The time-honored discounted cash flow method for determining appropriate utility returns falls short when interest rates are low. Inadequate ROEs ultimately increase cost of capital and wipe away...
Corporate Integration: Keys to Success
Stage-by-stage advice from an M&A veteran.
major challenge at this stage is that two or more businesses need to keep running while the workforce is preoccupied with all the changes. At the same time, many key managers are on special assignments, and customers and suppliers are reconsidering what they will do in light of the restructuring.
There will be many meetings. Few of these meetings will contribute to improved productivity in the short run; nevertheless, they are essential. Reminders to everyone about “minding the store” and encouraging cooperation with new colleagues and sister companies all need to take place frequently and sincerely. Reminders about inappropriate communication also need to happen frequently. The head of communications needs to have a central role in both the integration team and the new executive team.
Avoid fluff. Treat everyone as adults. Employees of the acquired company know the controlling entity paid a premium for control of their firm’s assets and that savings and synergies need to be generated to pay for this premium of “goodwill.” The communications team should inform all as quickly and as fully as possible about the new organizational structure, savings and cash generation targets, and how the executives plan to achieve them. Silence only will generate anxiety and rumors.
In addition to broadcast communications, hold both working meetings and communications meetings. The communications meetings should address:
• Integration or separation of functions;
• Locations of functions;
• Customer relationship management;
• Supplier contact management;
• Compliance (policies and procedures during the integration period, as well as permanent changes); and
• Other human resources issues ( e.g., how benefits will function during integration and what the new set of permanent benefit options will look like).
The teams to address these matters should have members from both prior entities. Team leaders need to convey the urgency of the assignments frequently. Teams should accomplish multiple “wins” along the path to completion, and the communications team needs to help note and celebrate accomplishments.
The implementation period typically runs 100 days. Release the 100-day plan with great fanfare. Track progress (if anything appears off-track, act quickly), and provide cause for “mini-celebrations” (excuses for mixing staff from each entity will help create bonds that normally form over much longer periods in the normal course of business).
If the “NewCorp” 100-day plan goes well, staff in the newly created company should start thinking of themselves as part of the new corporation about midway through the 100 days. As the 100-day period ends, it should be time for one last ceremony to acknowledge the contributions of the integration team and to announce the assignments of the remaining members.
Challenges directly attributed to elements of the deal likely will remain. Corporate finances, for example, often are highly leveraged to make the deal happen, and the cash flow implications can continue for quite some time. Nevertheless, the goal from the beginning of integration planning should be that official recognition of the meshing of the two entities into one new entity is completed 100 days after closing.
Work will need to continue on developing new, shared