How to successfully manage concurrent M&A and business transformation activities. A viewpoint paper on how to handle complexity to ensure business success and the achievement of synergies. Managing such a complex environment requires successfully adopting a multivendor enterprise governance framework. This paper examines some of the key considerations for implementing such a framework and delivering the value that shareholders and business end users are looking for.

1. Successfully managing concurrent M&A
and business transformation activities
Handling complexity to ensure success
Viewpoint paper
IEV
E
ACH
business value and synergies.
Merger and acquisition (M&A) activity in
the consumer packaged goods industry
appears to be gaining steam in 2010.
The resulting M&A integration activities,
however, are not the only major programs
that enterprises are undertaking. A number
of companies are undergoing major business
transformation programs at the same time. To
achieve M&A synergies—as well as innovation in
their business models, processes, products, and
services—companies are leveraging an ecosystem
of service providers.

2. Table of contents
M&A activity on the rise............................................1
The complexity of managing business transformations
and merger integrations simultaneously. ......................2
.
Enterprise governance: A key component of
successful M&A integration programs..........................7
Dealing with the realities of a
multisourcing environment..........................................9
Conclusion............................................................ 11
About the author.................................................... 13

3. Managing such a complex environment requires
successfully adopting a multivendor enterprise
governance framework. This paper examines
some key considerations for implementing such
a framework and delivering the value that
shareholders and business end users want.
M&A activity on the rise
Companies are not just using acquisitions and
divestitures to expand global reach, enter new
After showing some softness in 2009, M&A activity in markets, and focus on their core brands. In some
the consumer packaged goods (CPG) industry appears cases, they are also making acquisitions to vertically
to be gaining steam in 2010. Figure 1 shows major
integrate and optimize their supply chain operations
merger, acquisition, and joint venture activities in the
and routes to market (for example, Pepsi and Coke).
CPG sector from 2007 through the beginning of 2010. Whatever motive or scale, it’s always done based on
Figure 1
Select mergers, acquisitions, and joint ventures in the consumer goods industry (2007–2010)1
Year
Companies Involved
Deal Size
Synergies Estimates
Time to Full Synergy Realization
2007
• Nestle
• Gerber (Novartis)
• $5.5B
• $95M
• Four years
2007
• Groupe Danone
• Royal Numico NV
• €12.3B
• €60M
• N/A
2007
• Constellation Brands, Inc.
• Fortune Brands
• $885M
• $30M
• Three years
2008
• InBev
• Anheuser Busch
• $52B
• $1.5B
• Three years
2008
• SAB Miller
• Molson Coors
• N/A
• $500M
• Three years
2008
• Pernod Ricard
• Vin & Sprit (V&S)
• €5.7B
• €125M—€150M
• Two to four years
2008
• Heineken
• Scottish & Newcastle (S&N)
• $15.3B
• $235M
• Four years
2008
• Smucker’s
• Folgers (Kraft Foods)
• $2.95B
• $80M
• N/A
2008
• Bunge Ltd.
• Corn Products International
• $4.8B
• $100M—$120M
• N/A
2008
• Groupe Smithfield Holdings
• Campofrío Alimentación, S.A.
• €680M
• €40M
• Three years
2008
• Altria
• UST Inc.
• $10.4B
• $250M
• Three years
2009
• PepsiCo, Inc.
• Pepsi Bottling Group Inc.
• Pepsi Americas, Inc.
• $7.8 B
• $300M
• Three years
2010
• Coca Cola
• Coca Cola Enterprises
• $12.2B
• $350M
• Four years
2010
• Kraft Foods
• Cadbury
• $19.6B
• $675M
• Three years
1 ources: Annual reports, company websites, and press releases, SEC
S
filings and/or publications (such as The Wall Street Journal); HP analysis
1

