Serial acquisitions

We have found that a strong governance process enables quicker decision-making. But making such decisions is not enough. Strong governance also requires ensuring that the decisions are executed as intended. Leadership teams can do this by creating a steering committee and program management office PMO at the finance functional level.

The PMO will delegate decisions to the work team but meet once or twice weekly to escalate issues and decisions that cannot be made at the work-team level.

These meetings can also be used to monitor the status of integration design and execution based on those decisions. When a leading energy company acquired a smaller firm in , the goal was to expand its portfolio of offerings so the company could compete more effectively against major rivals. The deal was one of the largest in the industry, and the company had not made any major acquisitions in the preceding five years.

Differences between the two firms presented daunting challenges for the PMI process. The organizational cultures contrasted sharply.

The contrasting operating models meant that the two companies handled business transactions differently. Additionally, as the acquisition process extended over roughly two years, some employees were in flux regarding their job security for the duration. It is difficult for any organization to extract high performance from individuals facing such insecurity. To surmount its PMI challenges, the acquirer adopted strong governance measures.

It established an Integration Program Office IPO that enabled integration across back-office and front-office functions and made the decision to drive common infrastructure across the enterprise. The IPO crafted a detailed plan and timeline and began tracking progress on the PMI progress against targets on a regular basis. The involvement of the IPO enabled everyone to see the path that the new entity needed to follow, where it stood along that path at key milestones and what was needed from each function to complete the process.

Fifty eight percent of our survey respondents said that they have an internal team fully dedicated to PMI, citing numerous benefits from this approach.

They also reduce the cost of merger integration by using their leading-practice knowledge and solutions from past integrations to reduce reliance on contractors and outside consultants. Additionally, dedicated teams speed integration time by utilizing methodologies, templates and tools from past integrations. See Figure 7. Another consideration is which functions should be included on a dedicated internal PMI team.

Approximately three-fourths of our respondents cited the overall finance and human resources organizations, about two-thirds said IT integration and financial processes and reporting, and almost half named supply chain integration. See Figure 8. Comparably, our experiences with clients suggest that the PMI team should comprise representatives from each function affected by the merger or acquisition—typically corporate accounting to address chart-of-accounts mapping, compliance, external reporting and back-office functioning , forecasting for planning and reporting , investor relations for external reporting , business-unit finance for management reporting , tax, treasury, finance HR and finance IT.

Sixty percent of those we surveyed said that they assign the same individual as team leader for every post-merger integration.

Moreover, almost all respondents said that the members of their PMI team sometimes or always have ongoing responsibilities other than post-merger integration. According to these respondents, such responsibilities are typically backfilled when the team members are involved in post-merger integration work.

See Figure 9. However, these teams continue to be responsible for closing, consolidation and reporting for each legacy firm until the merger is closed. The key members from these teams may split their time between integration and business as usual activities. Companies may also often back-fill remaining roles on the integration team and business as usual teams with consultants and contractors to provide additional capacity.

The new entity faced several challenges, including integrating two legacy firms with very different organization structures, reducing operating costs, ensuring compliance, retaining finance talent and clarifying roles. To surmount these challenges and ensure successful future-state integration, TW used the combined finance organization to source a dedicated team for the merger.

The team included full-time finance employees who knew the business and could lead the integration design from an operational perspective. These resources were back-filled with contractors from a staff-augmentation firm. This approach freed up full-time resources for the PMI program.

The dedicated team also included finance associates from the middle ranks of management. Their participation on the team gave them a sense of empowerment and ownership in the PMI effort, established balance within the finance function and injected the team with a strong operating perspective that senior leaders would not otherwise have had.

Savvy staffing of the team has paid big dividends. As one example, TW consolidated its financial statements for its first-quarter close earlier than legacy Towers Perrin had produced Financials before the merger. And everyone involved in the PMI journey experienced an increase in personal motivation, which helped them address initial challenges including interpersonal conflict and ambiguity over roles. Thanks to the empowerment of middle managers, finance associates feel proud they have a portfolio to manage.

They enjoy being members of the business team, and they give the business their full support on operational decisions. For example, a company whose strategy centers on growth might aim for sales and revenue enhancement through access to new customers and strive to liberate internal resources to drive that growth. Such a business might be less concerned with cost synergies. Leaders in this enterprise may be less concerned with driving sales growth.

See Figure Given the importance of achieving synergy targets, it is not surprising that most of the enterprises represented in our study track actual synergies gained from a merger or acquisition against targeted synergies for two to four years after integration.

Synergies gained are measured by tracking baseline revenue and costs with the annual accumulated improvements projected year over year against the actuals achieved each year. However, such tracking can be difficult, because the company should normalize actual results for inflation and for foreign-exchange differences if global organic and other inorganic growth through consolidations has occurred outside that merger event.

When actual synergies fall short of the target, the company should analyze whether subsequent company events or strategies affected the loss of synergies, whether synergies were overestimated or whether flawed execution was truly the cause.

Of the companies we surveyed, 20 percent achieved percent of their synergy targets, while 50 percent achieved percent of their targets. One percent achieved synergies beyond their targets. Save my name, email, and website in this browser for the next time I comment. Type above and press Enter to search. Press Esc to cancel. Facebook Twitter Instagram. Library Materials. Previous Article Depth classification.

Next Article Periodical service in college libraries. Related Posts. Digitization and digital preservation June 14, Preservation and Conservation of Library Materials June 14, Periodical service in college libraries December 12, Once a target is acquired, Koch uses its distinctive capabilities and approach to risk to systematically improve performance and grow the business over a multidecade holding period.

The clarity of its investment thesis and its disciplined approach to valuation allows Koch to acquire companies in different industries—such as pulp and paper company Georgia-Pacific and electronic-interconnector manufacturer Molex—confident that they will grow faster and create more value as Koch subsidiaries than they would on their own. Finally, by defining precisely the mechanisms through which the acquiring company will make the acquired business more valuable, an investment thesis gives the buyer confidence in future earnings power.

This investment starts at the top. In the process, they make deal sourcing and the patient cultivation of targets part of the culture of the entire organization. Other serial acquirers make a special effort to foster connections with family-owned companies, nurturing their relationships over the long term and positioning themselves for a generational transition that leads to a decision to sell.

The best acquirers recognize that no two deals are exactly alike. During integration, allocate the majority of team resources to those activities whether innovation, procurement, or pricing, for example in which most of the value is expected to accrue. Any company targeting more growth from acquisitions can learn from the successful serial acquirers who have invested in the three practices discussed above. To do so, however, requires a degree of organizational investment that is significantly larger than most companies make.

For busy senior executives, it is always tempting to wait for the right deal to be presented to them.