When contemplating an acquisition, divestment or a merger, it is critical to have a robust plan to give effect to its intent once a transaction completes.
With respect to an acquisition, management/board members should have a clear view as to how the business will look post transaction, the synergies that are available and a plan for achieving them. This work is completed prior to the commencement of a transaction and often forms the thesis for the acquisition. This work is exciting as it focusses on value.
Against this, much of the detailed work that needs to happen immediately before and after completion can seem mundane, but it is vital to the success of the deal. Sometimes those close to the deal never appreciate the level of change and uncertainty that can cascade through organisations once a deal is announced.
Depending on the complexity of the transaction, planning for completion may have to commence early in the transaction life cycle. Our framework for pre-completion planning focuses on eight key areas:
- Business structure – Know what the business will look like before Day 1 including corporate structure and organisation chart and what is required to get there
- Focus on value – Prioritise integration on the areas which drive value
- People – Resolve people issues quickly with reference to a desired organisation chart to provide clarity and certainty
- Operations – Ensure the integration is not draining resources from running operations
- Culture – Plan and manage cultural differences in the two organisations
- Communicate – Communicate a vision for the integrated business, remove uncertainty and develop communications plans for employees, customers, suppliers, regulators and the public
- Speed over perfection – Prioritise a return to ‘business-as-usual’ over achieving every possible improvement
- Synergies vs stranded costs – For buyers: prioritise effort on realising synergies based on value, timelines and cost to achieve; For sellers: identify potential stranded costs and prioritise plans to address/minimise these costs.
Turning plans into action requires effort. Clear timelines and responsibilities need to be set out when planning commences, with a framework to ensure accountability.
The involvement of members of the due diligence team and business unit heads is critical as those responsible for the integration must be able to articulate the steps being taken to track and deliver the value expected.
Boards must challenge management to ensure pre-completion planning is robust, and plans are being converted into actions.
This article is part seven of the ‘Transaction lifecycle’ series.
Part one: Don’t let a poorly planned transaction destroy value, or your business
Part two: Assessing the strategy – why transact?
Part three: Assessing synergies – when is a combined business more valuable than the sum of the parts?
Part four: Driving success (and minimising risk) of transactions with focussed due diligence
Part five: Assessing and refining the deal
Part six: Logic before emotions – the key to successful negotiation