Post Merger Integration Assessment Complete

Post-Merger
Integration Assessment
©PRITCHETT, LP
800-992-5922
Project Objectives
• Integration Assessment Project Objectives:
– Gain insights into Acquirer executive’s experience with respect to past and current
integration practices and results to date
– Incorporate the perspective of acquired company personnel
– Use the assessment learnings to inform the development of an integration approach
that is grounded in the needs and requirements of the business units and improves
our competency in this critical area
• Interview Approach: Discussion focus areas for each participant

– Drawing on previous integration experience: What has gone well and why? Where
have you had challenges?
– What adverse impacts did you experience, if any, and what would you recommend we
do differently next time?
– What integration support do we need to create to make this a core competency?
– Focusing on the areas of synergy program management, communication planning,
culture & talent assessment, and org design: what are some learnings we can draw
from to help us create a more scalable and consistent approach to address these
areas when required?
©PRITCHETT, LP 2 www.MergerIntegration.com
800-992-5922
Dominant Themes
 Underestimate change/culture  HR, IT and other staff support
affects on acquired companies functions under resourced
 Limited future org structure  IT integrations take too long
planning for post close  Sporadic support (off and on)
 Integration strategy and roadmap  Sparse communication efforts
very “ad hoc”
 Overwhelming acquiring company
 Undefined decision making personnel
processes
 Resources assigned incongruent
 Limited time for pre-planning and with expectations
preparations Lack of Inadequate
Resourcing  Pulled resources from key IT
Pre-Planning
infrastructure projects
 Back office integration typically goes Positives to  Revenue and margin erosion
Value Lost
well Build On  Loss of sales productivity
 Exposure to Acquirer corporate  Lower employee engagement &
makes employees feel accepted morale
 Every integrations has some positive  Delayed synthesis with other
highlights to leverage Acquirer business entities
 Acquirer brand helps expand into  Slow to leverage international
new markets/customers markets/opportunities
 Sourcing efficiencies and other  Customers confused
synergy/business benefits viewed as
“quick wins”  Slowed down momentum of .
3
growing business
Foundation for Integration Success
Specific focus areas and recommendations
Acquirer needs to establish a strategy for each

integration to help executives and support Centralized resources that can be deployed to
resources shape their planning organize integration and serve as pivot point for
Integration Integration all executives and support functions
Strategy Support
Make integration consistent
across business units and not
an “optional” exercise for Critical staff areas like HR, IT
execs. Create a repeatable Institutionalize need to be augmented for
framework along with the the Approach integrations. Can’t support
tools and templates to ensure Resource integration and day job - both
consistency Integration Augmentation will suffer
Success
Leverage the
Positives Systems
Integration experience should Integration
build on positives and what we Need clearly established systems
know works today integration mandatories and
Communications expected timing along with the
support to get them accomplished
Communications efforts are ad hoc, sparse and fail to address

