post-acquisition integration (cross-border case)

1

Post-acquisition integrationPractical questions in case of cross-border acquisition

Virgilijus Dadonas

M&A

3

MergersAcquisitions

VerticalConcentrichorizontalConglomerateValue drivers

Cross-Borderdomestic

intellectual propertyaccess to customers

natural resourcesindustrial assets

human capital

Scal

eSc

ope

Prog

ram

mat

icOr

gani

cla

rge

tact

ical

Sele

ctive

Market cap

Value chain

Economic area

Top d

river

s

CustomersDistribution

Build vs BuyKeep vs Sell

Grow vs ShrinkIntegrate vs Manage separately

Synergy SpeedSurvivalleverageCritical massdiversificationrisk spreadingeliminate rivalsacquisition of cashmarket dominanceexcess debt capacityStrategic realignmentSales maximizationUndervalued assetsCompetitive sizeprotect marketgain footholdsdeferred faxpower

absorptionequal merger

equity injection M&A n

arro

w co

ncep

tCo

mpl

ete t

akeo

ver majority

minority

Business cooperationmanagement outsourcingjoint ventureCooperationfranchising

minority cross-ownershipholding

Asset cooperation

Reverse triangular

merger Roll-

Up

Stoc

k acq

uisi

tion

managerialismmismanagementmanagerial hubris

4

M&A development

Manage the Transaction

• Establish robust process for due diligence

• Communicate effectively to manage the regulatory approval process

Achieve PMI• Formulate and refine the PMI

plan• Customize the governance

structure• Cultivate globalized talents• Close the cultural divide

Build up relevant capabilities and manage changes

Develop clear M&A strategy

• Align with corporate vision and industry trends• Establish a mechanism for strategy review and revision

Clear M&A strategyis fundamental

Developing relevantcapabilities is critical

Effective implementationis key

5

M&A process

Pre-M&A Planning

Deal Execution

Post-M&A Integration

Formulate M&A strategy

Select and screen the targets

Negotiate and agree on the deal

Built robust integrated

organization

Integration =Due Diligence + Post-merger integration =

Value capture

Transfor-mation

First – integration,then – transformation

6

Integration as part of corporate strategy

Corporate Strategy

Business Strategy

Corporate

Target company

Corporate growthstrategy

M&A strategy

Where to invest?

How to compete?

7

Integration phases

Phase 1Integration preparation

Phase 2Integration planning

Phase 3Integration execution

Phase 4Transition

to business

Deal announcement / signing• Signing of the SPA• Official announcement of deal

(conditional on regulatory approval)

Day 1 / closingTransfer of ownership and “go live”

Major milestone achieved

Official end-date of integration by realization of major milestones

Regulatory approval

Approval of deal by regulatory authority

8

Acquisition processfrom buyer side

Discussions:• Right contacts• Matched intentsInitial acquisition assessment

Targets:• Identification• Screening / evaluation• Selection

Targeting Preliminary discussion

Exclusive commitments &

discussions

Non-disclose (confidentiality) agreement (NDA)Preliminary valuation model VM1Business case for internal acquisition approval AA1Letter of Intent (LoI)Preliminary acquisition proposal AP1Transaction process clarification

9

Acquisition processfrom buyer side

Acquisition proposal AP2 for negotiation incl. SPANegotiation:• Price• SPA• Trading concessionsDraft agreementFinal internal acquisition approval AA3Final acquisition approval AP3 = SPA

Information request listsDD:• Legal (& Regulatory)• Financial & Tax• Commercial / Business• Operational• HR & Payroll• (Cultural, Environment,

Technological, etc.)DD ReportRevised valuation model VM2Pre-negotiation internal acquisition approval AA2

Due Diligence Deal negotiation Transaction closing

SPA signingRegulatory approval (if needed)Closing

Integration

(cont.)

10

M&A synergies

Cost

Improved market access Financial

Economies of capital market

Market powerEconomies in

innovative activities

Scale economies

Removal of redundancies

Diversification

Managerial efficiency

Consolidation of functions

Supply chain

Procurement

Market knowledge

Tax benefits

Negative synergy

Growth Synergy objectives Return

11

process re-engineeringChange managementproject managementoperationsmentorshipCoaching

deal strategy developmenttarget selection & engagementdue diligenceintegration planningintegration executionpost-integration monitoring

