Over the past decade, the nature and scope of mergers and acquisitions (M&A) have gone through dramatic changes, and the role of the integration manager (IM) has been evolving to keep pace. In order to describe both the considerable changes in M&A management and the consequences for IMs, Accenture looked into some of the biggest deals in the world during the past several years and learned that deals are increasingly global in nature, often require preservation of multiple customer channels, involve more extensive outsourcing and multiplatform IT architectures, and include value drivers tied to the acquisition of innovation capabilities and niche products. Furthermore, while the previously held belief that M&A destroys business value may no longer apply, success of M&A and integration delivery can either help or hurt a company’s share price. Because deals are increasingly more complex and the pressure to deliver results are even greater, many IMs no longer have the luxury of focusing primarily on the details of the integration. They now often stand on the front line for their organizations and are required to provide strategic leadership at cross-functional levels. The message is clear: How you shape the IM role in your company can have a big impact on your company’s strategic ability to rapidly deliver value before, during and after the M&A process. Here we look at how the changing nature of M&A is affecting the IM role and some potential ways to respond.
Ideally, the IM should have direct, on-the-ground experience in the relevant regions. International complexity can be further intensified in deals involving emerging market companies. These types of transactions may bring additional challenges, no matter whether an emerging market company is the acquirer or the target. As acquirers, emerging market companies may have relatively little international management experience, and thus may be incapable in handling management or regulatory norms in new geographic markets. When developed market companies buy into emerging markets, they may be unprepared for the localization and unique customer requirements of the local market. Similarly, they may lack knowledge of local infrastructure and political nuances that could impact the success of the deal. Should companies, then, shy away from emerging markets? Absolutely not. Accenture’s experience has demonstrated established companies buying into emerging markets can actually outperform other merger types. The key is to recognize the additional challenges inherent in an international deal during both pre deals and integration planning. The broad availability and standardization of virtual collaboration tools, such as video conferencing, make cross-geography planning and subsequent execution much easier. The IM must become a master of these tools, but the tools themselves may also present their own hurdles. While web-based collaborative tools can allow the IM to connect across different countries and time zones more easily, they can also slow down relationship and trust development between target and acquirer teams and impede cultural assimilation. In simple terms, a typical company’s culture is harder to experience via online chats and videoconferences than in person.
The last 20 years have witnessed an explosion of outsourcing across geographies, functions and business-critical elements. It is not unusual for vendors’ delivery performance to suffer once contracts are displaced or they no longer have incentives tightly aligned with the merged company. One midsized banking merger, for example, involved the rationalization and integration of numerous outsourcing providers. The IM needed to understand details of each outsourcing agreement, lead times, volume projections and systems changes. And based on these information, the IM was required to determine if any of the outsourced capabilities should be brought back in-house. The IM established firm agreements with vendors to make sure they were aligned with the ultimate vision of the integration, and to avoid being influenced by their competing agendas. Failure to properly manage vendor and outsourcing provider relationships during the integration could have resulted in significant business risks including customer overdraft issues and data center challenges, which can potentially damage the bank’s reputation. By being able to take these factors into consideration in this instance, the IM instead successfully decreased costs by removing inefficiencies and consolidating vendors where the opportunities existed.
As discussed earlier, the IM is often called upon to oversee the integration of many moving parts. For example, one IM for a large global financial institution sought to understand how customer reference data was consumed, mapped and utilized across customer-facing channels, banker tools and analytic channels. In developing the proper analytical models, the IM was able to determine which customers would be impacted by which conversion events. This allowed the IM’s company to implement mitigating actions that minimized customer impact. Given this shift toward multidirectional IT platform integration, strong IMs must be able to drive effective change management within both the target and acquired organizations. The IMs must also drive integration across an increasing number of customer channels and IT architectures. Customers in many industries now interact with companies across multiple channels, including retail and social media, direct and indirect, formal and informal. Integration must address multiple channels simultaneously to prevent disruption of any aspect of the customer experience. At the same time, a company’s reputation can be at great risk if it fails to properly manage across channels, given that customer may use the social media outlets to voice their dissatisfaction. The IM needs to be customer-focused and consider the customer impact of material decisions.
Today market forces often require companies to respond quickly and to deliver needed enhancement even during a merger. Because many companies already have multiple, enterprise-wide projects in process—which in a previous era might have been postponed but now often remain green-lighted—the IMs are often called upon to manage their merger integration activities to accommodate and address ongoing transformational activities. And often times, this requires a release management strategy where transformation releases are intertwined with integration releases to reach an ultimate future state target. Similarly, the acquisition of distressed assets in today’s economic environment may require several stabilization activities to be implemented in tandem with integration activities. An emerging type of transformational change is the acquisition of smaller companies for their innovation and entrepreneurial capabilities. Synergy targets related to this type of deal can represent a different dynamic than buying companies to simply extend geographical reach or to realize cost synergies. An acquired product set may fill a discrete niche in the acquirers’ overall portfolio or may be integrated broadly across the acquirer’s existing platforms and products. When a company’s M&A strategy includes these smaller deals, the IM may need to run several smaller integrations simultaneously while managing the additional challenge of spreading entrepreneurial energy across a large company.
The IMs are now expected to generate substantial and newsworthy achievements of major revenue or cost synergies that can be trumpeted to the analyst community in the first post-close earnings cycle. More and more, we see “Strategic IMs” who concern themselves with generating quick wins and realizing the overall business case, leaving “checklist” integration tasks to functional integration leads. This trend may be further fueled by the fact that more and more IMs are being rewarded with substantial options and share grants. Timing is a critical issue here. Typically, acquirers achieve higher returns and synergies when they appoint the IMs before the announcement. That is, the IMs are more and more beginning their role in the target screening and due diligence phases, which can allow them to also understand how specific strategic targets were developed. Also, the company sends a positive message when it announces that its IM is going to be an experienced manager with a deep understanding of a deal’s strategic goals, end-to-end business knowledge and, especially for bigger deals, some prior merger integration experience.
While traditional program management skills and willingness to dive into details are still important qualities, it is less important. Rather IMs need to be the leaders who can build a team that has more tactical skills while primarily focusing on their strategic objectives, market management, and team management. Successful integration managers in today’s fast-paced and complex environment are often more senior and strategic than their predecessors were, and possess more end-to-end business knowledge. They typically have had exposure to multiple aspects of the company and hold a deep understanding of a deal’s value targets and how to deliver the synergies. The IMs need to embody their company’s strategic agility—anticipating4- changes in their marketplace, as well as the opportunities and risks in their newly merged organization and how these will have a synergy effect and quick wins. They must anticipate customer needs and competitor moves, and adapt their integration plans, processes and organizational structures to respond to these changes, all while continuing to execute the merger, manage the business and motivate staffs. Today’s integration manager has evolved to embrace the concurrency of initiatives and rapid global change, and to operate as a senior leader driving successful deal outcomes.
This article was provided by Accenture.