Making up for Lost Time

By Phil Dunmore, Managing Director, PIPC (UK & Europe)

Deal Monitor, October 2009

As the money markets start to warm up and liquidity taps open, AIM listed companies with strong management teams and growth plans will be amongst the first to benefit. Many of these firms will be looking to accelerate their growth through acquisitions and mergers in order to make up for what the ambitious will see as 'lost time'.

The inherent danger is that these companies will come out of the traps too quickly, eagerly looking at deals and opportunities. While growth through acquisition isn't the wrong strategy, necessarily, failure to plan in advance and implement an appropriate business and IT integration framework will likely destroy the shareholder value that the deal may have promised.

A recent PIPC survey has shown that the majority of mergers fail to deliver the benefits promised. Failure can occur through inadequate due diligence in compiling a deal or at financial closure. However, by far the most significant reason (53 per cent) for mergers failing is down to poor business and IT integration after the deal.

Company directors and any number of nominated advisors including bankers and legal counsel are incentivised only on ‘doing the deal’ not on the downstream success of integration.

Integration expertise is key both prior to the deal and after the fact. Indeed, once the deal-making process is complete, the hard work really begins. Forget manuals and ‘how to’ books - integration is not something companies should be learning as they go.

There are some fundamental principles to take along the way that will heavily shape its success. Five such principles can be summarised as:

Rapidly define a clear and well-architected end state design. Don’t look for a consensus on this, as there won’t be one. Also, avoid the ‘mix and match’ route which will lead to prolonged decision making at a time when speed is vital to chances of success.

Avoid the desire to use the integration as a time to optimise. While mandatory imposed change and requirements to keep the show on the road will take precedence, all other ideas for improvement must be stemmed and for integration to become the priority.

Create an integration plan, but don’t strive for perfection, as it will never be achieved. Aiming to create an integration plan that answers all of the questions before the organisation moves into Execution will just result in integration delays ... not a perfect plan!

Drive momentum to succeed by instilling a single accountability and dedicated focus on delivering integration. Managing the delivery of a successful integration is not a part time activity ... nor is it for the uninitiated. Ensuring dedicated Executive sponsorship is vital.

Manage the market and communicate like mad. The post-acquisition world creates uncertainty in both the external market and with employees in both organisations. Work hard to constantly communicate the logic of the acquisition, the integration plan, and the progress being made against it. The importance of this cannot be overstated!

By no means is there a ‘one size fits all’ model to integration success! However, success can be heavily influenced by not losing sight of the above principles; setting the right direction, creating the momentum, and ultimately getting the IT and business organisations fully behind the task ahead.