M&A s

tage

s

M&A p

erfo

rman

ce

Com

pete

nce

Synergy

Deal structure

Access to customers

Regu

lato

ry

Credibility of financial accounts

antitrust/regulatory approvalpolitical hurdles/interferenceOnerous regulatory remediesSpecial view to foreign companyUncertain timetablescorruption

Mist

akes

quality & credibility of revenue steamstransparency & visibility

Data

prot

ecti

on

targ

et co

ntac

t & re

view

purc

hase

agre

emen

tpr

e-cl

osin

gne

goti

atio

ndu

e dili

genc

ele

tter

of in

tent

Conf

iden

tial

ity a

gree

men

tm

emor

andu

m of

inte

rest

s

Closing

Combinationaltransformational

Speed and time spend onintegration capabilities

Communicationleadership

discipline

deal rationale, expectations and assumptionsimproper M&A strategy development

insufficient confidentialityUnfair target assessment

failure on integrationlack of perspective

poor due diligence

M&AChallenges

12

Value leakis the major post-deal issue…

Time

Rev

enue

M&A

integration

Running revenuePre M&A planned revenue Post-M&A achieved revenue

• Acquisition of revenue• Synergy

Revenue gain

pre-M&A post-M&A

Exit

Closedintegration?

13

Value leak… that can be addressed by focusing on

Through early planning and communication

Preparation

People

Speed

Focus

Post-deal key

success factors

Maintain momentum from deal completion

First execution especially during first 100 days

Concentrate resources and time on value drivers

and opportunities

Earnings growth + Operational efficiency + Risks mitigation

while ensuring day-to-day

14

Smart elements of M&A

Many acquisitions look great on paper… ● All M&A require robust, disciplined project management ●Every deal is UNIQUE ● Signing of a deal is not the end - it is really the beginning of the real work to REAKIZE VALUE from the acquisition ● Other people’s best practices work best in other people’s companies ● Companies seek to access customers in different ways ● Some mergers are doomed from the beginning ● Success or failure cannot just be delegated ● To control the integrity of the deal price and avoid irrational movements within the company and the market, M&A deals must be highly CONFIDENTIAL ● Synergy targets need to be rooted in SOLID business plans ● MEASUREMENT drives achievement ● High-performing M&A projects take less than 6 months to move from a non-disclosure agreement to a binding offer ● Inflated expectations and assumptions result in lack of discipline and perspective ● Management cannot enter the deal process without being prepared to walk away from a target ● The STRATEGY is more important than the target ● Post-acquisition performance measurement helps management CONTINUOUSLY educate itself ● Value is not created until successful integration of target entity ● Measurement is an ONGOING process designed to provide members of the various M&A stages teams with real-time feedback ● M&A team needs to better understand and define the END-STATE vision ● One-size does not fit all types of deals ● Do a better job of identifying the acquired company’s capabilities and where the true synergies can come from ● Set more REALISTIC timeframes to achieve objectives ● Don’t fall asleep having high-level M&A model which lacks specific steps or instructions needed to actually GUIDE actions ● Size slows speed and dilutes accountability ●Success of deal is only achieved when EVERYTHING works together as it should, not simply when budget projections are met ● There is no value in prolonging a deal negotiation ● SPEED allows you to exploit post–deal opportunities on your own terms

15

Oper

atio

nal

finan

cial

lega

l

DD teamexisting M&A expertise

geographical locationaccess to resources

nature of dealtarget size

Tools & deliverables

Onsi

te vi

sit

inte

rvie

w

Clean teamdata roomChecklistenclosuresred flags

DD m

yths

Culturalleadershipregulatorytalent retentionbusiness intelligencecompensation & benefits Size does not matter

One practice fits allno cultural differencesall speak the same lingowe will get all data we need

some openness will not hurt

Traditional

Asse

ssm

ent

repo

rts &

revi

ews

key a

sset

s & ri

sks

hard

& so

ft is

sues

docu

men

ts re

ques

t lis

t

management & operationsdocuments & transactions

financial statementslegal compliance

Minimal reviews

exte

rnal

audi

tors

cons

ulta

nts Pre-integration planning

executives selectionSuccession planday 1 Plan100-day Planpost-integration review

Project management

tools & templatesskills & experience

resource managementmaster plan and updates

Due Diligence

hr it Cult

ural

16

Due Diligence process

Due Diligence

Understand the transaction

• DD organization and management

• Communication• Information request lists• Questionnaires (check-lists)

adjustment

1 stage:• Complete questionnaires• Conduct on-site surveys• Conduct interviews2 stage:• Review responses• Additional information

clarification

(Virtual) Data Room?

