What to Do From Deal Announcement to Deal Close

When a major merger or acquisition is announced, it is typically met with a combination of excitement and anxiety by the employees at the respective companies. The focus of this article will be on one of the most critical steps to occur at both companies very shortly after deal announcement: each firm needs to assemble a merger integration team that will rapidly put together a plan for what needs to be accomplished between deal announcement and deal close (i.e., when the Federal Trade Commission grants approval for the combined company to operate as a new legal entity – typically 6-9 months).

The merger integration team is comprised of cross-functional leaders and experts in their particular area. They are entrusted to make important decisions on behalf of the group that they represent. A company-wide team will typically be led by a very senior leader in the organization and will be comprised of representatives from the following functions: Marketing, R&D, Manufacturing, IT, Human Resources, Finance, Legal, Facilities, Procurement, and Communications.

The team’s primary goal is to lay out a plan for how they will execute the merger integration post-Day 1. There are two key principles associated with all planning in the period between deal announcement and deal close: 1) The plans are very much assumption-based as each legacy company must rely solely on publicly available information around the operations of the other entity; 2) Employees of each company must be reminded that the two firms are operating as separate legal entities until the merger/acquisition is approved by the FTC; consequently, any exchange of information between the two firms should be cleared by the Legal departments of the respective companies.

The planning will be kept confidential by the integration teams and they will likely delve into planning for the following:

1. Business continuity – Operations on Day 1
a. How will we ensure that we have an uninterrupted flow of products and services to our customers?
b. What controls will we have in place to comply with laws and regulatory guidelines in the countries in which we operate?
c. What are the content and timing of communications to employees so they may have the information to perform their day-to-day jobs, including who they should contact if they have questions?

2. Cost synergies – Where, how, and when we will reduce costs and realize operating efficiencies?
a. R&D and product portfolio rationalization
b. Headcount reductions
c. Site closures
d. Negotiating more favorable contract terms with suppliers and outsourcing partners

3. Processes and IT systems – Which processes or IT platforms/software to use going forward
a. Full adoption of a legacy company process/IT system
b. Hybrid approach – adopting the best of each
c. New process/IT system – completely discard the legacy process/IT system and adopt a new process or IT platform/software

4. Transformation – Exploring “white space opportunities”
a. Disruption from a merger can present opportunities for dramatic organizational change
i. Talent management
ii. Reductions to fixed cost structure
iii. Operational efficiencies
iv. R&D productivity
v. Refocusing the value proposition of the company’s products/services

The above outlines how the integration team can organize its planning efforts in the months between deal announcement and deal close. Detailed, assumption-based plans will pay huge dividends to the new company so that it will be poised to move forward in unlocking the potential of the combined firms on Day 1.

 

Dan Patrick  |  Senior Consultant  |  TayganPoint Consulting Group  |  dpatrick@tayganpoint.com

Molly Romano  |  Consultant  |  TayganPoint Consulting Group  |  mromano@tayganpoint.com 

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