4. Figure 2
Sample MA activities at a major CPG company2
Kraft Foods, Inc.
1980—1989
• General Foods Corporation acquires Oscar Mayer Co.
• abisco, Inc. merges with Standard Brands (founded in 1929) to become Nabisco Brands.
N
• General Foods Corporation is acquired by Philip Morris Companies Inc.
• R.J. Reynolds merges with Nabisco Brands, creating the largest consumer goods company in the U.S.
• Kraft, Inc. is acquired by Philip Morris Companies Inc.
• The food products divisions of Philip Morris—General Foods and Kraft—are joined (Kraft General Foods).
1990—1999
• raft General Foods acquires Jacobs Suchard, making the company number one in the European roast
K
and ground coffee market and a leader in confectionery.
• raft General Foods acquires the U.S. and Canadian ready-to-eat cereal business from RJR Nabisco.
K
• Kraft General Foods is reorganized and renamed Kraft Foods, Inc.
2000—2009
• raft Foods’ parent company, Philip Morris Companies Inc., acquires Nabisco Holdings, a world leader in
K
cookies, crackers, and snacks. The Nabisco brands are integrated into the Kraft Foods business worldwide.
• raft acquires United Biscuits Iberia, reclaiming rights to the Nabisco name in EMEA.
K
• Kraft Foods completes its acquisition of Groupe Danone’s global biscuit business.
2010
• Kraft acquires Cadbury.
the assumption that significant advantage or synergies
can be gained by combining the entities in question.
The timeframe to reach such synergies? Typically three
to four years.
To be fair, MA activities have long been part
of CPG company playbooks. In fact, many of
the major companies in the sector grew to their
current size through acquisitions (see Figure 2).
There are, however, some differences with today’s
MA activities.
A number of companies—after years of running
multiple disparate brands and business units—are
proactively trying to integrate their new acquisitions
while consolidating their current operating company
holdings. This parallel set of activities will drive up the
level of complexity significantly for companies. It will
require their best in terms of program management
and execution to achieve the forecasted synergies.
2 Source: Kraft Foods website
2

5. Figure 3
Potential areas of opportunity for MA synergies in the CPG value chain3
• New product
pipeline
• New consumer
insight
• New patents
Illustrative
• New cross-marketing
and cross-promotional
opportunities
• New social media
solutions/strategies
• New production
technologies
Marketing
Promotions
New Product
Development
Introduction
• RD
rationalization
• Leverage-added
scale
• Supplier
rationalization
• Procurement
function
rationalization
• Ingredient
rationalization
• New
geographies
• New services
• New BI
capabilities
• Multichannel
Logistics
Transportation
Production
Procurement
• Advertising spend
optimization
• Marketing
function
rationalization
• Promotional
spend
optimization
• New customers
• New route to
market
• New
geographies
Customer
Management
Billing
Payment
Collection
Sales
Distribution
• Manufacturing
plants
consolidation
• Sales force
rationalization
• Distributor
network
rationalization
and optimization
• Route
optimization
• Carrier
• A/P and A/R
rationalization
function
consolidation and
• Warehouse
rationalization
rationalization,
consolidation,
optimization
• Customer care
function
consolidation
and
rationalization
Back-office rationalization and optimization (finance, HR, etc.)
IT (applications infrastructure) rationalization and integration
The complexity of managing
business transformations and
merger integrations simultaneously
One way to identify the areas a company can tap
into to help deliver MA synergies is to take a look
at the CPG value chain and its supporting functions.
Figure 3 provides a high-level overview of the
functional areas and levers along a CPG value chain
that can be used to deliver market enhancement, as
well as cost-savings benefits.
Tapping into an area of opportunity and optimally
using a lever will usually require business process
consolidation and optimization, as well as IT
rationalization and optimization. It’s important,
therefore, that both business stakeholders and IT
leaders be involved in any MA activity as early as
possible. Ideally, this is from the moment a potential
acquisition candidate has been identified to the
3 Source: HP analysis
3