• Analyze findings (reports) for every DD accomplished

• Risks assessment• Identification and validation

of value drivers• Synergies evaluation• Gap analysis & cost of

integration calculation

• Summarize DD findings and develop DD report

• Issues: risks, opportunities, critical needs, important issues, cost implications

• Initiatives: risk mitigation, opportunities leverage, business need, dependency between functions

• Present results to seller and discuss ‘hot’ issues

Adjust valuationmodel

17

Transformation pre-planning

Increase

Eliminate

Create

Reduce

What areattributes, activities, services

to increase


to reduce

What areattributes, activities, servicesto create


to eliminate

+ +

- -See prospectively: chose between business processes optimization (improvement) and re-engineering

18

Due Diligence check-lists

Business / Commercial

Legal

HR

Regulatory

Technology

Cultural

Financial

Operational

Environment

Corruption

Intellectual property

Data protection

Tax

Payroll

Antitrust & politics

IT

Information security

Accounting

Market

Sell Side DD review Buy Side

Lim

ited

DD

rev

iew

acc

ess

leve

lFu

ll

Customers

19

Smart elements of Due Diligence

DISCIPLINE, DISCIPLINE, DISCIPLINE ● DD has only LIMITED ability to set accurate expectations of the total synergies available in a deal ● DATA PRIVACY is crucial ● Ensure that the deal timetable allows sufficient TIME for thorough DD to be conducted ● Allow extra time to understand the pre-and post-regulatory requirements, create relationships with local stakeholders incl. state/political institutions ● Corruption DD clean up a way to fix shortcomings identified ● If M&A team does not do its homework, it may find that company come under scrutiny from regulators complaining ●Understand the business OBJECTIVES behind the acquisition ● PRIORITIZE DD efforts and determine what information is important to review, and what can be skipped ● SPEED is a critical driver of success ● For effective DD team relevant and timely industry EXPERIENCE is crucial ● Checklists are helpful for guidance, but should not be used to just ‘check the box’ ● No DD investigation would be complete without a personal ONSITE manager visit ● Just because everyone on the team is skilled at DD does not mean that they necessarily will understand each other's findings ● The key to DD lies in ASKING the right follow-up questions at the right time ● ‘One size fits all’ approach may not always work in DD ● Due diligence often sounds easier than it is ● You will never get all data you need -learn to live with INCOMPLETE data and use your own judgment to fill in the gaps ● All transactions usually move to the acquirer’s system footprint ● Finding the RIGHT PMO and putting functional teams in place is an essential first step ● Consolidation is time-consuming ● Manage the pre-planning regime like the execution phase (90/60/30 days) prior to Day 1 ● There are no improper questions ● What may be seen attractive from the outside may look entirely different when you take full control

20

Integration organization

Integration plan

Common PMI phasesPMI capabilities

Risk factors

Integration components

resources & conflicting prioritiesintegration strategy framework

integration support toolsChange management

IMO m

ission

the f

ive S’

shr

proc

esse

sta

rget

s & tr

acki

ngCu

stom

er en

gage

men

t Steering boardPMI directorintegration managerintegration teamsdecisions chaindecision/integration management office

measuring integrationIntegration processIntegration toolsPMI models

Standalonetandem

program management & integration planningChange management & communication

planning & prioritizingissues identification & fixationsynergy identification & implementation

CoordinationCommunication

busi

ness

inte

llige

nce

role

s & re

port

ing l

ines

hum

an re

sour

ces &

regu

lato

ry accounting & financeCommunicationOperationshead officeend statusauditlegal

Speedpeople

culture

end-

to-e

nd pr

oces

sle

sson

s lea

rned

Com

mun

icat

ion

disc

iplin

e

Set d

irec

tion

Capt

ure v

alue

build

orga

niza

tion

Integration typemajor acquisitionmerger of equals

tuck-in

Inte

grat

ion po

licies holding

Symbiosisabsorptionpreservation

process re-engineeringChange managementproject managementmentorshipCoachingCo

mpe

tenc

e

Integration(PMI)

21

PMI capabilities

1

2

34

5

6

Customerengagement

Programmanagement& integrationplanning

The five S’s

Targets andtracking

Changemanagementcommunication

HRprocesses

• Strategic logic of the deal• Spirit of integration• Speed of integration• Systems to be chosen• Scope of integration

1

• Team structure and launch• Cross-team coordination• Issue management• Integration design process• Preparation for Day One

