- August 30, 2019
- Posted by: Ramkumar
- Category: Mergers And Acquisitions
Integration management office
In this blog, we shall discuss about the importance of instituting an effective Integration Management Office which is responsible for ensuring smoother transition of the target company to the acquirer organization and realize the synergy targets that was envisioned during the pre-deal stage.
We shall also discuss on the requisite skills and capabilities required to set up an effective integration management office that would help the acquirer to achieve consistent success in executing the Integration objectives for each acquisitions.
Setting up an Integration Management Office
- Setting up a world class Integration Management office or even a Diligence Management office requires a lot of effort.
- To achieve success in Integration, it is critical that the top down strategy formulation of the acquirer senior leadership is complemented with the bottom up execution and program management of the acquirer IMO.Most of the acquirers face challenges in either one or on both of these requirements.
- Further the M&A program manager should have skills in Process, Tools and capabilities which makes this role more demanding and challenging.
Five essential disciplines for an effective Integration Management Office
- Setting up an effective integration management office requires five essential disciplines to achieve consistent success and value addition from M&A transactions.
- The first three disciplines provided below are the basic capabilities that an acquirer should have and the 4th and 5th disciplines can be executed only when the first three disciplines are effective and running.
- Setting up cadence early between the Integration Manager, Workstream leads and steering committee is critical to the overall success of the integration.
- In most instances, the Integration manager is the primary escalation point for any issues emerging from any function or area.The integration manager would immediately address the crisis with the respective functions in closed room meetings and the decisions taken would be communicated to the relevant personnel.This approach cannot happen in a high pressure situation during Integration.
- The integration manager should set up weekly cadence meetings with workstream leads to measure the progress achieved, address any key risks and dependencies along with setting up milestones for the subsequent weeks.
- The Integration manager then needs to analyse the RAID log that is fed by the workstream leads and priortise all the active RAID issues for early resolution.
2) Risk, Action items, Issues and Decisions (RAID) Log
- The Integration team should own the RAID Logs.This is one of the critical responsibilities of the Integration Manager.
- The RAID logs are fed as inputs to the Integration manager from the workstream functions during cadence discussions and status reports.
- The integration manager should analyse these logs and clearly segregate them into Risks, Issues, Action items and Decisions.In many cases, Risks and Issues along with Action items and Decisions are mixed together which leads to confusions.
- Once the logs are clearly segregated, the Integration manager should act on these activities and resolve it.The integration manager need not be the subject matter expert to resolve these issues but he is at the best position to understand the magnitude of these activities and identify resources to act on these activities and resolve them.
3) Status Update
- Getting status update is the bread and butter of Integration Management office.The IMO needs to observe, analyze and report on each activities taking place with respect to Integration to decide the integration readiness of each function.
- The status update in the basic form will require an update from the functional leads at a weekly basis on the list of activities finished, status of the milestones, activities planned for coming week along with Risks, Issues and actions to be taken.The workstream will also have dependencies on other functions to complete the activities.
- The Integration manager needs to analyse the updates provided by the workstream to come up with a report on Integration status for Steering committee.
- It is necessary that the Integration manager interacts with every functional leads atleast weekly and understand/experience the issues.This takes time, resourcing and expertise.This emphasises that Integration management is a team activity.The routine reporting process can be automated through the usage of standard templates and tools.
4) Decision Support
- An effective IMO should not wait for decisions/signoff from steering committee but proactively engage discussions with senior management on the list of decisions already taken by the steering committee and the pending decisions required from their end to get a sign off.
- An effective governance process provides a clear demarcation on the roles and accountability of IMO.Hence around 75% of the decisions are generally taken between the functional leads and Integration manager.The remaining 25% of the decisions are high level decisions that requires approval from Steering committee.
- To expedite the decision making, the IMO can first analyze the issues for which a decision is needed from the Steering committee.The IMO should then understand the risks, dependencies and the synergies impact of the decision and share it with the Steering committee.
- At any point in Integration, the steering committee needs to provide sign offs and approvals for multiple workstreams.The IMO hence needs to prepare a decision calendar with the timelines for the steering committee to give signoff.These decisions are prioritized based on how they are aligned to the KPI and Integration objectives and are resequenced based on their importance to achieve synergy targets.
- By proactively analyzing the issues for which decisions is required along with risks and synergies impacts, the IMO supports the steering committee with necessary inputs to provide a timely signoff.
5) Align Integration Value drivers to Key deal thesis
- It is important that the Integration value drivers and priorities are aligned with deal thesis.The deal thesis provides the synergies assumptions like cost savings or increase in revenues which would happen as a result of the acquisition.
- It is necessary that these deal rationale are translated to value drivers and assigned to relevant functional or business leaders who would be accountable to achieve these synergies.
- The functional leads would then break the value drivers into list of activities/milestones and allocate resources to work on these activities.These activities are then tracked to ensure that they achieve the necessary objectives.
- Setting up and running a world class Integration Management office is a tough task.
- Running an effective Integration management office requires a combination of top down strategy leadership complemented with superior bottom up Program management and execution.