Category Archives: Integration Process

Short This Stock

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So the word from Oz should have the shorts doing chest bumps.  This from Magnus Nicolin, CEO of Ansell Limited (ASX: ANN), which acquired Comasec SAS:

The overall integration process will be a gradual one as we take time to get to know the Comasec business.

It would appear that even the most basic tenets of acquisition integration have not reached Australia yet.

In case The Merger Verger’s reading is unclear let me offer the shareholders of Ansell a translation:

We are standing by to flush our (your) investment in Comasec down the toilet using a process that will be slow but certain.

In fact, let me go a step further and offer a letter that you might want to send to the noble Magnus, your CEO:

Dear Mag:

We are glad that you are seeking ways to grow our investment in Ansell Limited. But I, for one, am distressed by what I read about your approach to the Comasec acquisition.  Please be aware that your future at my company will depend in large part on how well that approach plays out.

Now, me, I’m just a humble shareholder so don’t expect me to know as much as you about doing acquisitions but it occurs to me that a “gradual” process can’t be that smart. I mean, if you just sort of amble along doesn’t that merely postpone the time that any benefit might inure to us as shareholders? And wouldn’t it extend the time that we are paying for duplicated overhead? And increase the likelihood of employee defections?  And open us to competitor shenanigans? I’m just dubious.  Is “slow and steady” really the right approach here?

And another thing: you say you want some time to “get to know” the acquired company.  (Uhm … how do I say this nicely?)  I would have hoped you’d get to know the company before you acquired it.  By the time the transaction closed, I would have expected you to know not only the target but also what you were going to do with it. You see what I’m saying?

Listen, anybody can make an acquisition.  We don’t pay you to do that; we pay you to make them work.  “Mañana” cannot possibly be the right approach.

So get on with. Today.

Cordially,

Cher Holder

The Merger Verger’s Take:

An “overall integration process [that is] a gradual one” is a failure waiting to happen.  A true short’s delight.

Timing Is Pretty Much Everything

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The Merger Verger is so confused.  People seem to be slow to get things started and then in a hurry to get them over with.  What’s up with that? I mean, if we were talking about eating Brussels sprouts, I could understand but if you’re in the merger business you must think it’s fun, right?  Why not dig in? Why not see it through?

When I hear CXOs talk about acquisition integration, they mention two timing events, almost exclusively: closing day and Day 100.  That’s it.  Life begins at time zero and ends 100 days later.  Hell, a stinkbug lasts longer than that.

Here’s the message:

Acquisition integration should start sooner than you think. It should start in the strategy stage.  Particularly when strategic expansion – either in the vertical or horizontal direction – is the plan, attention to integration issues can clear the pathway, identify issues to address in advance and sharpen the analytical assumptions that underpin your bidding.  If you are starting to think about an acquistion, start to think about integration.

Query to Readers: I would welcome stories from readers who have been involved in integration activities that by virtue of starting either early or late have given rise to potentially useful observations.

Acquisition integration should continue longer than you think.  There is no finish line, no “The End,” no graduation, not even any fat lady singing in acquisition integration.  Even the attainment of financial metrics does not necessarily mean “it’s over.”

Remember the adage “old habits die hard?”  Old habits prevent the adoption of change.  And acquisition integration is about the effective management of change towards a specific strategic intent.

Let me see if I can explain this timing thing in a way that even the visual learners will understand.  If we view old habits as including practices, perceptions, expectations and the like, we might ask “to whom does the adage apply?”  Let’s look:Hmmm.  That’s odd.  It seems to apply to everyone.

So, Sherlock, what does that suggest to integration professionals (and the executives that depend upon them) about the timing of the integration process?

Wait, I answered that question already … about a dozen lines ago:  “Acquisition integration should continue longer than you think.”

This does not mean “forever” but nor does it mean in full accord with the best-laid plans.  Not everything will go according to plan and most of the unforeseens will require more time than less.  So be prepared for that in advance.  In fact, any good integration plan will prescribe how to handle key delays.

  • CXOs: challenge your people but be open to change.  It is better to be flexible and successful than rigid, punctual and errant.
  • Integration Directors: lay out clear plans and expectations, monitor them closely and prepare in advance for any project’s inevitable sloths.   And keep your CXOs informed, good or bad.

Unfortunately, despite years of working on deals and a zillion conversations with people about them, I cannot offer a formula for when an integration process can be declared complete.  It is just different with every deal, with every team, with every set of circumstances.  So your focus should be on the objectives, not on the clock.

This is a vital topic and we’ll likely come back to it again often but let me close here with another …

Query to Readers: What are the metrics you follow (using the term “metrics” both numerically and subjectively) to assess/sense when an integration process is nearing completion?  What lessons can you share from those times when the numerical metrics had been achieved but softer goals had not?

Too Many Balls (and Too Few Planes) in the Air

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So the woes are official.  United’s recent announcement of its 2Q 2012 quarterly results confirmed what virtually every customer already knew: the merger of United and Continental is still causing problems.  It’s not quite Jeffrey Smisek with his Head on Fire but it’s not good either.

Even the most carefully orchestrated integrations can hit clear air turbulence, particularly when merging entities as complicated as airlines.  Let’s look at some of the issues in hopes of finding a little preventive medicine.  (Ahem … American, are you out there?)

The UAL announcement noted the following problems:

  • Cut-over to a single reservation system has been more complex than anticipated.
  • Changes to the frequent flier policies have wrought confusion and pissed off customers, particularly at the most-active flier levels.
  • On-time arrival metrics have slumped.
  • Flight cancellations have increased.
  • Baggage handling mishaps have increased.
  • Spare plane inventory was cut back only to have to be rebuilt.
  • Reservation transaction times have increased, making them more expensive and more frustrating to customers.
  • Changes to the company’s revenue accounting system have led to revenue adjustments.

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The “Lesser Whole Theory” Bites United

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Poor United Airlines has been receiving a lot of unfavorable press recently, mostly about unhappy premier customers. The Merger Verger has discussed the integration process with United at some length over the last few months and basically believes that they have done a good job at planning for and executing the merger.

So what’s going wrong? And are there lessons for the rest of us in this turbulence?

Much has been written about the “need for speed” in the integration process over the last few years. (Who hasn’t read the Band-Aid metaphor a zillion times?) But does that need apply to all aspects of the integration process or is it better used selectively? Clearly in the case of financial controls and employee (and management) reshuffling, speed counts.  But United’s problems seem to center around customer service issues, in particular the combined software systems and the training on those systems.  That suggests three possible explanations:

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