6. Figure 4
The role of IT in MA and post-merger integration
IT Imperatives to Meet Analyst Commitments
Illustrative
MA Strategy
Representative
Opportunities
Day-1 Integration
Cost Synergies
Strategy Growth
MA Strategy, Due
Diligence Business
Case Development
Enable Day-1 Infrastructure
Supply Chain Business
Process Consolidation
Product, Market,
Geographic Expansion
Leverage Scale
Technologies
New Route to Market
Channels
Business—IT Alignment
Required IT
Enablers
Statutory and Performance
Reporting Analysis
• evelop an early
D
• Provide rapid integration • ntegrate customer
I
• lign IT strategy to
A
view of the required IT
of voice and email
experience systems and
revised business unit
capabilities to support
systems
processes to present
strategies
the business mode of the • Establish global
a single face to the
• efine route-to-market
R
merged entities
customer
communication links and
as well as multichannel
• ssess gaps in IT
A
intranet access
• upport facility closure
S
strategies and
capabilities
and consolidation
implementation plans
• Enable integration
• ontribute to business
C
of business reporting
• upport supply chain
S
• xpand e-business
E
and synergy planning in
and decision support
and business process
capabilities from
support of the acquisition
information
consolidation
customer interface to
underlying infrastructure
• apture IT synergies and
C
cost reductions
Lessons Learned
• P analysis has identified under-communication
H
as the number one problem in post-merger
integration programs.
• peed of integration is essential to achieve synergies.
S
• ction is more important than perfection; create a
A
sense of urgency.
moment all due diligence and post-merger integration
activities have been completed. Figure 4 provides a
high-level overview of the suggested role IT should
play in all acquisitions.
By participating early in the process, IT can create
a more accurate and prioritized road map than if
• isparate systems and processes can result in
D
degradation of service quality and customer or endconsumer satisfaction, resulting in loss of market share.
• nattention to personnel and organizational issues
I
can lead to low service levels and permanent loss of
experts and functional specialists.
engaged after the due diligence stage. In addition,
because IT-enabled business process consolidation
and optimization are key elements of a typical MA
synergy plan, IT will have to play a key role in helping
business line executives enable the transformation and
deliver the forecasted synergies.
4

7. Figure 5
High-level overview of a sample CPG MA integration plan
Illustrative
Select Functional
Areas
Q1
Year 1
Q2
Q3
Q4
Year 2
Q2
Q3
Q1
Q4
Q1
Year 3
Q2
Q3
Q4
Distributor and sales force rationalization
Sales and
Marketing
Data synchronization consolidation, BPO, and roll-out
Commercial data integration
Route accounting/DSD roll-out
Marketing integration and advertising spend rationalization
Master data integration
Supply Chain Ops
and Procurement
Reverse logistics consolidation
SC planning and optimization
Order-to-cash integration and optimization
Plant maintenance
MES and warehouse mgmt. integration
Procure-to-pay integration and optimization
Finance foundation
Finance, HR,
Performance Mgmt.
Finance integration and BPO
Human capital mgmt. integration
Enterprise perf. mgmt.
Strategy planning integration
Other back-office integration and BPO
• Companies need to be
able to manage and
integrate the effort of
multiple vendors and
internal organizations.
• Companies need to
analyze who the
recipients of new
processes, policies,
procedures, and systems
will be to determine if
the organization can
digest the changes.
• Governance and
organizational change
management are
essential.
Day 1 activities
Information
Technology
Key Points
• Companies should
analyze the demand on
resources (SMEs and
service providers) to
support multiple, related,
and concurrent programs.
Applications rationalization and modernization
Consolidate networks
Consolidate infrastructure, outsourcing, and maintenance
Ongoing transition organizational change management
Enterprise Program
Mgmt. Office
In-flight projects/programs consolidation, analysis, prioritization, and rationalization
Other/new programs (IT org transformation, acquisitions, joint ventures, BPO, etc.)
End-to-end enterprise program management (inc. benefit realization reporting)
In most cases, IT must help rationalize the multiple
solutions enabling a particular business process
that needs to be consolidated and optimized. IT
would also help implement the new solution in
areas of the merged businesses that did not use the
Source: HP
selected business process and underlying, enabling
technologies. Figure 5 provides an overview of
all such activities aggregated into a sample MA
integration road map for a CPG company.
5