change management priorities. Need a robust communication
plan and the resources to execute it
www.MergerIntegration.com
4
Stakeholder Feedback
©PRITCHETT, LP
800-992-5922
Pre-Integration Planning
Pre-Integration Planning
What We  No real organized pre-planning effort-resulted in slow start
Heard:  Limited or no intra-functional coordination
 Create an integration plan that can align acquired company’s capabilities with Acquirer’s ambitions
 No cultural assessment to gauge assimilation complexities
 Could not start until 2 weeks after close-so we were immediately behind
 Functional planning efforts were pretty siloed-no cross functional coordination
 Need more formalized functional checklists & timing expectations
 Planning is one thing, setting aside the resources to execute is another
 Identify integration leads at the acquired company during pre-planning, not midway thru the
integration
 Need more robust analysis of engineering, manufacturing processes, and equipment
 Need better mapping of functional dependencies so we can sequence integration efforts
 Need to put more thought into commercial go-to-market plan for combined Acquirer/Acquired
Company operating model. Even our existing customers were confused
 What is the ultimate strategy now that we have a few businesses that overlap in some key areas-
are we going to synthesize somehow?
800-992-5922
Integration Strategy
Integration Strategy
What We  Integration strategy was fuzzy-no real roadmap
Heard:  “Wait and see” is not a strategy or a plan
 Our integration strategy is theoretical and not grounded in reality
 We are not learning as we go and getting better-we seem to repeat the same mistakes
 Auction process does not allow for robust pre-deal due-diligence
 Need to formalize the “new” business strategy before starting integration work
 Key strategies need to be better defined. “Expedited product development” sounds great but what
does that really mean?
 Branding decisions incredibly slow to develop-what is the vision or let’s stop and figure it out
before we proceed too much further
800-992-5922
Organizational Planning
Post-Close Organizational Planning
What We  No real plan for combined organization or transition plan after legacy execs left
Heard:  Retention packages were discussed but nothing formalized
 No communication on bonus structures
 Need more robust assessment of company management so we know strengths and weaknesses
and don’t waste time letting things “play out”
 Need to make sure we know who has the technical expertise in the organization and target them
for retention
 Clarify reporting lines and figure out how and where acquired company management reports in
advance of close (“I got input from Paul but reported to John”)
 No formal talent assessment tools or process to help us make decisions
 Did not properly assess managerial talent upfront-had to replace many of them eventually
800-992-5922
Integration Success
Integration Success
What We  We preserve what we bought them for in the first place
Heard:  Acquired company able to do financial reporting on their own
 We capture best practices from acquired companies that can help Acquirer
 Acquired company feels fundamentally different 3-6 months after close. If things are the same, we
are not integrating and creating value
 Companies fully embrace and understand (and leverage) all of the advantages Acquirer can offer
 Form a lean tiger team to fully operationalize our lean competencies sooner so acquired companies
can benefit from our expertise
 Scope cross-selling opportunities in advance and create an implementation plan to realize them-
they won’t happen without a plan (comp changes, training, etc)
 Establish and communicate the roles of Acquirer integration leads in advance
 We need tracking and updates on a regular cadence
 Need an common approach, “integration” seems like an optional exercise for some
 Successful transfer of what we do well into acquired company
 Share a high-level integration plan with acquired company senior management in advance to help
set expectations and better address resource issues
 Avoid the “soft first year syndrome” by having a robust integration plan
 Create “tiger teams” for critical functions like IT, HR etc. that can deploy to integrations
 Join forces to crack complex problems together vs. working mutually exclusively
 Within the first 30-60 days have an idea of what the branding plan is going to be
 Pre-defined phasing so we can plan ahead
800-992-5922
Day 1 Execution
Day 1 Execution
What We  We did a Day 1 event, but very little after that
Heard:  Please remember that for many acquired employees the deal is a “knee buckling” event
 No close day communication-heard it thru the grapevine that the deal had closed
 HR efforts were well coordinated
 We came in, but our roles were not defined and people were confused as to why we were there
 Communicate key points of contact so acquired company employees know who to call for what
 Did not see the Acquirer business leader until months after close-people felt like they were not that
important
800-992-5922
Tools & Templates
Integration Tools & Templates
What We  Need more basic tools and templates so we can accelerate the integrating process
Heard:  Need a consolidated Day 1 plan
 Need standardized back office processes that are formalized and be applied consistently from
integration to integration
 Need a basic playbook that gets us 50% of the way there, along with a generally accepted sequence
of events that can be applied from integration to integration
 Integration tools and process needs to help integration managers and acquired company
management understand “end state..what are we integrating and how”?
800-992-5922
Employee Impacts & Change
Acquired Employee Impact
What We  “Acquirerizing” a company tends to overwhelm some employees with repeated information
Heard: requests
 Benefit consolidation (what employees are most concerned about) took way too long, or has not
happened at all
 We need to quickly standardize simple things like holiday schedules so people feel like they all work
for the same company
 We should do specific post-integration employee surveys to help us improve our integration efforts.
Using the annual employee survey to do this is ineffective
 It’s been a year and are comp and benefits are still separate-how can I feel like I’m part of Acquirer?
Change Management
What We  Acquirer actually does change well-we could help acquired companies but we don’t
Heard:  Acquirer very data driven-some companies are not. We need to make sure we are not a shock to
the system and implement change methodically and help companies adjust
 Sometimes it felt like we were afraid to communicate openly, but people were starving for any
communication
 Better to get the “change cold shower” over at once, vs. having it go on and off again over a year
 Trying to harmonize titles between a very small company and Acquirer created problems. The “title
consistency” mandate just caused problems
 We need to better manage the pace of change: what to accelerate and what to throttle back
800-992-5922
IT/Systems
IT Related Issues
What We  Transitioning to common email platform took a year (or still isn’t done)-how can we feel like we are
Heard: part of Acquirer when I can’t find people and organize a meeting in outlook?
 Took over a year to get into new system
 Connection to Acquirer network took 18 months!
 VDR process seemed to be overly cumbersome
 Need some standard SLAs to guide IT efforts and help set expectations for IT resource requirements
(e.g. email platform integration within 90 days of close)
 Corporate IT resources already stretched thin-integration actually robs resources from corporate
infrastructure projects
 When we acquire a company with a substandard network infrastructure, we need to stabilize it first
before we try force more work on top of it for our own reporting needs as it affects their ability to
maintain business continuity
800-992-5922
Functional Topics
Functional Specific Integration Efforts
What We  Each function had their own priorities, there was no central coordination
Heard:  Limited clarity of what “end state” was for each function-making it hard to integrate with the “end
in mind”
 Need to make sure we set up proper operational reporting
 When we bring new functional resources in, we need to pause and give them a download on the
transaction and company before we turn them loose
 Functional leads rarely given enough time to do all they needed to do
 Make sure we have HR folks present during benefits sign up week. Spotty HR coverage is almost
worse than no HR coverage
 Sales compensation efforts were slow, required multiple comp plan changes which confused and
demotivated sales people
 We should accelerate HR integration efforts with acquired employees to help foster connectivity to
Acquirer
 Don’t assume the Acquirer way is better-research first
 We don’t need to be so nice all the time-especially when we know we need to do something better
to improve business results
 When do we know we are done? Seems to be a moving target
 “Acquirer folks are like the finest pit crew in the world but when in comes to a ’72 Vega there’s only
so much you can do”
 We should let the acquired company know who has functional and operational expertise so they
can call/email when they have a problem
800-992-5922
Communications & Synergy Program Mgmt
Communications
What We  Need better communication planning: It took way to long to get things approved, always start, stop,
Heard: start stop and messages were not well defined in advance
 We say “no change” then we dribble small changes out over months. This undermines the trust
factor with acquired employees
 Communication updates for some companies were spotty or non-existent
 Communications were HR data dumps, no meaningful message
 Communication efforts need to help us build trust, quickly, so we can engage employees we need
to drive the business
Synergy Program Management

