Restructuring is happening on a global scale across
most industries. Mergers, acquisitions, strategic
alliances and JVs are deployed as a means of increasing
shareholder value. However all the data points direct
it is far from a straightforward task to deliver on
the promised benefits from these transactions:
1 = Survey by AT Kearney, 2=
The Economist Survey, 3 = Business Week Research
So What?
Does this mean that business integration can never
work? Should companies shy away as it is highly likely
to destroy value? Obviously the answer to both is
no, restructuring is something that will not stop
and companies must be able to take advantage of growth
opportunities. It is vital to know where the issues
and risks in delivering the benefits actually come
from, and knowing in advance how you will manage or
mitigate them.
Sometimes, it’s clearly the case that for whatever
reason, the deal is simply the wrong one and that
it should never have been undertaken. Around 30% of
failures can be pinned to failings at the due diligence
stage. A further 17% of failures can be traced to
the negotiation phase, i.e. the deal would be a good
one if the terms were right. However, the majority
of failed integrations, some 53%, stumble as a result
of poor implementation of the integration programme
itself. The transaction was a good one and set up
well but the delivery failed.
Enhancing the Likelihood of Success
Of course, all integration programmes are different
and there is no such thing as a ‘one size fits
all’ model. However, to mitigate the risks of
failure, PIPC strongly recommends the following actions.
These have been distilled from our practical experience
of working with many global clients to deliver successful
business integration programmes:
1. Define a clear set of principles
Clarity of purpose across the organisation can only
be achieved by having a clear set of principles that
drive the programme. Successful examples of a single
aim, simply articulated include:
2. Prioritise the key opportunities
Successful integration requires immediate and systematic
focus on the key opportunities that drove the valuation
and the justification for doing the deal:
3. Instil the right management focus
It is vital to instil the right clarity of purpose
across the organisation by ensuring there is:
4. Focus on the mobilisation
The first days of any integration programme are critical
to ensure that delivery is set up for success.
5. Manage the impact on customers
Make sure the combined customer groups don’t
see integration as a reason to leave. They must:
Looking to the Future
Opportunities on a global scale to benefit from industry
restructuring and subsequent business integration
will grow as the global economy grows and evolves.
PIPC has developed a best practice approach for managing
the crucial integration stage which can be shown to
have a significant positive effect on speeding up
the integration process, enhancing shareholder value
and increasing overall profitability.
