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Archive for the ‘Integration’ Category

It seems somewhat ironic that the numbers of mergers and acquisitions taking place (not so much during this recent recession but certainly in the lead up to it) continues to increase, yet research still seems to suggest that surprisingly few ever achieve their promised strategic and financial goals. You might well ask why this is.  Of course, if there was an easy answer then the problem would no longer exist but the evidence shows that it does.

CGA believes that the real value from any merger is delivered, and can only be delivered, through excellent integration.  Yet in many mergers responsibility for delivering integration lies either with people who have other roles as well or does not clearly exist at all.  Although due diligence teams will by necessity develop a deep knowledge of the acquired company, they all too often disband after the deal closes and provide little or no handover.

You should ask: Who is responsible for the integration process? Who will ensure that integration deadlines and performance targets are met?  Who will set out how operations will be combined and make it happen? Who will educate people about the new world and provide a focal point for the challenging issues that will always arise?  The role needed is that of an integration manager/leader whose sole reason for being there is to deliver integration successfully. 

This individual will be a highly motivated top achiever and will be known for having delivered complex change programmes successfully.  He/she will be able to get to grips with complex situations quickly, relate to many levels of authority. The will be empathetic where appropriate but will not avoid the tough decisions and, perhaps most importantly, will have enough clout to make things happen.

(Why it may be better for you to use a smaller consultancy practice sometimes)

Having worked for one of the largest accountancy practices in the world, let me start of by saying that large consultancy firms do have a hugely important role in helping the free market economy run effectively by providing high quality legal, accountancy and other business related services. They have access to a huge bank of highly trained and skilled individuals and have gained a reputation for providing a quality service that has been earned over a period of many years.  Finally, there are a number of transactions that are of such a size and complexity that only the largest consultancy firms would have the resources to meet the needs of their clients adequately.

However, the vast majority of businesses are small to medium sized and the majority of the needs of these businesses are likely to be met more effectively by the business advisory and consultancy firms who would describe themselves as “mid –tier”. The reasons for this are as follows:

• More personalised approach – With smaller consultancy practices you are more likely to work with someone who can closely relate to the unique pressures of running your business as it is  quite possible they have faced similar issues themselves.  Also, you  should get a solution that is tailored to your own specific circumstances because of the time that the smaller consultancy practices are able to devote to their clients.
• Highly skilled teams – Smaller consultancy practices often have people who have trained with the bigger consultancy firms or have worked for large organisations and are able to match the large consultancy firms in terms of knowledge and skills. Quite often the smaller consultancy practices will have an in depth knowledge of a particular business sector or industry class which may well tie in with your business.
• Costs – Large practices carry large overheads and this is reflected in the charge-out rates to clients. Smaller companies will often be able to provide similar services for a fraction of the cost.

In summary, there are areas of the market where big consultancy firms are the right solution for the right business. However, for the majority of small to medium sized businesses, the smaller consultancy / business advisory practices will deliver a service which will meet and often exceed their needs

Computers and computer-assisted communications systems are part of the lifeblood of most organisations today. They provide timely and accurate tracking of finances and other management information; they enable effective internal and external communications, and other key business processes.

In a merger or takeover, it is unlikely that both parties will be using the same systems and even where there is one dominant technology in place across both businesses, the integration challenge must not be underestimated.

As well as the purely technological aspect, there are a number of non-trivial staffing issues to consider, like what skills are currently available across the two organisations, compared with those needed, and contractual issues, both from an opportunities  point of view (what savings can I make) and an obligation perspective (what contracts must be honoured or bought out of).

To understand the true cost of integration, it is essential that IT is considered as early as possible and that transition costs are factored into the decision making process sooner rather than later.

Although these are the issues that most organisations would tend to focus upon, the real opportunity comes from the forward-looking element; identifying how technology platforms and resources can best be positioned to support the new organisation. This means that the decisions should have clear, identifiable links to the business strategy.

Having such links also enables better decisions to be taken in terms of what the priorities are and where resources should be directed to deliver the best value and return.

Moving even a small number of users from one technology platform to another or enabling integration between two dissimilar systems requires rigorous planning and testing if costly mistakes are to be avoided. Finding out after the event that key systems are incompatible can rapidly erode the business value that might otherwise be achieved.

Although IT incompatibility in itself is not necessarily a good reason for abandoning the merger, understanding the full implications means that a decision to proceed is better informed.