2

• Employee morale• Stakeholders• Cultural integration planning

3

• Integration objectives• Synergy targets setting• Implementation milestones and

benefits tracking

4

• Retention planning• Selection process 5

• Customer risk management• Customer experience management• Customer input

6

PMIcapabilities

Based on: BCG

22

Portfolios, Programs, Projects

Projectdoing the project

right

Programdoing the right

projects

Portfolio Management• Enterprise-wide perspective• Strategic goal alignment• Investment mix• Market and shareholders driven• Adjust to market conditions/

opportunities/ changing priorities

Program Management• Business-area perspective• Benefit stream realization• Alignment of related projects• Roadmap of value

Project Management• Well defined boundaries• Capability delivery• Budget, scope, schedule• Team delivery• Requirements management• Architecture design• Development• Test

TACT

IC

S

TRA

TEG

Y

STRATEGIC GOALSAre we working on the right project?

Are we investing in the right directionDo we have the right resources to be competitive?

TACTICAL GOALSAre we carrying out projects well?Are projects on time and on budget?Do project stakeholders know what they should be going?

Portfolioselecting right

things to do

23

Basic types of PMOPortfolio/Program/Project Management Office

ProgramPMO

ProjectPMO

CorporatePMO

BusinessPMO

Temporary Permanent

Higher

Lower

Hie

rarc

hic

posit

ion

Expected life span

• Portfolio management office -provides support at a strategic level within the governance and strategic project selection and management domain

• Program management office - tends to provide strategic and centralized support to the program, including the management of shared resources, methodologies, tools and techniques

• Project management office - provides centralized and coordinated management or support of those projects for which it is responsible

24

Business Development functional management

Hie

rarc

hic

posit

ion

Strategy

Tactic

Proj

ect

Pro

gram

Po

rtfo

lio

(e.g.)

Company: vision & missionStrategic goals

BD

por

tfol

io

ProgramA

Proj

ect

A1

Program B(M&A)

Proj

ect

B1

Project A2

Subp

roje

ctA2

-1

Subp

roje

ctA2

-2 Proj

ect

B2

Proj

ect

C1

… …

…Business-as-usual

25

Project Management Office (PMO)

PMO

Supportive PMO provides a consultative role to projects by providing templates, best practices, training, access to information and lessons learned from other projects.Degree of control - low

Directive PMO goes beyond control and “takes-over” the projects by providing the project management expertise and resources to manage the project.Degree of control - high

Controlling PMO provides support and require compliance through various policies. Compliance may include adopting project management frameworks or methodologies, using specific templates, forms and tools, or conformance to governance.Degree of control - moderate

Support

Direct

Control

PMO is a management structure that standardizes the project-related governance processes and facilitates the sharing of resources, methodologies, tools, and techniques.

M&A Integration

26

Integration organization

Integration Team• Functional/project

experts• Teach & Support• Drive & Control

Integration Steering Board

• CEO, CBD, RD, PMI,…

Functional Managers• Local management• Learn• Implement

Integration Director

Integration Manager

Integration Management OfficeDecisions management

PMI ProjectFinance

PMI ProjectOperations

PMI ProjectIT

PMI ProjectHR

PMI ProjectHO

PMI ProjectCommunication

PMI ProjectCommerce

Special-issue teams

• Temporary units

27

Integration Management OfficeIntegration Director vs Integration Manager

INTEGRATION DIRECTOR• Strategic level• Mentor/Coach• Advice/Help• Facilitate• Review• Project management

sponsorship• Knowledge management

INTEGRATION MANAGER• Tactical level• Execute/Manage• Plan/Organize• Initiate• Control• Technical project mngt• Identify• Stakeholders identification and

communication

Leadership

Integration Manager is linked to PMI phase of definite integration project

Integration Director is linked to pre-, PMI, and post-integration strategy of the company

28

Integration Management OfficeIntegration Director vs Integration Manager

Transformational Leader/Deal Owner Project Manager

Outside traditionalspecialist expertise

IntegrationDirector

Lead the effort

Strategicleadership

Operationalresponsibility

Managerialleadership

Technical project management

IntegrationManager

(cont.)

