Post-Integration Manufacturing M&A Planning: Getting the Most from the Deal

The world of manufacturing investment banking tends to focus on everything that comes before the deal: regulatory snafus, final sale price, and the challenges of inertia. But for most companies, success comes later. Post-merger integration is critical to the success of your business. Without ample planning, the deal may not realize its promised value, wasting time, effort, and talent. These five strategies can help you ensure that, when the deal closes, 1+1 doesn’t equal something less than 2.

Identify and Understand Value Drivers

All value creation opportunities should be explicitly stated early, with a plan for realizing success via each driver. It’s not enough to simply point to potential sources of value. You must have reliable metrics for determining how much these value drivers are worth, and how your business intends to drive that value higher. Particularly in the era of COVID and beyond, it becomes increasingly important to focus on contingency plans and adaptability to unforeseen crises.

Know the Importance of Governance Structure

Stark cultural and operational differences between two companies necessitate a new governance structure that helps expedite integration and reduce the risk of value dilution. Rather than merely creating functional teams, try defining value creation groups. A cross-functional approach here is key. This allows you to focus your attention on solutions for multiple functions. You must identify and begin assembling your governance structure early in the process, rather than turning governance into a mere afterthought.

Make a Diligence “Clean Room”

During the due diligence phase before closing, access to and availability of data can have lasting effects on the transaction. With too many delays, the deal may lose momentum. And if you cannot produce the data a buyer needs, they may begin to lose interest in the deal. A “clean room” can help you expedite the process. A clean room mans you rely on a third party vendor or specific individuals without conflicts of interest to share data between the parties. A clean room not only accelerates due diligence, but can also help with assessing future synergies and cost savings—a key consideration for integration planning.

Design a Detailed Operating Model for the Value Chain

You must have a deep and complete understanding of each company’s current people, systems, processes, and assets. This is the foundation upon which you will build the new entity, drawing upon the respective strengths of each prior entity. The future operating model depends on the type of deal and its goals. A small tuck-in may not require dramatic changes. A transformative deal, by contrast, presents the opportunity to implement sweeping reforms that increase value.

Focus on Culture

It’s the hidden aspect of every deal, and the one that’s most likely to send the deal awry: culture. Changes in corporate demographics, management style, requirements, benefits, and more can be real challenges for your workforce—who will in turn create serious challenges for you. The hidden, unstated aspects of the deal—who holds the power, who makes decisions, how employees are treated—are often the most important. So be explicit about differences, and find ways to bridge these gaps.

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Posted on

May 3, 2021