Mergers & Acquisitions

Report
Mergers & Acquisitions
1 + 1 = 1,5 or 2,5?
The real success factor
1
Key Facts
• Different studies came up with unsuccessful
mergers & acquisitions between 50 – 75%
• List of well known underperformers is long
• BMW/ Rover
• American Online/ Time Warner
• JP Morgan Chase/ Bank One
• Alcatel/ Lucent
• more examples….
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3
M&A Process – general overview
A successful integration is a long term process…
Project Management
Execution
Phases
M&A
Strategy
Post-Merger
Integration
Selection
Controlling
Integration
Planning
… in which people aspects are vital!
4
Typical Acquisition Process
Selection/ Due Diligence
• Dedicated Management team in place
• Key stakeholders are CEO, CFO and GAO
• Focus areas are markets, products,
financials, manufacturing and logistics
• Involvement of consultants to verify the
topics above
• Final decision being made mainly on
above factors
• While Human Capital is the real asset it’s
not evaluated accordingly
5
Typical Acquisition Process
Execution/ Integration after D-Day
• Company would like to get ROI asap
meaning lack of investment for professional
integration plan
• Operational teams are tasked to handle
integration on top of their day-to-day job
• The integration of Human Resource is
treated second class
• Involvement of consultants ends with
successful financial takeover
6
The real success factors
• The success of a company is mainly determined by
high performing employees/ teams
• The real asset a company acquires is therefore the
human one. Soft issues - such as leadership,
employee communication, talent retention and
cultural alignment are critical for success
•Management needs to focus on this asset not only
during the due diligence process but even more
importantly during the integration phase
• If 1+1 equals 1,5 of 2,5 depends mainly on how
the company will manage the HR aspects
• The expertise of consultants in this area will make
a huge difference
7
Success factors of value-creating M&A activities
Strategy
•
Definition of a clear strategy, vision and targets
•
Integration planning, synergy evaluation
Leadership
 Clear and early assignment of leadership
 Professional integration project team
Culture
 Accept the existence of cultural barriers and
address these barriers appropriately
 Professionally managing changes
Communication
 Early, open and direct external and internal
communication
 Motivating staff
Growth
 Strong focus on positive growth potentials
(customers), not just on realization cost
synergies
 Optimization of core processes
Early wins
 Concentration on early wins to generate
acceptance and motivation
Risk Management
 Holistic risk management avoids risks turning
into threats
… are the foundation of a solid house
8
Integration Plan
• General direction on integration strategy
• Identify all relevant integration tasks and prioritize them
• Identify a full-time Integration Manager to be on site who knows PKI very
well and is culturally aligned
• Assign someone from each Function to participate in the Integration Team
• Establish Project Team and schedule weekly calls
9
Integration Critical Elements
•
HR actively participates in the People Strategy for Integration through
– In depth understanding of culture/ critical behaviors
– Detailed screening of organizational structure
– Detailed analyzes of skill sets
– Detailed analyzes of individual performance categories and leadership capabilities
– Solid understanding of all comp/ benefits aspects
– Clear understanding of legal situation
– Participation in the transition team (cultural alignment)
– Providing selection, retention and severance processes
– Ensuring Communication Processes
• Methods (when to use different communication vehicles)
• Audience (explaining different concerns people may have)
• Content (what to say and what not to say)
• Timing and coordination
– Optimizing HR Operations
• HR staffing
• Transition architecture
• HR policies
• Service delivery model
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Example HR Integration Plan during the first 6 months
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•
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•
•
•
•
•
•
•
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Prepare welcome letter for new employees
Prepare Corporate employee communication
Inform works council – if necessary
Establish Integration Manager on site
Install local integration team and get them together in a workshop
Provide common information platform
Conduct meetings with Key Employees
Establish Retention Program
Establish clear organizational structure and meeting culture
Organize site visits
Conduct Product Training and Training of core Management Processes
Assess costs of harmonizing benefits and define strategy
Align reward and bonus scheme
Conduct leadership workshop for middle management
Establish rigorous staffing and selection process
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Employment / Labor Issues in PMI
1.
Merger / Asset Transfer
–
–
–
–
2.
Harmonizing Terms & Conditions
–
–
–
3.
automatic transfer of employment relationships?
consultation with works council, unions needed?
consent of employees needed?
realistic timeline?
often consent of employees needed → strategy?
often consultation with works councils, unions needed
P : fate of stock options, company pension plans
Downsizing / Restructuring or Relocation of Business
–
–
–
often consultation with works council, unions needed
review if ban on closing down business or on terminations
awareness of industrial relation climate → strategy?
Goal: minimize severance pay and other related costs
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Appendix
CULTURAL ALIGNMENT WORKSHOP
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Cultural Alignment Questionnaire
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Cultural Assessment Tool
PerkinElmer assessing PerkinElmer
PerkinElmer assessing Evotec
… clear vision
… innovative
6
… clear vision
… strong business ethics
3
3
2
… living up to its leadership values
2
… reacting well to the market
4
… reacting well to the market
4
… living up to its leadership values
… customer focused
5
… customer focused
5
… strong business ethics
… innovative
6
... willing to support risk taking
... willing to support risk taking
1
1
0
0
… focusing on developing its people
… fast in making decisions
… having many capable people
… focusing on developing its people
… fast in making decisions
… unbureaucratic
… having many capable people
… open direct communication
… unbureaucratic
… process oriented
… strong cross-functional work
… open direct communication
… flat/lean structure
… process oriented
… strong cross-functional work
Evotec assessing PerkinElmer
Evotec assessing Evotec
… clear vision
… innovative
6
… clear vision
… customer focused
4
… reacting well to the market
… strong business ethics
2
... willing to support risk taking
… living up to its leadership values
… reacting well to the market
2
... willing to support risk taking
0
0
… focusing on developing its people
… fast in making decisions
… having many capable people
… strong cross-functional work
4
1
1
… open direct communication
… customer focused
3
3
… living up to its leadership values
… innovative
6
5
5
… strong business ethics
… flat/lean structure
… unbureaucratic
… process oriented
… flat/lean structure
… focusing on developing its people
… fast in making decisions
… having many capable people
… open direct communication
… strong cross-functional work
… unbureaucratic
… process oriented
… flat/lean structure
15
Review and discussion of results
• Looking at the results from the questionnaire are you surprised or
did you expect these results?
• Where are the most communalities and discrepancies?
• Are there any areas which we have not discussed and we would like
to highlight?
• What would be good to keep for our new combined culture?
• How can we maintain the best of both cultures?
• What kind of barriers do we expect?
• How can we mitigate these barriers?
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