29

Integration Director

• Able to guide the integration process by means of leadership able to overcome: • the risk of cultural clash • the risk of possible clashes between different management styles • the risk of personnel turnover

• The quality of such complex individual involves both of the two crucial sides: the technical and human

• [as] Mentor:• is considered has used his skills successfully on multiple projects and can

supervise/mentor/coach others on his skills • possesses effective presentation and strong written and verbal communication skills

• [as] Transformational leader: • personality, leader’s behavior, technical competence, tactics he can use in order to exert his influence;

• creativity, boldness, craving to succeed and strong determination;• strong charisma, through which he is able to create an ideal vision in his followers and to

install a sense of trust and loyalty towards him;• emotional appeal (or empathy), by way of which he is able to communicate his vision

motivating followers;• sense of creativity at intellectual level, through which he is able to make people focus on new

ideas and problem solutions; • high consideration for individuals, i.e. is always disposed to listen to his people’s problems and

ideas in order to motivate them and to receive continuous feedback on his choices.

30

Roles of Integration Directorduring PMI

• Communication facilitator• figure out a shared vision to the two previously separated companies and

their teams, strategic intents/objectives and directions; • promote cooperative atmosphere between the integration teams;• promote the spread of creativity, new ideas and knowledge.

• Transformational leadership• he is seen as an individual with a clear integration plan in mind, trustable,

competent and seriously interested fortune of the acquired company;• enhance exchange mutual competencies;• inspire individuals, achieving their commitment and conquering their trust;• prevent loss of motivation and immediate consequential people’s turnover.

NOTE: Stereotypical M&A case: Traditional approach when M&A team is responsible for deal making while Operations team - for integration leads directly to loss of continuity of M&A+PMI process and deterioration of accountabilityfor acquisition targets → Integration Director should be the unifying factor representing top management

31

Roles of Integration Directorduring PMI

• Organizational buffer• alleviate the pressure on the integration teams from the top management

arising from• the necessity of the acquisition promoters to validate their business (acquisition)

case in front of the investing stakeholders,• the need to have the top management approval and legitimization,• request of "immediate' results (short-termism) that from operational and/or

strategic and/or financial point of view seems to be unattainable;• inconvenient requirements coming from the integration teams that could

compromise the whole integration process success;• mitigation of cultural clash between the two teams.

• Network facilitator• widespread the results of integration and promote new knowledge/ideas

obtained and creativity through the entire organization;• act as moderator of interaction among various individuals, who operate in

different parts of the organization and, therefore, do not know each other (even though they would need to).

(cont.)

32

Integration ManagerCompetencies & skills

An effective integration project management requires that the project manager possess the following competencies:• Knowledge - what the integration manager knows about project management;• Performance - what the integration manager is able to do or accomplish while

applying his project management knowledge;• Personal - how the integration manager behaves when performing the project

or related activity. Personal effectiveness encompasses attitudes, core personality characteristics, and leadership, which provides the ability to guide the project team while achieving project objectives and balancing the project constraints.

Some highly desirable interpersonal skills of an integration manager are:Leadership | Team building | Motivation | Communication | Influencing | Decision making | Political and cultural awareness | Negotiation | Trust building | Conflict management | Mentoring

33

Integration ManagerRoles & Responsibilities

Integration project manager is the person assigned by the organization to lead the team that is responsible for achieving the project objectives. They are the people responsible for managing the project processes and applying the tools and techniques used to carry out the project activities. Good integration project manager should have a variety of skills. In general, his roles and responsibilities are to satisfy the needs:• task needs• team needs• individual needs

A project manager's typical responsibilities include:• Planning and organizing the work• Managing the day-to-day activities of a project• Delivering the project deliverables

34

5 drivers of integration success

Communication

Integration strategy

IntegrationteamSpeed

Aligned measures

1

Acquisitionintegration

successdrivers

Create impression that acquired companywas “always there”. Acquired company adopts practices of acquiring company.

1

Small, distinct team with enough resources and contributions from senior management.Leadership remains from acquired company.

Customers of acquired company must understand new opportunities in business.Employees of acquired company must understand new roles.Focus on how acquired company fits into acquiring company’s business.

Fast decisions are key for both strategic goals and promoting stability and reducing uncertainty in organization.

Focus on how acquired company builds growth and optimizes operations.Acquired company adopts measurement systems of acquiring company.

2

3

4

2

3

4

5

5

35

5 factors of integration success

Ongoing communication with stakeholders in order to maintain stability and provide a platform for solid performance post-closing.

2

Key employees often have experience and knowledge that are vital to maintaining consistent operations. Losing these individuals can be devastating to the long-term success of the deal.

Creating environment and behavior thatinspire a shared sense of purpose, coherence, community and trust, enable employees to focus and to remain highly engaged during post-closing integration.

See previous slide.Developing integration structure and policies that enhance and leverage the best practices.

