Advisory Services M&A Integration

How to complete the M&A integration process, minimize disruptions, and achieve desired synergies.*

Research shows that most mergers and acquisitions fail to meet the expectations set for them. Despite the best intentions, deals often fall short when the time comes to begin translating carefully developed strategy into the right mix of people, process, and technology. However, smart buyers can take steps to improve their odds. Perhaps the most important is to ensure a fast-paced integration that makes early use of disciplined planning, a well coordinated launch, and a relentless focus on the key value drivers behind the deal. At PwC, that is precisely the approach we take to M&A integration. We help clients execute rapid integrations to achieve desired synergies and allow for a quick return to business as usual. Doing so adds shareholder value, frees up human and financial capital for reinvestment in core operations, and enables our clients to complete a greater number of transactions in a shorter period of time. Our focus is on execution. You and your strategic advisors set the objectives for your deal. We work to help you take the actions necessary to reach them.

*connectedthinking

The Seven Fundamental Tenets of Successful Integration

Capturing sustained economic value in a merger or acquisition is one of the most significant challenges for todays growth-minded companies. As you might expect from PwC, we have a point of view about how our clients can best go about reaching their objectives. We believe there are Seven Fundamental Tenets to successful integration.

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1. There Accelerate the transition. is no value in delay. It is critical to focus on

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Financial Impact

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obtaining bottom-line results as quickly as possible to maximize shareholder value. Prolonged transitions slow growth, diminish profits, destroy morale and productivity, and lead to missed opportunities and loss of market share. On the other hand, accelerated transitions result in more rapid return on deal investment, better capitalization on post-deal opportunities, and reduced organizational uncertainty.

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2. Define the integration strategy. Integration is a highly tactical effort. But the
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Probability of Success
Value Drivers

tactics must be implemented in ways that capture and protect the value of the deal. Rapidly converting acquisition strategy into integration strategy is of paramount importance. Integration priorities are easier to identify and execute when a clear integration strategy is well defined and communicated.

Figure 1Intiatives are ranked according to financial impact and probability of success. Those with the highest financial impact and highest probability of success receive resource priority.

3. Focus on priority initiatives. Resource work load limitations demand that

integration efforts be prioritized. And shareholder value must drive the allocation of resources for meeting those priorities. First, potential sources of value capture and value creation must be identified. Then, resources are allocated based on potential financial impact, probability of success, and timeline requirements. Please see Figure 1.

4. Prepare for Day One. Critical Day One tasks need to be identified
Executive Steering Committee Integration Teams Integration Leader

early, before longer-term, more detailed planning commences. This allows for prompt identification of long-lead time items, well before they can turn into closing day surprises. A detailed plan should then be created, including all actions that will be put in place on Day One. Planning for Day One should begin in conjunction with the due diligence process.

Integration Management Office

5. Communicate with all stakeholders. Communicate early and often with all stakeholders,
Communications

Sales

Services

IT

Finance

Marketing

Operations

Facilities

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HR

including customers, employees, investors, suppliers/vendors, and the general publicproviding information that addresses their special concerns yet is consistent in overall theme and tone. Communication should articulate the reasons behind the deal, reveal timing for key actions, and be candid about both what is known and what is unknown. Feedback mechanisms should be included to ensure the dialogue is two-way.

Figure 2A team of specialists responsible for integrating core functional areas reports to individuals responsible for the overall integration. This structure ensures that tactics are closely aligned and dependencies are coordinated to directly support strategy.

6. Establish leadership at all levels. Swift selection of key management posts early in

the transition is critical for minimizing uncertainty, assigning accountability, defining functional authority, and establishing role clarity. Companies need to quickly define organization structure and operating model, and clarify key management roles and interrelationships. In addition, during the initial phases of integration, a team-based control structure should be established to link integration strategy and leadership with tasklevel action, and to coordinate issue, action, and dependency management across the organization. A successful integration management structure must define clear responsibilities and reporting relationships. Teams of functional specialists are tasked with integrating core functional areas. They, in turn, report to a team of individuals with overall responsibility for managing the integration. Finally, a steering committee of senior leaders provides oversight for the overall effort. Please see Figure 2.

7. Manage the integration as a business process. Mergers and acquisitions rarely fail due to flawed strategy. Rather, failure is most often a result of not executing

the strategy in a timely fashion. Successful integration must happen quickly and systematicallythe period of time between deal announcement and deal close, and the first 100 days post close, are absolutely critical to realizing quick wins and preparing the combined company to maximize value over the long term. Please see Figure 3.

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

Phase II

Phase III

Plan for Day One

Identify and execute Day One requirements across all functions Develop 100 Day Plan including quick wins Secure resources and implement retention programs

Execute 100 Day Plan

Deliver tactical integration projects Deliver quick wins

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

Consolidate all integration initiatives into an executable plan Ensure plan fits with core business and prioritize with other initiatives Assess resource capacity and requirements Align incentive arrangements with integration objectives

Maximize Value Through Future State Implementation

Implement, track, and monitor integration execution to ensure deal value capture

Announcement

Deal Close

100 Days Post Close

Figure 3The PwC integration process follows a sequence of coordinated steps to focus resources and capital on the right things at the right times.

Our Approach for Delivering Integration Success

Our disciplined approach helps companies achieve early wins, build momentum, and instill confidence among their stakeholders. We tailor our services to complement client needs and internal client capabilities. We focus our clients on the right things at the right times, creating early and sustainable capture of deal value. We deliver time-tested integration processes, frameworks, and experienced resources in an effort to help our clients realize their full operating and synergy goals as quickly and effectively as possible. Our capabilities include both integration specialists and functional specialists to support the management and coordination of overall integration activities enterprise-wide, and to provide tactical experience in critical functional areas as needed.

How We Help
Integration Management Support
Over the years, PwC has developed a winning approach to launching and managing enterprise-wide integrations. Our solution includes a proven integration methodology and an expansive set of process tools, templates, and guides to support the overall integration. Through a centralized Integration Management Office (IMO) staffed by experienced PwC integration management professionals, we are able to uniformly roll out our methodology and facilitate the overall integration process across the combined organization.

Functional Integration Assistance

PwC has the core competencies in the fundamental infrastructure areas that form the building blocks of capturing value in a transaction. Our experienced integration professionals apply their subject-matter and process expertise to help clients realize synergies, identify and eliminate redundancies, and position the company to achieve transaction objectives. We deliver expertise across functions to complement our clients resources at appropriate times throughout the integration.

Contacts
Key market contacts:
New York Jim Smith (646) 471 5720 [email protected] Michael Wright (646) 471 7321 [email protected] Sergio Pedro (646) 471 1928 [email protected] Timothy Mueller (646) 471 5516 [email protected] Boston Mike Boyle (617) 530 5933 [email protected] Joseph McConville (617) 530 5424 [email protected] Paul Kennedy (617) 530 5288 [email protected] Dallas Barrett Shipman (512) 708 5651 [email protected] Charlotte Debra Skorupka (704) 344 4143 [email protected] Chicago Dave Pittman (312) 298 2114 [email protected] Los Angeles Gregg Nahass (213) 356 6245 [email protected] Atlanta Joe Balog (678) 419 4152 [email protected]

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