- August 15, 2019
- Posted by: Ramkumar
- Category: Mergers And Acquisitions
M&A integration at Cisco
In this blog, we shall discuss about the M&A integration at Cisco and how successful acquirers like Cisco have built a consistent integration process which has helped them to quickly realize value from their acquisitions.
We shall take the case study of Cisco and analyze some of the best practices followed by the company which allows it to be highly successful.
Importance of robust Integration capability
- Companies acquire businesses in order to get access to its products, technology or expand to new markets.The success of the acquisition purely depends on whether the acquirer had achieved the value that was envisioned during the deal phase.
- In order to realize immediate values and achieve their synergies targets, acquirers need to have a strong integration capability tasked with experienced resources, processes, tools and infrastructure in order to execute the integration effectively.
M&A integration at Cisco is its forte
- Cisco has long been a serial acquirer and has acquired more than 200 companies till date.Cisco is able to achieve synergies targets and add value in every acquisition it has undertaken.
- This is because Cisco has built a centralized integration team with repeatable and consistent processes, tools and templates that are needed for each acquisition.
- The centralized integration team has the same group of employees who would be involved in each integration.This approach has helped the employees to built deep integration expertise, build consistent set of templates, tools, processes and metrics that can be applied and also customized for every integration.Post every integration, the employees are able to document the key lessons learned and refine their integration processes incorporating those lessons.
- The cross functional teams like HR, Sales, Marketing, Supply chain, Customer Advocacy, IT and Finance have built a team which is specifically focused on developing a set of metrics and processes to integrate the target company with Cisco Functions.
- The Centralized integration team collaborates and communicates with cross functional teams to understand the inter dependencies, gaps on the integration activity and take steps to resolve and cooperate.
- Cisco recognizes that ~70% of all the integrations can be streamlined and codified with best practices. The remaining 30% is deal specific and requires experienced personnel to take decisions based on their wisdom and experience.As Cisco acquires companies from startups to larger companies with different business models, the integration capability can be adapted and aligned to the business objectives of the deal.
- This integration capability can be extended to other transactions like divestitures, divisional consolidation and in acquisitions by its subsidiaries.
M&A integration at Cisco – Approach followed
Cisco follows a three pronged approach to Integration.
- The centralized integration team will assign an integration leader who shall collaborate with cross functional teams to discover the scope of the integration, document and understand the respective processes of each function of the target and build an integration plan to integrate key activities/tasks.
- The function integration team then executes the plan to integrate the target functions with the Cisco.
- Once the integration is completed, the functional teams monitor the integration progress to validate if the synergies targets are achieved.The integration process is refined and changed in order to achieve the synergy targets.
- The integration capability is constantly upgraded and refined to include all integration operating models from limited integration to full integration.
Integration tools, Methods and processes
- The centralized integration team has codified the best practices, templates and tools for integrating each function.
- The consistent set of metrics reduces any confusion and improves productivity. This also helps the team to come up with a detailed integration plan and execution.
- Cisco also have a robust infrastructure that consolidate all the documents, checklists and templates in one location.The company also uses productivity tools like Webex and virtual meetings to allow multiple teams to collaborate with each other at same time.
M&A integration at Cisco – Integration metrics
Cisco follows a list of metrics for each integration to assess its performance.
Retaining key employees
- Cisco has managed to retain 100% of the target employees post transition.It was able to retain 90% of the target employees in the first 2 years post closing.
Revenues of the target
- Cisco was able to protect the target revenues post acquisition by retaining the customers and establishing a robust communication plan with customers that improved the customer experience.
Customer Service and Sales integration
- Integrate the target sales and customer service teams as appropriate to maximize the sales opportunities and expand the customer base.
M&A integration at Cisco – Function Integration Approach
Cisco focuses on the following target functions and integrate the same with its functions quickly.
- Cisco address the key employee concern about their job security, role and compensation post acquisition.
- Cisco quickly maps the target employees with its org structure.It sets up an internal micro site that addresses all key questions of target employees and also links it with Cisco training portal.
- It addresses other important issues like Immigration, stock options, employee benefits and pension contributions.
- Cisco has automated basic tasks like onboarding target employee into payroll, set up mail box, access to intranet and other applications.
- Cisco HR team then set up an orientation session for the new target employees to give them an overview about their company, history and business performance. These sessions are recorded and delivered through webex and video presentations.
By engaging the employees quickly and able to give clarity on their role and future in the company, Cisco is able to increase the employee productivity post closing.
- Integrating the sales and related functions of the target company is the most complex and critical activity of an integration.
- Cisco aligns the sales compensation and performance targets of the target company with its internal policies.This creates a consistent performance metrics and compensation for its combined sales force for selling each other products.
- By preventing any attrition of the target sales employees post acquisition, Cisco is able to minimize the disruption associated with loss in revenues or customer post acquisition.
- Cisco has built a consistent tools and process to train the salesforce in new products and service offerings. This helps the sales force to grow revenues by cross selling each other revenues.
- The customer and prospects data is migrated from target sales systems to Cisco SFA in order to get an integrated view of the revenues and pipeline of the combined entity.
- Cisco is able to integrate the customer service process of the target and bring it to it’s own platform.
- Cisco has an established Customer Advocacy model where it supports customers in building and customizing cisco products.Cisco continues to adhere to the commitments made to the Target customers but in addition provides its best services to increase customer experience.
- Cisco also consolidates the contact centers of target company to improve costs and build an consistent experience for customers.This is done by routing the target contact center number to Cisco contact center and allowing the Cisco contact center support team to address all customers requests.
- Cisco has built a best processes to integrate the financial reporting of the target company.
- Cisco aligns the target financial to its accounting standards and periods so that the controller is able to consolidate the target revenues with Cisco financials.This will allow the shareholders and investors to track the progress of the integration and additional value created post closing.
Key benefits for Cisco
- Cisco is able to add value for all its acquisition. It was able to achieve the synergies targets for all its acquisitions through its integration best practices.
- Cisco was able to integrate the target faster with minimal disruption either to revenues or key employees leaving the organization. This is because Cisco has a codified checklists and process for each functions which helps faster and smoother integration.
- Cisco was able to retain 100% of its key employees post closing.
- Cisco was able to integrate its sales force quicker which helped in increasing revenues through cross selling and building new value propositions.
- Cisco strong collaboration approach with target company enables it to understand the target way of Working which helps it to integrate only those process which minimizes disruption and frustration among the target employees.
- With each integration, Cisco was able to learn new findings which it had incorporated in its robust integration capability. This allowed it to further refine its integration process
- Cisco was able to optimize costs by migrating the target systems and data to its systems.This helped in increasing productivity and reduced additional costs.
- M&A integration at Cisco and its track record in executing integration gives lessons to other acquirers on how to add value with each acquisition.
- Cisco centralized integration process helps it to build consistent set of templates, checklist and communication tools which can be deployed quickly in each integration.Since same group of employees carry out integration activity, they have developed key expertise which helps them to quickly integrate important functions.
- From each acquisition, lessons learned can be identified that can be applied to future integration plans and activities.