Determining the reports and indicators management will need to monitor the acquired company’s operations during the transition

3

4

1

5

Key employees retention

Developed integration drivers

Business relations retention

Cultural alignment

Reporting system

1

Acquisitionintegration

successfactors

2

3

4

5

36

Integration planning & execution

Integration Steering BoardSet direction and

monitor

Integration Project OfficeCoordinate and

control

Integration Team

Plan and implement

Decides on strategy,infrastructure and resource allocation

Ensure alignment of initial plans with overall direction

Monitors implementation and

ensures rapid actions

Assesses environment & opportunities and builds initial integration plan

Reviews & consolidates plans

and ensures implementation

Builds detailed integration plans and implements

37

Integration phase

Feasibility / Investigation

Due DiligenceAnalysis

Transformation direction

Integration Plan

Integration process

Milestones Review

Integration Review

Integration Plan

Design

Integration Plan Milestones Review

Integration process

Implementation

Integration process

Monitoring

Milestones Review

ExecuteControl

(Refine) Plan

Lessons learned & feedback

Transformation

OptimizationIntegration

capacity upgrade for next M&A

project

Audit

38

People integration

Culture

People cost

Structure

Engagement

Talent Regulatory

People related risks identification

Culture risk

People cost risk

Structure risk

Engagement risk

Talent risk

Regulatory risk

Risk Heat Map

Proactive addressing the key people and organization related risks

Effective change management:• Organization level• Teal level• Individual level

Leadership:• Visible• Recognizable• Constructive

Due

Dili

genc

eIn

tegr

atio

n

People integration planning to be done based on the Risk Heat Map

39

Emotional phases during PMIStress management

Self

-est

eem

Time

Shock

Denial

Anger

Depression

Acceptance

Experimentation

Discovery

Integration

E. Kubler-Ross’s (1970) G. Weinberg (1997)

Old status quo

Integration in practice

New status quo

Perf

orm

ance

Transforming idea discovered

Acquisition

Stress

Support

Change

Role

Relation-ships

ControlDemands

1. Forming

Ending Neutral zone New beginning

40

Leading integrationCommunication strategy

Create trustEngage and motivate employees through clear, consistent and regular communication, while maintaining a focus on business as usual

Day OneCreate influenceCommunicate with credibility and influence to all stakeholders, while realigning operations to achieve the acquisition targets

Create visionCommunicate mission and long-term direction, while embracing short-term integration challenges

Integrationmission

completed?

100days

Remember The Pyramid of Employee Needs?Inspire… Engage… Satisfy

Pre-announcement

Agile Project Management

Estimating by real value = estimate size not duration

41

Media effectiveness tool

posternotice

cascadebriefing

hotlinechart room/shared databasewebsite/e-learningaudio video

broadcaste-mailv-mail

newsletterbooklet

attitude survey

personal letter

forum

road show

away day

Q&A/feedbackweb-based conf-callinteractive staff attitude survey

conferencestaff meetingtraining/workshop

interview withstakeholders

e-newsletter

workshop

staff meeting

conferencefocus groups

website/eRoom

regular e-mails/newsletters

strategic & operational meetings

planning workshops

team eventsreview/ feedback sessions

electronic/web

face-to-face

Methods / Materials

Com

mun

icat

ion

obje

ctiv

esIN

FOR

MED

UCA

TEIN

VO

LVE

MO

TIV

ATE

SUPP

OR

T

TRANSFORMACTACCEPTUNDERSTANDAWAREEngagement of employees

print/artefacts

De Haldevang (2009)

42

Cultural dimension consideration

Risk tolerance

Individualism

Uncertainty avoidance

Organizational culture

Collectivism

Motivation & rewards

Management style & decision

path

Relationship

Power distance

Self-image Punctuality

Masculinity

Distance

Time orientation

Communication

FeminityCultural context

National Professional Occupational Organizational

43

Cultural aspects in cross-border acquisition

Leadership culture

Organizational culture

National culture

Cross-borderM&A

Country environmentPolitical (in-, ext-), economical (in-, ext-), social, education, regulations, infrastructure, history, geography, climate, culture, behavior

Teamwork at top levelGovernance & management style, education, collaboration, personal & professional alignment, networking

Integrating company norms For decision making, top-down management, structure, internal P&P, communication, change, risk acceptance, problem solving, creativity, pay system & incentives

44

Culturo-operational integration

Social integration

Emotional integration

Intellectual integration

Operationalintegration

Shared• Knowledge• Expertise

Standardized• Management• P&P• Infrastructure

Collective• Commitment• Performance

Common• Identity• Purpose

45

Process vs Project mentality

Project

TECHNICAL aspect

TimeResources Goal

Fixed short-run goal

Process

TECHNICAL and SOCIAL aspects

Short-run goal with long-term context

TimeResources

LEARN

Integration

46

Hot spots of integrationWhat could go wrong?

