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IT Thought Leadership

Foundations for Predictable and Faster Merger and Acquisition Integration

by: Senior Director M&A Integration and Services Romy Kaura

Growth is a key driving factor for business success. A sound inorganic growth strategy creates an accelerated path and is integral to the business world. According to collated research and a recent Harvard Business Review report, the failure rate for mergers and acquisitions (M&A) sits between 70 percent and 90 percent.

The key challenge is that merger and acquisition integration is a complex undertaking as it involves two companies integrating under one corporate mission, bringing together large groups of people with their own personalities and ways of working, progressive complex deals, heightened regulatory environment, information security, data privacy and compliance requirements, a rapidly changing technology landscape, integration of unique business processes and employee turnover to name a few.  

This demands innovative ways of approaching and executing rapid synergy development. It includes delivering more dynamic, scalable, efficient and integrated solutions to monetize, boost employee productivity, and provide seamless customer and partner experience.

Lean in early

Like any significant transformation project, M&A integration can be disruptive if not done properly. It is like changing the tires of a running car. It is critical for the core M&A team to lean in early and begin understanding the following areas to gauge complexity, minimize surprises, and begin overall planning for due diligence, Day 1 and post-close integration:

  • Deal drivers, target company size, geo. presence, legal entity structure, organization structure, operating model, corporate culture, key talent etc.
  • Business model—what’s being sold (SaaS and subscription, perpetual, professional services, education services etc.), to whom do you sell, how do you sell and monetize. See Figure 1.
  • Information security, risk and compliance posture, the technology landscape—public cloud, private cloud and labs footprint, network and core Infrastructure set up, productivity and collaboration tools footprint, and unique business processes for areas like demand-to-quote, order-to-cash, issue-to-resolution, record-to-report and procure-to-pay.
Figure 1. Business model profiler.

Big picture

There are many moving parts and decisions in one area could have big impact on other areas. For instance, look at the deal view rather than the project view. Understanding interdependencies between different workstreams helps to develop realistic plans and possibly avoid redoing work.

Consider a scenario of business launch workstream decision and its possible impact to IT and other workstreams. Product launch strategy like acquirer company paper or acquired company paper would have an impact on GTM plans, fulfilment process, revenue recognition and support need, among others.

Similarly, target company employees moving decisions by real estate workspace workstream to acquirer campuses can very well impact the business continuity if network connectivity dependencies between acquirer locations and target locations, like branch offices, data centers, public cloud and labs are not understood and addressed. 

Integration strategy and guiding principles

It’s important to define and communicate Integration strategy, governance structure, team charter, operating model, guiding principles etc. to align people with strategic direction. For example:

  • Employee productivity and customer and partner experience are the critical guiding factors for all decisions throughout the integration.
  • Reducing Integration complexity is paramount to realizing synergies.
  • Operating as a set of integrated businesses as opposed to a portfolio of stand-alone units and the ability to leverage technology and resources across the organization is key to success.
  • Long-term cost savings and efficiencies can be realized by integrating core and business operations.

Structured process and playbooks

Structured process and playbooks for due diligence, Day 1 and post-close integration are key to addressing ambiguity and to effective planning. Playbooks are integration blueprints and come in handy to firm up the integration plan. For typical integrations, ~50 – 60 percent of the M&A integration work is a rinse-and-repeat effort. So, it’s important to update the M&A approach, playbooks and collateral based on insights and lessons learned from each deal (each integration has its own unique aspects) to make M&A integration “a well-oiled machine”. Prepare an integration plan and roadmap aligned to overall business integration needs. Set up a periodic cadence with relevant cross functional and target leads to manage and track overall execution for Day 1, Day 1 + 30, Day 1 + 60, Day 1 + 90, Day 1 + 120 and beyond.

Technology as enabler

As we know, there are many unknows when it comes to M&A integration. At the same time, there is intense pressure to move fast. Teams must effectively integrate the acquired company while maximizing synergies. Oftentimes the burden of accomplishing these goals falls on the M&A team as they are tasked with implementing the magic behind the scenes.

Problems surface when we start ‘looking under the covers,’ to figure out how to provide safe landing zone for employees, ensure employees are productive from Day 1 itself, and business continuity is maintained.

Let us take an example of a 4,000 employee, cross-border acquisition. VMWare Workspace ONE® and VMware Horizon® desktops, along with self-service capabilities provides a safe landing zone, increased collaboration, uninterrupted business continuity and an estimated $20M savings for the acquirer as employees of the acquired company can access resources of both companies from their current devices. See Figure 2.

Figure 2. VMware technology during M&A could provide an estimated $20M savings for an acquirer (4,000*40*$80+4,000*1,800).  Calculation considered ~five days of estimated productivity savings ($80 per hour as blended rate and $1,800 hardware savings for each employee).

In our experience, VMWare technologies are key enablers for predictable and faster M&A integration. We encourage you to contact your sales rep or vmwonvmw@vmware.com to schedule a briefing with one of our IT experts. Check out other blogs on this topic blogs on this topic.

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