead of close. It is best practice to determine the integration strategy ahead of the close of the M&A transaction, ideally with involvement of key employees of the acquired entity. Cross-company teams can be formed to work on long lead time items — for example, integrating technology from the acquiree into the acquiror's product offering.
2. Share learnings with the deal sponsor. The IMO should take time to share integration challenges and learnings from past PMI projects with the deal sponsor when the integration strategy is being developed. This briefing should be used to drive home the point that the IMO exists to make the business successful, and it can also illustrate what happens if the PMI project is not completed expeditiously.
3. Secure the deal sponsor's active support. The deal sponsor — who typically is the general manager of the acquiring business — must assign a high priority to supporting the integration. She needs to be available for key decisions relating to integration strategy and employees. While most decisions should be addressed as part of integration planning, inevitably some will come up later.
4. Make decisions quickly. Decisions need to be made quickly to remove uncertainty in integration planning and execution. Too often, assumptions are carried through the integration execution phase and later changed, resulting in wasted time and effort. If assumptions can be addressed by making decisions, this should be done as soon as possible.
Benefits of an Aggressive Timeline
A. Accelerated value capture. Accelerated realization of capturing value from the acquisition coupled with reduced uncertainty in the marketplace. Competitors will not be able to take advantage of a state of "integration paralysis," or worse, attempt to hire the acquiree's frustrated employees.
B. People decisions remove uncertainty. People-related decisions, done quickly, remove uncertainty for employees. Extended periods of uncertainty are a drain on the energy of both the acquiring company and the target. Worse yet, the best people may start to look for new opportunities outside of the organization.
C. A clear sense of urgency drives better solutions. By proposing a short timeline for completion, a clear sense of urgency can be instilled in all participants. It allows the IMO to drive "good enough" solutions to integration problems, as opposed to lengthy "best in class" implementations. This can be particularly critical when it comes to business processes and IT systems.
How to Get There
Start with an analysis to evaluate the costs of a speedy integration — resulting in accelerated value capture — versus a slower integration coupled with slower value capture. In this evaluation, take into consideration not only items that are easily quantified (e.g. costs, revenue) but also softer items such as possibly higher attrition in one scenario versus the other. In addition, there may be situations where a market window is missed with a slower integration and competing products enter the market, suppressing profit margins and/or sales.
Once this analysis is completed, consider whether the engagement of M&A integration advisory firms ought to be aligned with the timeframe chosen. Contractual options could include incentive payments when certain milestones are achieved, or other arrangements such as SLAs.