People

PreparationExecution

• Cultural conflict• Conflict between management teams• Loss of key people• Lack of executive commitments• Lack of attention to people issues during

implementation

• Late integration pre-planning• Overpayment for acquisition• Overestimated synergies• Weak DD• Lack of clear priorities• Low/no integration budget

• No IMO (or integration team), no clearly defined roles and responsibilities

• Missed targets, no focus on original planning

• Poor control and reporting• Poor communication• No end-state planning

47

Cult

ural

conf

licts

Coaching vs mentoring

Stress management

Post-acquisition challenges Leadership

Failed integration lessons

Change management

purp

ose

Succ

ess f

acto

rsin

tern

al vs

exte

rnal

Orga

niza

tion

al le

vel

indi

vidu

al/t

em le

vel

prog

ram

leve

lag

ile co

achi

ng

Cros

s-cu

ltur

al co

mm

unic

atio

nCh

ange

fact

ors &

drive

rsOr

gani

zati

onal

cult

ure

degr

ee of

chan

geCu

ltur

e bas

ics

Organizational vs national culturesCommunication difficultiesmanagement styleslanguage barriersConflicting values

‘them-Us’ syndromeCultural shock

Stress audit

mer

ger p

revi

ew‘pr

essu

re co

oker

’em

otio

nal s

yndr

ome

indi

vidu

al co

unse

lling

retaining key employeesovercome cultural differencesintegration systems & processesOptimize & integrate supply chainbalance integration activities with running business

real

ize sy

nerg

yre

tain

ing c

usto

mer

s

peoplepreparation

executionCommunication

management contradictionsChange through persuasion

process vs project mentalitydysfunctional routines

Change process stepsChange dimensions

Ment

alit

y

doingdecidingproject

processdiscerning

discovering

IntegrationChallenges

Cultural integration

48

Stakeholders communication circle

Determine communication

needs

Identify stakeholders

Communication circle (process, not event!) with

stakeholders - how to create, monitor and influence

stakeholders reaction to every your company action

# and availability of stakeholders

Bus

ines

s co

mpl

exit

y

Complex

Complicated

Simple

49

The decision drumbeat

4 2

1

3

DISCIPLINEdo it right

in right language

Based on: Bain & Company

FOCUSPrioritize – identify value, results you expect, and by when

1

ExecuteCoordinate critical decisions – focus on results vs decisions in right order

3 ResourcesAssign decision rights and roles – allocate resources incl. the right people and communicate that to all involved

2

MeasureMeasurable KPIs – focus on results vs decisions, not on process for process’s sake

4

Integration Management Office = Decision Management Office

50

The decision drumbeat

Based on: Bain & Company

Decide

Input

Recommend

Agree

Perform

Provide input to recommendation –information/facts first, then judgement

Formally approve recommendation – implies veto power

Gather relevant facts and apply judgement to recommend a decision or action

Make the final decision – “commit the

organization to action”

Be accountable for making a decision happen once made

Recommend

Agreed

51

From PMI to transformationBusiness case: Healthcare company

Control

Organization

Costs

Growth

Efficiency

Labor

Operations

Effectiveness

Development

Staff

Clinics

Service

Organization = our people

Finance = our business

Market = our clients

PrioritiesFocus

Education & competence

Clinics layout, medical equipment, RS, etc.

From All included portfolio → to Integrated care

Effectiveness of clinical operations = medical quality

Stage I – short-term

Stage II – mid-term

Stage III – long-term

52

Different roles of integration project management

X is …

Training

You could do X

Consulting

Try Y because…

Mentoring

I’ve done X

X, Y, Z, …

Coaching

What else?

