I was with a new client today to discuss a new procurement initiative for a business which spans 14 countries in Asia. The initial transaction which formed this large and very successful operation was completed in late 2008, an incredible time to make an acquisition both in terms of price and expectation management in terms of shareholders. Since then it has performed extraordinarily well both in terms of growth and return, so much so that it has become the only region with almost no limitation in terms of capital. Consequently the acquisition trail has continued as scale has become the primary driver both in country and across the region.
The conversation was interesting in that it revealed a trend that I’ve wondered about for a while….is the concept of a ‘lite’ integration actually something that works? In this particular case, part of the challenge behind the procurement project is achieving a cultural shift and some further homogeneity in terms of business processes. From what I heard, these two ambitions are key success factors and part of the reason why the first phase was not seen as achieving its ambitions. Both of these ambitions are without doubt legacy issues from the integration and continued acquisition trail, and I suspect they lie at the root of other transformation projects currently being launched.
Much of the motivation behind the temptation to ‘put off’ key integration initiatives is laudable and entirely understandable…some of the reasons sited often revolve around giving the existing management team continued autonomy, maintaining an entrepreneurial spirit and giving the impression that what is happening is not a ‘takeover’. Added to that are the practicalities of limitation..there is a limit to the number of projects that are doable in any integration and everyone needs to prioritise.
But I wonder? Isn’t there also an element of ‘let’s not go there’ on the part of the sponsor of the deal and those landed with the responsibility of integration / achieving a return?
Ultimately the amount of work probably remains the same….having an entirely independent procurement process, or financial management system, or way of evaluating performance makes central management even more complex than it needs to be, and so if the work isn’t done initially, it will have to be done eventually.
And my question to you would be, given the momentum and expectation of change which always accompanies a transaction, isn’t that the perfect environment in which to pitch some of these projects, in particular if they can demonstrate a commercial benefit early on in the process? Surely worth challenging perhaps some of those other activities which are given priority. If you can achieve one truly successful integration project in the ‘too hot to handle’ category, imagine what the overall impact on the business might be…just a thought!
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Categories: Change management, Mergers & acquisitions, Post merger integration, Project Management
Tags: Analysis, Complexity, Decision making, Merger integration, Performance, planning, Procurement, productivity, stakeholder management
Ben: Great blog. We all live with these light or as we called them at Microsoft, long-tailed integrations. Your reflections are very apt regarding examining both the initial motivation and the long term impact of not integrating!!!
Thanks for your response Steve…I do understand the predicament and feel for the integration director in trying to ‘manage’ the scope. However what I think happens frequently is the weight of numbers around the integration table influences the prioritisation process. It’s extraordinary how often you sit in an integration steering committee and all support services are well represented but the client facing side is small…inevitably the conversation is dominated by well meaning but often less significant conversations, leading to an approach on integration which is dominated by projects which are not value generative!
Ben, interesting blog. The thing I find is that an M&A deal creates an opportunity for fresh thinking, new ideas and aspirations, and of course the momentum to bring such opportunities to fruition.
To do nothing may be the pragmatic decision in the circumstances, but to do nothing? This simply indicates a lack courage and imagination. In the end it’s an anti-climax and generally disappointing.
Agreed Toby…the interesting thing for me is that there is so much negative publicity around integration these days (because of the perceived failure rate) that rather than a career enhancement opportunity, I suspect many see it as a career limitation challenge….in those circumstances, finding someone with the courage to be a little innovative is hard. The other observation I’d make is that no one applies the same scrutiny to ‘internal transformation’ projects which companies are spending enormous amounts of money on and often with similarly bad results as they do to the external deals…you’ve got to ask why!!