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PwC M&A Integration

Seven Fundamental Tenets

of Successful Integration
This Morning’s Agenda

1. PwC and the Deal Lifecycle

2. Presenter Introduction
3. Seven Tenets of a Successful Integration
4. Recent PwC Survey Findings
5. Common Integration Questions and Considerations across Functions

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 PwC and the deal lifecycle
PwC advised clients throughout the phases of the deal lifecycle; We work on the buyer
and seller side of the deal, maximizing the value of the deal activity.
Day 1 Day100

Strategy & Initial Integration Transform/

Target Diligence Integration
Negotiation Planning Evaluate
Screening
• Validate the original • Develop plans to • Convene, monitor • Maintain accountability at
Strategic assumptions for achieve the and manage the the business leader level
Rationale doing the deal business teams to for capturing synergies
goals/objectives implement the
• Size and verify the • Maintain accountability
and seamlessly plans
value and timing of for delivering the
operate to obtain the
synergies business
“day-one” as business rationale results per the strategic
• Highlight risks to the combined entity objectives rationale
combined business
case – uncertainty of • Identify and gain • Track decisions • Measure results to the
commitment from and progress, and
assumptions and business rationale
accountable ensure
implementation risk baseline
owners teams capture the
for future results – identified • Elevate/improve
synergy attainment synergies performance to the next
and level where gaps over
on-going business competition exist
performance

Increasing Detail/Accountability

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Presenting – Lori Bistis, PwC Deals Director
• 14 years of technology and consulting experience specializing in post deal integration, separation activities, transition
services agreements, project management, process definition, and pre-deal IT /Operational due diligence.
• Brings a range of industry experience particularly within media & entertainment, technology, communications, and
manufacturing / supply chain.
• Has managed extensive vendor partnerships and led teams through significant periods of change.
Selected Project Experience
• Led the post-deal merger integration and customer conversion efforts for a large telecommunications acquisition, focused
on support of the complex IT conversion requirements across billing, customer, and network inventory systems.
• Led the post-deal merger integration effort at a leading digital media advertising client(s), responsible for supporting
integration efforts across all functional groups, with particular focus to product, technology, sales, and operations.
• Developed a carve-out implementation plan and detailed process review to establish a target operating model, focusing on
IT and finance/accounting operations for a large Financial Services client.
• Led the post-deal merger integration effort for multiple technology acquisitions while working in the media industry,
focused on intellectual property assessment and patent harvesting, IT, product operations, organization design, cost
avoidance reporting and justification, knowledge transfer, and the Integration Management Office.
• Led the divesting of a large business unit , carving out an event management service and digital media property from a
major media company and developing supporting TSA schedules to ensure a smooth transition for separation.
• Managed numerous pre-deal due diligence efforts working with private equity clients, focusing on IT and back office
operations across various sectors including life sciences, consumer and industrial products, technology, and retail.
Before PwC
• 8 years in the media industry and held the position of Director of Content Systems Integration (PMO and QA) at ESPN.
• Began her career with Accenture as a process and technology consultant (5 years)
• Graduated with honors from Syracuse University.
Key Solution Delivery Areas: Selected Technology Clients and/or Selected Media Clients Selected Private Equity
• Post-Deal Integration (IMO, IT) Partnerships: and/or Partnerships: Clients:
• Carve-Out Activities
• EMC • Barnes&Noble • Disney / ABC • Clayton, Dubilier & Rice
• TSA Development
• Lockheed Martin • Google • ESPN • The Carlyle Group
• IT/Operations Due Diligence
• Covidien • Toshiba • Millennial Media • Altamont Capital Partners
• Process Analysis and Development
• Extreme Reach • Frontier / AT&T • EA Sports • Centerbridge Partners

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PwC Seven Fundamental Tenets of Successful Integration
Capturing sustained economic value in a merger or acquisition is a significant challenge.
Regardless of deal size, complexity, or geographic reach, some fundamental tenets are
key to success for realizing deal objectives.

1. Accelerate the transition TM

2. Define the integration strategy
3. Focus on priority initiatives
4. Prepare for “Day One”
5. Communicate with all stakeholders
6. Establish leadership at all levels
7. Manage the integration as a business process

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Tenet #1. Accelerate the transition TM
There is no value in delay. A focus on obtaining bottom-line results as quickly as possible
to maximize shareholder value is critical.