53

Definition & meaning of roles

Coaching

Teaching

Counselling

Consulting

Mentoring

Therapy

Training

Passes on advice and knowledge of aperson who has been there before; expertinstructs and teaches the trainee

Develops thinking and capabilities: thewhat & how of an action

Assists and gives advice in resolvingproblems; looks at past to present where &what

Provides answers and solutions, expertisein a given field on the best way to solve aproblem

Passes on advice of a person who has beenthere before; unequal relationship: moreexperienced person vs less experiencedperson

Helps a person to improve hisperformance; observing; giving feedback;inspires new thinking. Action: looks atpresent to future: what & how will you goabout it? Doesn’t provide answers norsolutions

1

Treats or relieves a disorder; action notemphasized; focus on fix what is broken1

2

2

3

3

4

4

5

5

7

7

6

6

Roles

54

Agile coaching competency framework

Based on: Agile Coaching Institute (2015)

TechnicalTechnical expertise typically

delivered through Mentoring and Teaching

Process-focusedcompetencies

Content-focusedcompetencies

Agile-lean practitioner

Mastery

BusinessBusiness value drivers expertise

often paired with Teaching, Mentoring or Facilitating

TransformationalOrganizational development

expertize frequently paired with Coaching and Facilitating

CoachingGuiding the creative ‘out-of-box’ process

FacilitationGuiding to solutions and decision making

TeachingInstructing in specific knowledge, skills and

perspectives

MentoringSharing knowledge,

experience and visions

Knowledge & ApplicationBroad, relevant, practice-based

‘servant leadership’

55

3 levels of agile coaching expertise

Develops leaders, focuses on culture, catalyzes change

Facilitates practices and collaboration on one team or a handful of teams

Individual

Team

Project

Organization

Operates at the multi-team level; develops teams, mentors others, advices managers

Enterprise Coach

Agile Coach

Agile Team Facilitator

56

Agile coach trinity

Team coach

Individual coach

Management coach

AgileCoach

COACHFocus on teams to improve value flow

to customer

Build relationships

IndividualListen, engage, and ask questions to draw out and overcome individual’s internal challenges

ManagementGuide management in the allocation of resources to create environment for teams to grow based on the needs identified in teams retrospectives

TeamGuide retrospective conversation to facilitate the development of self-organizing and self-improving team

57

Smart elements of Integration

DISCIPLINE, DISCIPLINE, DISCIPLINE ● Develop a strategy and viewpoint on ‘HOW MUCH integrate’, ‘HOW MUCH centralize/decentralize, ‘HOW MUCH do yourself or outsource’, and ‘service scope’ ● KNOW what you’re doing and why you're doing ● Recognize the difference between the ‘quick fix’ and ‘long-term’ solutions ● COMMUNICATE everything; if you think you are communicating ‘too much’, you are probably not communicating enough ● Vision, Values and Culture ARE real and material systems, and cannot be ignored ● Take on the hardest decisions EARLY ● Manage key STAKEHOLDERS ● If someone is an ‘enemy’ of change, you should probably kill him – the SOONER, the better ● The higher degree of integration, the higher the economic PERFORMANE of the acquisition ● Get everyone speaking the SAME lingo ● Structuring the integration team correctly and staffing it appropriately are both essential to a successful integration ● Culture and practice of integration focused on avoiding failure can CONFLICT with realization the full value of M&A ● Best practices are based on past conditions ● Identify and focus on the CORRECT priorities ● Do not allow the integration effort to disrupt ongoing operations ● 100-day plan should not be focused as much on figuring out ‘what to do’, but more on ‘HOW’ to realize the acquisition objectives ● Lead roles should be staffed by people with in-depth industry and functional experience ● Appointing the RIGHT team to manage the integration is one of the most important factors in determining the success of the integration ● Deals with robust integration plans backed by explicit principles and policies deliver greater shareholder value ● The management of the HUMAN SIDE of change is the real key to maximizing the value of a deal ● If the assigned RESOURCES have other pressing responsibilities, execution of the integration plan will suffer due to inadequate attention ● Start integration process BEFORE closing ● Functional leaders without integration experience will bring delays, mistakes and additional resource drain ● How do we use integration to improve our OWN culture? ●PMO is a ‘glue’ of integration ● Improvisation has no place in the unforgiving business of change ● The primary purpose of integration team is to IMPLEMENT strategy, not develop or validate it ● Integrate with the END in MIND ● Disrupting a system by plunging it into complete chaos is rarely a recipe for success ● COMMUNICATION is a stabilizer ● Acquisitions are of PEOPLE, so the cultural piece is critical

58

Every integration, even every day of integration is unique.Evaluate this experience and learn from it.If you do not evaluate – you do not learn,

if you do not learn – you do mistakes,you repeat mistakes – you fail…

See presentation on:http://www.slideshare.net/VirgilijusDadonas/postmerger-cultural-integration-66795251

http://www.slideshare.net/VirgilijusDadonas/postmerger-cultural-integration-66795251