Even when Shared Services is involved fairly early in the typically complex Mergers & Acquisitions (M&A) process, carrying out the actual integration with an existing operation can be quite challenging, to say the least. With often daunting issues faced in such areas as technology, culture, and overall change management, this type of transition carries with it significant risks for both the entity being migrated and the existing Shared Services organization.
Recently, a major consumer products company that has carried out four acquisitions/divestitures in the past four years was featured on a Peeriosity PeercastTM. For this Shared Services operation, once serious discussions with a target company begin, a cross-functional team (including Shared Services) within the company is established. Then, once the actual deal is signed, integration planning can start immediately, instead of waiting for the formal closing of the transaction. An Integration Management Office (IMO) is then formed, with functional leads representing key areas of the company, which consists of Finance, HR, Legal, Shared Services, IT, Marketing, and Supply Chain.
This company has developed a playbook for integrating acquisitions and within that playbook, each work stream has detailed checkpoints to validate. A Master Project Plan is developed for each IMO lead and weekly cadence reports from all team leads are provided.
Some of the benefits that the IMO provides include the following:
- The central venue for communication and discussions by the team
- Access to target for information requests
- Management of early interaction to prevent overloading
- Overall guidance to teams
- Escalation to management on major issues
- Steering Committee updating
A few of the lessons learned this Shared Services operation has gathered over the years while carrying out M&A-related activities include the fact that divestitures are equally as complex and time-consuming; due diligence efforts often do not capture all information needed; surprises will happen; cutover dates need careful consideration (avoid January 1st), and flexibility and commitment of all parties are required for success to be the end result.
In conjunction with this PeercastTM, research was conducted with the Peeriosity membership utilizing iPollingTM technology. The first of two poll questions looked at the level of M&A activity that had been experienced by their Shared Services organization over the past five years.
Reviewing the results, 39% of the participating companies in the research had either a Very High (26%) or High (13%) level of M&A activity, with an additional 30% of the companies indicating that they had experienced a Moderate level of this type of activity. These results certainly highlight the significant levels of M&A-related activities being experienced by the majority of Shared Services operations.
The second iPollingTM question then looked at what aspect of the Shared Services operation typically poses the biggest challenge when integrating a new merger or acquisition. While in the past the People dimension (10%) typically dominates the results when looking at major initiatives such as this, in this case, the Process dimension was clearly the most difficult challenge for 51% of the companies. Also notable is that for 29% of the companies, the challenge varied with each M&A transition.
Some of the member comments associated with this poll include the following:
Consumer Products & Services Member: We have purchased three separate organizations, but have only slowly integrated them into Shared Services. We typically leave them “alone” for 6-12 months to better understand their operations & then look for opportunities to leverage common technology (e-mail, collaboration, etc.), and processes.
Healthcare, Pharmaceuticals, Biotech Member: Certainly, pay and benefits are a challenge, but integrating vendor contracts and Accounts Payable can be challenging as well.
Consumer Products & Services Member: It is always tough to implement the standard procedures and controls in a new organization. Tax interpretations can also be another challenge, and country regulations can differ too based on the type of business, legal entity structure, etc. Exceptions keep being asked, approved, and reversed and it is an ongoing effort.
Manufacturing Member: Different purchasing systems and Requisition-to-Pay processes are typically the most significant challenges at the time of facing a merging/acquisition.
Real Estate & Construction Member: Generally, with acquisitions, you will be bringing them onto your system and your processes, so it is imperative to make sure all of your processes are properly documented and process flows are available for all processes.
How well prepared is your Shared Services organization to effectively integrate new mergers and acquisitions? Are there further improvements to this critical process that can be put into place with a reasonable amount of time and effort?
Who are your peers and how are you collaborating with them?
“PeercastsTM” are private, professionally facilitated webcasts that feature leading member company experiences on specific topics as a catalyst for broader discussion. Access is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from attending or accessing discussion content. Members can see who is registered to attend in advance, with discussion recordings, supporting polls, and presentation materials online and available whenever convenient for the member. Using Peeriosity’s integrated email system, Peer MailTM, attendees can easily communicate at any time with other attending peers by selecting them from the list of registered attendees.
“iPollingTM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility to all respondents and their comments. Using Peeriosity’s integrated email system, Peer MailTM, members can easily communicate at any time with others who participated in iPolling.
Peeriosity members are invited to log into www.peeriosity.com to join the discussion and connect with Peers. Membership is for practitioners only, with no consultants or vendors permitted. To learn more about Peeriosity, click here.