CSC Thought Leadership Series: Scott Jackson on Key Strategies for Successful Mergers

This is one in a series of commentaries, interviews, and technology briefs from CSC's leading executives and technologists.

Post-Acquisition Assimilation

By Scott Jackson, CSC Consulting Group

The push for consolidation in the Aerospace & Defense industry remains strong globally. This decade is likely to see continuing mergers that will create a few global mega-players, especially in the trans-Atlantic market - if the players can expand their view of what constitutes acting within their national interests, and if the lawyers can get these agreements ratified through complex regulatory wickets.

In this environment, it would seem that the efficiencies realized in combining A&D companies outweigh the costs of the acquisition - right?

It has been our experience that M&A teams do a thorough job of administratively combining companies. But they fail to appreciate the difficulty and breadth of the organizational and process re-design required to successfully execute post-acquisition integration strategies, and as a result, fail to achieve their expected gains.

To maximize the value gained from the merger, acquiring companies need to ensure that the entire process is coordinated with strategic purpose through integration - yet no two acquisitions are alike. We have identified common themes and success factors that have been employed by companies who have been combined successfully.

Assimilate - Don't Conquer

Organizational and structural changes should be made quickly and decisively, with overlapping operations identified during the due diligence process. Identifying acquisition champions at the acquired company and seeding your assimilation teams with those people can provide the required bridge across the two cultures.

This is a different approach than sending assimilation teams in from the acquirer to remind them who bought who. Ask key business stakeholders to agree up-front as to the business expectations and priorities of the deal, and to demonstrate visibly that a broad-based participation in the planning and execution of the future enterprise is occurring.

Communicate early, often and honestly, genuinely engaging members of the acquired company in the process re-design teams. To defeat silos within the old organizations, product collaboration applications and toolsets can be introduced during the transition that will serve to force the new entity to re-examine their legacy processes and systems and create a more streamlined, consolidated enterprise.

If you don't plan to consolidate cultures or organizations, that's okay, but don't forecast that "synergies" will result in dramatic value creation for the combined enterprise. Rather, expect a more linear, incremental revenue and income stream.

Measure - and Reward - Results

Strategic imperatives encompassing all functional areas (HR, Engineering, Information Systems, Manufacturing, Sales, Finance, etc.) should be flowed down to joint tiger teams. Reorienting the new organization to measure and reward breakthroughs in customer value shifts the organization to one that focuses on those factors that drive profit and growth.

Although this is not that difficult to do, it's surprising how often this measurement gets lost in the noise of competing integration activities. Identifying and focusing on sales integration issues immediately is important in structuring dedicated support to these efforts. Agreeing on a scorecard that measures performance against the goals on which the acquisition was based is all that is needed to initiate a joint focus on results.

Plan Ahead - Create an M&A Playbook

CSC works with clients to create "playbooks" early on to map out the major moves and anticipated assimilation changes. For example, an IT tiger team develops a playbook to identify and address the issues surrounding applications, infrastructure, technology, and IT strategy, plans and processes and culture.

In this manner, IT transition cost, schedule and expectations are largely anticipated and managed, and the expense for developing and executing the playbook is appropriately included in the costs of acquisition.

The end result is a well-defined process for IT transformation that was started during the due diligence phase and aligns with the stated strategies and rationales for the acquisition and documents results achieved on jointly developed scorecards that tie into strategic goals. The process, if not the playbook itself, could then be reused as a straw man for customizing subsequent acquisitions.

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