The Transition Phase Value of an Accelerated Transition TM

• Faster capture of return on deal
investment
• Exploitation of post-deal opportunities
• Reduced organizational uncertainty

$ Impact of a Prolonged Transition

• Slower than market growth
• Diminished profits
• Decline in morale and productivity
• Missed opportunities
Shareholder • Loss of market share
Value

Time

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Tenet #2. Define the integration strategy
Integration priorities are easier to identify when a clear integration strategy is defined
and communicated.
Acquisition Strategy
Acquire new products and services
Open new markets and distribution
channels
Acquire key talent (people)
Obtain key assets and capabilities
Consolidate businesses
Acquire new business model
Integration Strategy
Define product roadmap; develop marketing plan;
align sales and partner channels; train sales force;
align compensation systems
Negotiate distribution agreements; consolidate
supply chain operations; align sales and partner
channels
Assign staffing roles; define retention plans;
integrate compensation, health, and welfare
Align operating policies, procedures, and
processes; secure asset custody
Rationalize facilities and headcount; merge
financial systems; drive procurement synergies
Define and communicate new direction
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Tenet #2 (continued). Define the integration strategy
Planning the degree of integration across functions and geographies is critical to
translating acquisition strategy into integration strategy.
Transformative Absorption Tuck - In

Deal Type

Transformative/ Product/Service Geographic Industry 1/16/2015

8 Intellectual Property
Industry Convergence Extension Expansion Consolidation & Other Assets

Degree of Integration Approach Considerations

High Absorption High
Incorporate target into
Full buyer infrastructure

Disruption to business

Similarity of business
Best of Breed/Hybrid
Choose best from buyer &

Risk of financial
misstatement
target for combined
Partial

Synergies
Control
business
Back-office Integration
Front-end business
remains “as-is” with
Low to None back-office integration
Standalone Take control and
minimize risk; minimal
integration of target into
Low buyer infrastructure Low

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Tenet #3. Focus on priority initiatives
Limited management time and the need for speed requires prioritization of integration
initiatives. Shareholder value must drive resource allocation.

Define the Sources of Value Allocate Resources based on

Capture and Value Creation Financial Impact and Timeline

Business Case Development

• Build financial impact for initiatives
• Perform risk assessment for initiatives
• Rank initiatives on a risk/reward basis
• Validate assumptions

Detailed business case for each Value Initiatives are ranked with respect to financial
Driver initiative, including qualitative impact and probability of success. Those with high
and quantitative information based on financial impact and high probability of success
extensive analysis receive resource priority.

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 Tenet #3 (continued). Focus on priority initiatives
The PwC Value Driver Lifecycle follows a sequence of coordinated steps to identify,
prioritize, execute, and track the drivers of value across the integration continuum.

Synergy Analysis Value Driver Analysis Value Driver Execution

/ Synergy Tracking

Synergy Business Workplans

Model Cases
Synergy
Tracker TM
Outputs

Initial financial model Detailed business case for each Detailed project plan for each
based on limited Value Driver initiative, including Value Driver initiative based Tool used for tracking
information and set of qualitative and quantitative on qualitative information and reporting synergy
assumptions information based on extensive from business cases; includes achievement based on
analysis tasks, resources, dates, and quantitative information
deliverables from business cases
Timeline

Due Diligence Integration Planning Integration Execution

Announcement Deal Close

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Tenet #4. Prepare for “Day One”
Critical “Day-One” tasks are identified early, before detailed planning commences.
This allows prompt identification of long lead items before they turn into closing day
surprises.

Products and Technology

Sales and Marketing Integrated “Day-One” Plan
Operations
Tasks/Actions
Human Resources
Product Roadmap
Information Technology
Sales and Marketing
Procurement
Operations
Finance Report to the
Integration Human Resources
• Treasury management
Management Office
• Revenue recognition Information Technology
• Purchase accounting Procurement
• Credit and collections
Finance
• Fixed asset inventory
• Financial reporting Integrated Plan

• Budgeting and forecasts

• Entity consolidation

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Tenet #5. Communicate with all stakeholders
Identifying stakeholder issues and building a communications plan to aggressively
manage these issues is essential to achieving a smooth integration.

• Be Clear: Communicate what you know and what you don’t know
• Give Direction: Set expected timing and milestones
• Describe a Process: Develop the context for the decision process
• Keep Management Visible and Credible: Deliver consistent messages at all
levels of the organization
• Prepare Initial Communication: Draft key messages that clearly articulate the
reasons behind the deal
• Create a Communication Plan: Develop a timeline based on key transition
milestones, and communicate progress or decisions on each issue
• Continuously Communicate Decisions and Key Milestones

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Tenet #6. Establish leadership at all levels
Swift selection of key management positions early in the transition is critical in
clarifying authority, assigning accountability, and mitigating the crippling effects of
uncertainty.

Organization
• Define organization structure and operating model
• Determine personnel requirements, roles, and responsibilities

Leadership
• Select and announce executive and leadership positions
• Develop retention plans and incentives

Employees
• Identify and select employee headcount
• Termination
• Transition
• Retention

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Tenet #6 (continued). Establish leadership at all levels
A team based integration structure is important to link strategy and leadership with task
level action, and to coordinate activities and dependencies across the organization.

