Case Study: Merger Integration
Integrating an acquired company
Medium ($747,000,000 annual revenue)
Technology (business support solutions provider)
Integrating an Acquired Company
Situation: Research overwhelmingly demonstrates the ineffectiveness of acquiring companies in capturing financial synergies when integrating new acquisitions. Estimates are that between 50–75% of acquired companies fail to achieve pre-acquisition financial targets. A technology company specializing in providing business solution support (primarily to the cable industry) acquired a company with proprietary technology that could increase the service and solution offerings to existing clients. The management team of the acquiring company wanted to ensure that they would not be another M&A statistic.
Process: The CEO engaged Myron Beard Executive Consulting (MBEC) to assist in the integration of a newly acquired company. MBEC met with the acquiring company’s management team to better understand both companies and the challenges facing integration. MBEC created an integration plan including the following processes:
The MBEC Difference
The parent company was able to completely and successfully integrate the acquired company. Within one year, the acquired company’s services were responsible for significant new revenue.
- Understanding the new company: During the M&A process, it is critical to understand the degree of integration required. In some cases, the acquired business should stay as a stand-alone because of different products, services, customers, or markets. Some acquisitions should be fully integrated because of their complementarity to the parent company in products, services, customers, or markets. Finally, some acquisitions should be a hybrid, with some back-office functions consolidated but operations and sales remaining independent. MBEC interviewed principal individuals in both companies, reviewed business plans, and reviewed services and markets to get a better understanding of the acquired business. On the basis of this review, it was determined that the acquired company would be fully integrated into the parent company and become a complementary service line to the existing company services.
- Establishing the Integration Office: The creation of an “Integration Office” is a pre-requisite to beginning any integration activities. This office creates expectations and a roadmap for the integration, grants authority and empowers, establishes reporting processes, and is responsible for project management. The Integration Office oversees all aspects of the integration and reports to senior management. In working with management, MBEC helped identify a small group of cross-company experts to establish the office.
- Creating an integration team: The Integration Office then worked with the various organizational functions to identify Integration Leads to help with the actual implementation (e.g., legal, HR, finance, etc.). This team held an offsite meeting, facilitated by MBEC, to begin the process of understanding the acquired company and identifying high-level synergies and consolidation opportunities. The emphasis was on making major integration decisions and implementing them in the first 100 days.
- Establishing functional plans: MBEC facilitated training of each function to help identify areas for consolidation and how to create project plans for implementation. This training included how to work a project plan and also laid the groundwork for developing a master Merger Integration Plan defining tasks, priorities, assignments, and deadlines.
- Integration implementation: In conjunction with the Integration Office, MBEC facilitated daily, and then weekly, meetings to review each function’s progress on integrating their piece of the project. Deadlines and milestones were established and MBEC helped individuals and Integration Leads remove roadblocks and barriers to implementation. In addition, in conjunction with the Integration Office, MBEC facilitated reports to senior management of the combined organizations. A master scorecard was developed to monitor progress and create integration reports and updates.
Outcome: During the first three months, all major integration decisions were made and project plans were put in place for implementation. Over a nine-month period, the parent company was able to completely and successfully integrate the acquired company. The new management team consisted of a mixture of prior parent company executives, with some executives from the acquired company. Within one year, the services of the acquired company were being offered to existing customers of the parent company and these new services were responsible for significant new revenue.