What We  Integration related synergies were mixed in with regular “run of business” objectives making it hard
Heard: to separate one from the other
 Need more granularity to help us better pinpoint the opportunities and associated timing
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Internal Support Model
Internal Integration Support
What We  We use people in groups where there’s very little “bench strength” to begin with (e.g. HR, IT), so we
Heard: end up putting tremendous strain on the departments and overworking the same people again and
again
 Any dedicated internal support should report into EVP of acquiring segment
 If we offer support, make sure it’s allocated for enough time (6 months or longer)
 Dedicated resources would allow acquired employees to stay focused on their business
 Specifically need help with: HR, IT, Purchasing, Finance, Supply Chain, Compliance
 Need to make sure we have a sound governance structure with clear decision rights
 Establish centralized resources as a pivot point among all functions
 For a smaller deal, having the Integration Manager be the commercial lead (GM) would be optimal
 Need someone to outline best practices so we can build our solutions accordingly
800-992-5922
Setting Expectations
Setting Expectations at Acquirer Corporate
What We  Acquirer senior management does not have a good understanding of the realities of integration
Heard:  Integration typically takes a year, so let’s plan for that
 HR and Finance functions that require intense integration engagement. Need augmented
resources-we are stretched too thin (still responsible for “day job”)
 Priority was on trying to meet a very aggressive valuation plan-making it easy to deprioritize
integration efforts because the plan was overly aggressive
 Consider a “soak period” before starting full integration so we can better prepare: get the “gotta
dos” done first, as that’s a lot of work as it is
 Overly aggressive valuation puts everyone “behind plan” right off the bat which makes it hard to
focus on integration
800-992-5922
International
International
What We  Integrating the international arms of acquired companies takes forever
Heard:  Unclear as to who was responsible for setting the strategy for that country once there were 2 or
more Acquirer entities
 We were slow to connect Acquirer contacts with acquired company contacts in foreign countries-
hence everyone slowed down to see what the plan was (i.e. who survives?)
 It seems to take longer than it should to open up international market opportunities for our
acquired businesses
 Operationalizing international opportunities seems to be a “slow role”, which is unnecessary given
Acquirer’s well established international presence
800-992-5922
Key Variables
Key Variables: One Size Does Not Fit All
What We  Size and sophistication of business
Heard:  Geographic reach
 Integration duration
 Size (revenue)
 Legacy ownership plan (stay or go)
 Communication channels
 Legacy systems stability & sophistication
 Ownership structure (e.g. family vs. PE)
 Centralized vs. decentralized acquired company business practices
800-992-5922
Success Stories and Positives to Build On
Success Stories/Went Well
What We  Acquired Co. had a weekly integration related meeting where officers were invited
Heard:  Acquired Co. retention planning went well and resulted in no defections
 Acquirer continued local community involvement and that made a big difference to our employees
 People were made aware of potential career opportunities at Acquirer, which was positive and
made them feel like they were now part of something bigger
Acquirer Strengths (positive changes we can make)

What We  Lower cost materials sourcing (Large vendor base to expand options)
Heard:  Incorporating Acquirer brand (e.g. on the building) helped people feel they were part of something
bigger
 Financial support great-”if we need something we make a capital request and Acquirer takes care of
it”
 Exposure to new markets for acquired company (operationalize it quickly so they can see the value)
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Ideas from the Field
Ideas to Help Foster a “One Acquirer” and speed integration
What We  Operational, IT and Sales summits so peers can get together to exchange ideas and get to know
Heard: each other
 Expose people to corporate campus-just visiting once had a profound affect on our sales team
 Prioritize email platform consolidation so it’s easy to work together for simple things like scheduling
a meeting
800-992-5922

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Post-Merger

• Interview Approach: Discussion focus areas for each participant

Acquirer needs to establish a strategy for each

Communications efforts are ad hoc, sparse and fail to address

Synergy Program Management

Acquirer Strengths (positive changes we can make)

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