M&A Integration Process, the Art and Science of Decision Making
M&A decision-making process is driven by multiple drivers, enablers, and outcomes. Bringing high speed, numbers and quality decisions into consideration are key values during the M&A integration process.
In today’s rapidly changing business world, delivering value during the M&A integration process is not at all a mystery. Even a well-developed strategy does not always result in the optimal combination of people, processes, and technology for integration. However, it does not mean that you can pass over appropriate actions in the appropriate manner to get the ideal outcomes.
M&A Integration Explained Roughly
The process of merging or acquiring a firm covering all of the departments and company’s aspects from beginning to end is referred to as the merger and acquisition process. The M&A integration process is an extraordinarily complex activity attributed to multiple functions, personnel, products, geographies, customers, unique nuances, dependencies, risks, and the sheer volume of tasks.
M&A integration decision-making is part art and part science. Bringing all this together requires several decisions to be made in the quick and right order to overcome interdependencies throughout companies. Where decisions have multiple drivers, enablers, and outcomes with higher velocity decision-making in comparison to other business situations, only a seasoned M&A decision-making professional can pick the essence of it.
4 Vs Of M&A Decision-Making Process
Understanding the four Vs surrounding good decision-making i.e., Volume, Velocity, Value, and Variety is crucial to time. On the other hand, how, when, and where these integration-related decisions are made can affect the end state of the integration and value creation from the transaction.
In a recent survey I conducted, approximately 100 M&A integration leaders were interviewed, and here are insights that can bring better awareness to the issue at hand:
- 61% believed slow speed or lack of decisions created sub-optimal value from the deal.
- 43% shared concerns about the quality of decision-making.
- 34% believed the slower speed of decision-making affected synergies.
- 22% understood the differences between executive decisions in steady state operations and differences in an M&A integration environment.
The below figure can help throw some perspective on the volume and velocity of decisions during various business situations and how an M&A integration stands out.
Understanding the Variety of M&A Integration Decision-Making Process
The quality of M&A integration decisions is causally related to its enablers. Usually, during an M&A integration, we see many decisions with one or more enablers. Integration managers and leaders should quickly wrap their arms around each decision, its key enablers, the owners, and the impact of the decision itself. Ensuring that the right enablers are used will enhance the quality of decisions e.g., a decision requiring specific experts should not be made with data analysis or experience alone.
Each type of decision or its enabler has an inherent level of transparency attached to the M&A integration decision-making model — understanding the right enablers to each decision helps communicate the rationale ensuring higher levels of transparency.
Quality of decisions can also be affected by the style of decision making e.g., consensus vs unilateral, etc., these are more cultural and should be undertaken based on what merger and acquisition strategies revolving around decisions work in each organization. Understanding the value of decisions is equally important e.g., At $100 million planned synergies, each week of delay due to lack of decisions postpones the realization of ~$2 million in EBITDA.
Managing Decisions: Leading Practices
- Make sure everyone on the M&A decision-making team understands the financial, operational, commercial, and legal aspects attributed to each decision or lack of it.
- Establish good governance to enable decision rights at the right levels in the organization early in the deal cycle e.g., at the merger integration due diligence stage itself.
- IMOs should facilitate the right decisions, by the right people using the right enablers in the M&A integration decision-making model.
- The more dissimilar the cultures the greater the need for definitive and timely integration decisions
- Decisions, at the right places, will enable combined problem solving, set directions, and rule out further discussions — decide up front, especially the tougher ones.
- Establish the authority of each decision maker with clear lines of formality, interaction model, and demarcation with other decision-makers.
- Make sure culture and ideology-based decisions are communicated widely with a proper understanding of the impact on integration.
- Enable and staff the integration with qualified personnel with the right and relevant skills — expertise-based decisions are required in specific areas such as legal, IT, etc.
- Understand the impact of external forces on the M&A integration decision-making model e.g., HSR, pressure campaigns, regulations, etc., and make sure the impact is well-understood.
- The IMO should include a list of open decisions in all status reports and seek timely closure from the right people.
If a company has a good track record of divesting or acquiring assets, the market will trust its capacity to execute future M&As. In today’s business environment, M&A expertise is crucial; thus, it’s necessary to deal with an experienced partner that has assisted many organizations through an M&A.