8. Figure 6
High-level overview of a sample combined MA integration and in-flight business transformation programs plan4
Illustrative
High-risk period for the merged company
Select Functional
Areas
Q1
Year 1
Q2
Q3
Q4
Year 2
Q2
Q3
Q1
Q4
Q1
Year 3
Q2
Q3
Q4
Distributor and sales force rationalization
Sales and
Marketing
Data synchronization consolidation, BPO, and roll-out
Commercial data integration
Route accounting/DSD roll-out
Marketing integration and advertising spend rationalization
Master data integration
Supply Chain Ops
and Procurement
Reverse logistics consolidation
SC planning and optimization
Plant maintenance
Order-to-cash integration and optimization
MES and warehouse mgmt. integration
Procure-to-pay integration and optimization
Finance foundation
Finance, HR,
Performance Mgmt.
Finance integration and BPO
Enterprise perf. mgmt.
Human capital mgmt. integration
Strategy planning integration
Other back-office integration and BPO
Day 1 activities
Information
Technology
Applications rationalization and modernization
Consolidate networks
Consolidate infrastructure, outsourcing, and maintenance
Ongoing transition organizational change management
Enterprise Program
Mgmt. Office
In-flight projects/programs consolidation, analysis, prioritization, and rationalization
Other/new programs (IT org transformation, acquisitions, joint ventures, BPO, etc.)
End-to-end enterprise program management (inc. benefit realization reporting)
Spin-off activities
Various Areas
(Acquiring Company)
Global SAP applications—blueprint, realization, go-live, roll-out
HRO process design/implementation
Demand signal repository implementation
Integration projects in each of the areas are critical to
delivering the target synergies by year three; however,
they typically are not the only major programs the
company is undertaking during the same period.
Figure 6 provides an overview of the type of activities
we have seen many of our clients undertake while
starting MA activities. See projects/programs under
the category of “Various Areas (Acquiring Company).”
Further complicating matters is the fact that merging
entities often have different consultancies supporting
key projects, as well as business and IT processes. So
it is not only vital that merging companies consolidate
their business processes; they must also sort through
the consolidation of, in some cases, a large number of
business process consulting and IT service providers.
More importantly, merged companies will need to
carefully orchestrate the resulting set of strategic
service providers into a collaborative ecosystem that
4 Source: HP analysis
6

9. Figure 7
Sample cumulative synergy savings model and the potential effects of delays in enabling it*5
6-Month Delay:
Loss of ~$99M
in Cumulative
Synergy Value
$250
3-Month Delay:
Loss of ~$50M
in Cumulative
Synergy Value
$ Millions
$200
$150
$100
$50
The speed of integration and the
realization of synergy expectations
will be dependent upon the mitigation
of value attainment inhibitors.
Baseline
$0
Y1 Q1
Illustrative
Y1 Q2
Y1 Q3
Y1 Q4
Baseline
Y2 Q1
Y2 Q2
3-Month Delay
Y2 Q3
Y2 Q4
Y3 Q1
Y3 Q2
Y3 Q3
Y3 Q4
6-Month Delay
* Note: Based on assumption that IT projects/programs affect approximately $200M in annualized synergy goals
is capable of delivering the synergy commitments. It’s
not hard to argue that a good portion of the three
years following an acquisition is a high-risk period for
the merging companies. During this time of complex
and competing initiatives, companies will need to:
Enterprise governance: A
key component of successful
MA integration and business
transformation programs
• Analyze the overall demand on resources (subjectmatter experts, as well as service providers) to
support multiple related and concurrent programs
Having to support and staff a large and sometimes
interdependent set of projects or programs can
severely strain internal business and IT organizations.
This is especially true in an economic environment
that has pushed companies to adopt lean staffing
models across the board. Companies faced with this
challenge will need strategic partners and service
providers to help them through the lion’s share of the
integration activities and a framework to manage it all.
• Manage and integrate the effort of multiple vendors
and internal organizations
• Analyze who will be the recipients of new processes,
policies, procedures, and systems to determine if the
organization can digest all of the proposed changes
• Ensure that governance and organizational change
management are seen as essential to the success of
the MA program and staff them accordingly
Inability to deliver will cause value leakage and
prevent a company from realizing its commitments
to the investment community. Figure 7 provides an
overview of a synergy savings model for a CPG
company and the effects three- and six-month delays
would have on its ability to achieve synergy goals.
Not only would the company in the model not make
its three-year synergy goals, it would also lose tens of
millions of dollars in potential savings.
But having capacity constraints is only one of the
many factors that can delay the realization of MA
and business transformation value.
Other factors include:
• Delayed roll-out of an enterprise governance model—
According to Forrester, 17% to 32% of companies
don’t have a program management office6
• Lack of business and IT alignment
• Insufficient resources to focus both on operations
and transformation initiatives
• Delayed or slow initiative starts (for example, due
to slow decision-making processes or the use of
multiple “vendor procurement” cycles)
• Inefficient initiative and/or vendor integration
5 Source: HP analysis
6 The State of the PMO, Forrester, 2010 (multi-industry data)
7