Executive Steering Committee

Integration Teams

Integration Leader

Integration
Synergies Communications
Management Office

Research & Information Human

Sales Services Facilities
Development Technology Resources

Marketing Maintenance International Finance Tax Legal

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 Tenet #7. Manage the integration as a business process
The PwC integration process follows a sequence of coordinated steps to focus resources
and capital on the right things at the right times.
Phase I Phase II Phase III

Set the Course

• Articulate the strategy for the combined company
• Plan the degree of integration and non-negotiable
• Identify and protect core operations out of integration scope
• Customize integration structure and approach
• Designate integration leadership at all levels and establish the
Integration Management Office
• Develop communication plan and execute early communications

Plan for Day One and First 100 Day Execute 100 Day Plan
• Identify and execute Day One requirements across all functions • Deliver tactical integration projects
• Identify and resolve Day One risks • Deliver and execute quick wins
• Develop 100 Day Plan including quick wins
• Secure resources and implement retention plan

Design the Future State
• Design functional and operational "to be" states
• Identify, value, and prioritize key integration
initiatives and synergies
• Develop leadership and organization structure
• Assess cultural differences and develop people
change program
Create Detailed Integration Plan Maximize Value
• Consolidate all integration initiatives into an executable Through Future State
plan Implementation
• Ensure plan fits with core business and prioritize with
other initiatives • Implement, track and monitor
integration execution to ensure
• Assess resource capacity and requirements
deal value capture
• Align incentive arrangements with integration objectives
• Monitor and address dependencies

Announcement Deal Close 100 Days Post Close

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Tenet #7 (cont). Manage integration as a business process
Experience shows that coordinated teams working in parallel to drive diligence and
integration increases efficiency as activities shift from diligence to integration.

Deal Evaluation Integration

• Business Case
• Deal Structure
• Synergies and Value Drivers
• Preliminary Integration Plan Go/No-Go
Decision • Establish the integration
• Regulatory Requirements
structure
• Financial Reporting
• Deploy communication strategy
Price • Execute cross functional
integration plan
• Achieve synergies
• Manage integration costs
• Comply with regulatory
requirements

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PwC Integration Survey
PwC recently surveyed management from over 100 US companies that completed a
merger or acquisition in the past 3 years. Findings show that early and timely execution
of a few fundamental integration activities directly correlate to capturing deal value.
Deal success remains a challenge by any measure, but, in particular, a rise in transformational deals has
increased the complexity of integration.

• Finding #1: Strategic and financial goals are easier to reach than operational targets

• Finding #2: Transformational deals are on the rise, representing more complexity and challenge for integration

Integration risks are plentiful, though some common areas pose the greatest challenges.

• Finding #3: Integrating information systems, operating procedures, and people represent the biggest post-close challenges

• Finding #4: Integrating the R&D function and developing new products in connection with a deal have proven difficult

• Finding #5: Capturing cost synergies is easier than capturing revenue synergies

Success factors for establishing integration momentum involve early integration planning and rapid execution
of specific activities.

• Finding #6: Performing integration planning early in the deal process improves deal results

• Finding #7: Speed of integration continues to play an important role in deal success

• Finding #8: Early and timely execution of a few key – but fundamental – integration initiatives are directly related to achieving
deal objectives

Delivering deal value over the long-term requires commitment and focus.

• Finding #9: Staying involved in integration efforts longer improves deal success

• Finding #10: Achieving full integration requires commitment and focus to delivering synergies, managing talent, and integrating
information system
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Common integration questions
and considerations across
functions

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“What is the typical timeline for a
finance/accounting integration?”

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Topic of Interest #1: Financial Control of the
Business on Day One
• Control the cash; Treasury management
• Close the books
• Address any tactical regulatory, tax and compliance-related requirements
resulting from a merger in the broadcast environment
• After Day One
• Understand capital budgeting across major projects (significant costs in
broadcast infrastructure)
• Understand financial systems and business process alignment
• Facilities and lease accounting
• Insurance
• Tax implications; Legal entity structure
• Identification and tracking of synergy initiatives
• Policies
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“What are some common pitfalls of an
integration?”

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Topic of Interest #2: Common Pitfalls

• Losing discipline and delaying decision making in an effort to appease

multiple stakeholders; “doing nothing”

• Assuming verbal agreements readily translate into operational policies and

procedures, and that trust can be maintained after communication miscues

• Failing to identify key assets and defining a plan for value creation (e.g. go
to market strategy, sales channel alignment, key personnel on-boarding
and training)

• Focusing on back office cost reductions prior to understanding service level

requirements

• Failing to acknowledge that business process change and systems

integration will occur over the long-term

• Cross boarder deals: Underestimating complexity brought by scale and

geographic diversity

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“Where are there opportunities for
synergies when managing an
integration?”

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Topic of Interest #3 – Operational Impacts and
Synergy Opportunities

• Personnel
• Back Office Operational Workflow (IT in particular)
• Facilities planning
• Vendor implications; Cost reductions and strategic sourcing
• Potential TSA costs to maintain operations

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“How should communications be
handled to ensure the right transition for
personnel?”

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Topic of Interest #4 - Soft Elements of the
Integration

• Impact of personnel changes

• One time costs for retention, severance, training
• Close knit sector / competition; Risk of losing key employees
• Internal and external communications; financial messaging in the market
• Compensation alignment and impact (Sales in particular)
• Variety of employee contracts and arrangements

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