1. M&A TOOLKIT
Post Merger Integration:
PMI Theory
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2. Best Practice requires a focus on deal-specific priorities, while
following general “motherhood” advice
DEAL SPECIFIC PRIORITIES
• What was the strategic rationale? What are the “crown
jewels” we have to protect in this deal?
• What is the Value Hypothesis? What do we have to do to
realise the value?
GENERAL “MOTHERHOOD” ADVICE
• Create a plan before the deal closes
• Plan communications to all stakeholders
• Ringfence integration team and resources
• Form combined team from both companies
• Identify and retain key people
• Retain customers
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3. Integration tends to be complete and fast when resources are
bought; partial and careful when values are important
RESOURCE-PROCESSES-VALUES FRAMEWORK
Resources Processes Values
Relatively easy to Hard to assess Almost impossible
assess value value to assess value
Easy to change, Hard to change, Almost impossible
transfer and reorganise and to change, transfer
rationalise rationalise and rationalise
FULLY INTEGRATE LEAVE STAND-ALONE
Fast Careful
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4. Your first priority in merger integration is to do no harm
PROTECTING VALUE IS THE FIRST PRIORITY IN PMI
• Identify the “crown jewels” that represent the value you bought
the business for
 Resources – e.g. customers, top salespeople
 Processes – e.g. brand mgt
 Values – e.g. low-cost, entrepreneurial
• Make sure they are
 Monitored at senior levels
 Retention/Incentives put in place
 Not risked in the name of short term cost savings
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5. Different types of M&A will have different M&A approaches
What is bought? (R/P/V?) Integration Approach?
OVERCAPACITY Mainly Resources Fast, bloody, high potential
for culture clash
GEOGRAPHIC Resources/Values Can take time, be win/win; keep local
ROLL-UP company intact; install key value-
adding processes (that don’t mess
with values)
PRODUCT OR MARKET Infill Product: R Infill: Immediate & full
EXPANSION New Product Platform: P/V
New Market: P/V Platform and Market: Careful; cross-
selling only
R&D Often only Resources As product, depending on Infill or
Platform
INDUSTRY Resources/Processes/Val Complex; existing companies usually
CONVERGENCE ues best left alone; leverage Resources to
create Newco
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6. The key risk in merger integration is to destroy the Processes
and Values of the target in the pursuit of cost savings
BALANCE IN MERGER INTEGRATION
Pressure to Patience
deliver cost needed to
savings and understand
synergies fast acquisition
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7. Use analysis to determine the risk of culture clash
ASSESSING THE RISK OF CULTURE CLASH
How far apart
are the cultures? Position:
•IBM-Lenovo?
•Framedia-Focus Media?
•Snapple-Quaker Oats?
How great a •Gome China Paradise?
change is
required?
How many
people need to
change?
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8. The acquirer will have to make key trade-offs in deciding their
integration approach
KEY INTEGRATION DECISIONS
Strategy First Integration First
Fast and “good
Slow and careful
enough”
Acquirer driven Acquiree driven
Transfer best Transform
practice “best of both”
Integration Integration Process
“CEO” Manager
Fully staffed Lean Integration
“Integration Office” © 2007-2013 IES Development Ltd. All Rights Reserved
team

9. Post Merger Integration issues can be prioritised by Importance
and Urgency
CLASSIFYING PMI ISSUES
Relative
Importance Mission
Critical
Important
Low
First 100 days First Year 3 Years
Urgency
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10. One of the most important integration decisions is leadership
MANAGEMENT CHOICES FOR ACQUIRED COMPANY
Existing
management
Don’t do an
Who is going to acquisition if
Hire new Pros and cons you don’t
run the acquired
management of each? know who
company?
will run it
afterwards
Parachute in your
own management
Which is the easiest choice?
Why is the acquisition of a company that
has to be turned round so difficult?
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11. Identify what the post-merger integration model will look like
EXAMPLE: AIA/PRUDENTIAL DEAL
Post-integration organisation
Integrated:
•One Country CEO
•All Middle Office functions
•All Back Office functions
Left separate:
•Agency salesforce
•Bankassurance relationships
Why did they select this structure?
Source: Prudential Investor presentation IES Development Ltd. All Rights Reserved
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