10. Figure 8
Leveraging an enterprise program management framework to manage MA and business transformation programs7
Enterprise
Governance
Sr. Executive
Vendor management
Financial management
Quality management
Risk management
Issues management
Resource management
Benefits management
Communication
management
Scope management
End-to-end
enterprise PMO
Supported
Activities
Organizational change management COE
Oversight
End-to-end program oversignt
Processes
Business and
IT leadership
Illustrative
Program monitoring
(Planning Board)
Program and project management
Program/project management COE
MA
Integration
Activities
•
•
•
•
New product dev. intro.
Marketing promotions
Procurement
Production
•
•
•
•
Sales distribution
Logistics transportation
Billing payment collection
Customer management
Sample
Business
Transformation
Activities
•
•
•
•
Spin-off activities
Global SAP applications
HRO process design/implementation
Demand signal repository implementation
7 Source: HP Analysis
8

11. Companies that face these challenges should consider
adopting an enterprise program management
framework to help guide them through combined
MA and business transformation programs. An
enterprise program office (see Figure 8) can provide
the standardized methodologies, tools, techniques,
and best practices needed to support complex
program and project management.
No single service provider is the best at everything,
so it’s no surprise that multivendor environments are a
reality. Especially if one considers a broader spectrum
of sourcing areas above and beyond the typical IT
outsourcing, applications management, and business
process outsourcing categories.
Optimum business performance is often driven by
“full-stack” integrated solutions—from business process
According to Giga, good governance and program
to applications and all the way down to infrastructure.
management practices can deliver a 20% reduction
So one can argue that areas such as systems
in project cycle time and a 30% to 35% increase in
integration, business process, and organizational
successful projects.8 In addition, Forrester research
change management also require sourcing decisions
shows that organizations with well-run, mature program that should be managed as part of a multivendor
management offices report improvements of more than governance framework. Multivendor governance
10% in managing schedules and over 15% in cost
can enable companies to seamlessly integrate the
performance over organizations with immature ones.9
work of multiple service providers (including internal
organizations) and deliver measurable business value
But the enterprise management framework must
to the end user.
be able to deal with the realities of multisourcing
environments.
8 esigning an Enterprise Project Management Office to Improve
D
Organizational Project Management Efficiency, Giga, 2002
9 everage PMO Skills to Build Program Management Competency,
L
Forrester, 2009
9

12. Figure 9
Multivendor enterprise program management framework10
Chief Intergration
Officer
Steering Committees
Business, IT leaders,
and key partners
Illustrative
Enterprise
Multivendor
Program Office
Org. Change
Management
MA and BT
Dashboard
MA and Business Transformation
(BT) Command Center
Visibility to performance
against business value and
synergy targets
Process Owners
Cross-Funtional Program Oversight
(incl. Sourcing)
Business-IT Alignment and Cross-functional Integration
Supply Chain,
Mfg. Ops.,
Procurement
Sales
Marketing
Finance, HR,
Back-Office
IT
Infrastructure
Apps
Vendor
Mgmt.
MA and Business Transformation Programs
Performing Vendors
Business Processes
“Full Stack”
Integration
Applications
Internal Org A
Data
Infrastructure
Vendor Management Integration
Performing
Vendor A
Program Office Processes
Organizational Change Management Center of Excellence (CoE)
Program/Project Management CoE
Performing
Vendor D
Operational Level Agreements
Program and Project Management
Figure 9 provides an overview of what a multivendor
enterprise program management framework might
look like for a large-scale MA integration program.
In these situations, it’s advisable to fill the most senior
governance role with a business executive (such as the
chief integration officer). Steering committees should
include both IT and business leaders to ensure:
Performing
Vendor C
Performing
Vendor B
The multivendor integrator would:
• Ensure there is alignment and integration of business,
IT, and outsourcing strategies (see Figure 10, “the
solutions value chain”)11
• Unify the management of all service providers
• Deliver communications transparency across all parties
• Proper alignment between the two groups
• Help manage the risk profile
• Full support of all IT-enabled business transformation
projects
• Optimize the number and type of vendors
providing services
• Cross-functional and full stack integration
• Provide the systems, tools, approaches, and
experience to seamlessly integrate complex
multivendor environments
Companies that temporarily need to supplement their
staff and capabilities—or need help establishing a
multivendor governance framework—can leverage
a strategic service provider to help create, staff, and
manage a multivendor environment. The role of such a
service provider would be one of a “prime contractor”
or a multivendor integrator.
10 Source: HP analysis
• Enable near-real-time visibility to performance
through portal technologies (“command center”)
11 Ibid.
10

13. Figure 10
The solutions value chain
Business
Business Solutions
• Business strategy
• Business requirements
Choosing a prime contractor or multivendor integrator
should be based on a supplier’s proven ability to:
Multivendor Management
Model
• Create and manage a successful multivendor ecosystem
Retained
• Use metrics to ensure that the focus is on client benefit
• Has control
• Owns contracts and overall
program management
• Manages interfaces to
business client
• Owns cost-effectiveness
Outsourced
Requirements
Using a prime contractor or multivendor integrator
does not mean a company gives up control. The
company still decides what to outsource, who the
suppliers are (relationships remain intact), and what
the vendor contract strategies will be.
•
•
•
•
•
•
•
•
•
Standard processes, tools
Common language
Performance measurement
Effectiveness and improvement
Performing Vendors
Design
Build/integrate
Test
Deploy
Operate
• Recognize that it is not the best at everything
• Manage complex governance and decision-making
frameworks required by multivendor environments
Conclusion
Virtually all major companies use multiple suppliers
to deliver on their business transformation and
integration programs. So business and IT executives
are increasingly interested in learning how their
companies can leverage frameworks, tools, and
techniques to successfully manage their complex
multivendor environment.
There is no “standard” approach for implementing
and managing a multivendor governance strategy.
Successful ones, however, tend to share a number of
key success factors or characteristics (see Figure 11).12
12 Source: HP
11

14. Figure 11
Success factors in multivendor management
• Establish a strong enterprise program management framework and office (PMO).
• Implement a supplier portfolio strategy.
• Competition is the intention, but should not be a distraction.
• All vendors must be prepared to handle new levels of complexity.
• Clear delineation of roles and responsibilities is key.
• Ensure common languages, processes, standards, and tools are used.
• Foster open, honest business relationships between vendors.
• Performance measurement tools should be in place from the start.
• Install a unified billing approach.
• Leverage organizational change management.
When all of the success factors and proper executive
sponsorship and support are present, program office
frameworks can help address the complexities, mitigate
the risks, and optimize the costs associated with
managing a multivendor ecosystem. All of these elements
will enhance an organization’s ability to deliver business
value to its end users and achieve the forecasted MA
synergies by the required deadline.
12

15. About the author
Will Ruiz
Will Ruiz is the U.S. leader of HP’s Consumer
Industries Consulting and Solutioning practice. He has
more than 20 years of experience in the areas of new
product development, manufacturing operations and
strategy, IT strategy, and business process innovation.
His background includes a broad range of operations
and order fulfillment engagements in the consumer
packaged goods, wholesale distribution, quick-service
restaurant, food retail, and manufacturing industries.
Before joining HP, Ruiz was a principal with IBM’s
Business Innovation Services group. Previously, he
was a manager with Ernst Young’s Management
Consulting Performance Improvement practice and a
senior manufacturing engineer with Analog Devices.
Will Ruiz holds an M.B.A. (high honors), as well
as a master of science degree in manufacturing
engineering from Boston University. He also completed
the Strategy Value Creation Programme at the London
Business School.
13

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