All Quiet on the Working Front

The Merger Verger spent some time earlier this week in the office of an executive whose company had announced its sale only 15 minutes before. We had the privilege to eavesdrop on two conference calls, one hosted AllQuietOnTheWesternFrontby the two CEOs to introduce the sale to their staffs and the other with the sales teams to go into details directly focused at them.

Both of these calls are part of Acquisition Integration SOP and they included all the usual Rah Rah stuff about how well the merged companies will perform in their new togetherness. But two interesting observations did surface – one simple, the other subtle – to which we draw readers’ attention. In this posting, we’ll look at the Subtle observation. Subtle but corrosive.

Now, our contact at the seller is a very busy guy. We’ve been in his office when he had multiple conference calls, emails and texts all actively going at once (to what effect we cannot say). But on this day – in the two hours immediately following announcement of the deal – his phone did not ring.

Silence. The breath of God. What’s up with that?

Answer: nothing. That is, no business was getting done … that kind of nothing.

If you’re a executive who’s closely involved with the mechanics of a deal or are charged with making sure the trains run on time during the period of post-announcement transition, you’d serve yourself well to remember that people think first, long and hard about themselves. Themselves; not you, not your wonderful deal. They will do little or nothing but wander mentally around that topic shell-shocked until they get answers, satisfactory ones. If they get no answers or the answers they get are lame, you will get no work or the work you get will be lame.

All Quiet on the Western FrontThe Merger Verger in Words of Two Syllables or Less:

On the spectrum of Satisfactory versus Lame, no one gives a hot damn whether you think an explanation is satisfactory. If your audience thinks it’s lame, it’s lame. So do yourself a favor: set aside the rah-rah, strap on the boots of your audience and only then start crafting your message.

About the Art:

Top: the cover of the first English language edition (1929) of All Quiet on the Western Front, written by Erich Maria Remarque and considered by many to be the greatest war novel of all time. The cover design is based upon a 1917 German war bonds poster by the artist Fritz Erler. Bottom: a transitional scene from the original 1930 movie version of Remarque’s book.

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And I Quote

“There’s one thing I can guarantee: [integrating an acquisition is] going to suck.  You and your team are going to have doubts, get tired, and become frustrated.  That’s normal.  Keep fighting, remembering, and reminding why you did the acquisition in the first place, and keep going.”

Lawrence in the desert

Source: a short piece entitled “How to Integrate a Company You Acquire” from Inc. magazine, available by clicking here.

Photo from “Lawrence of Arabia,” (directed by David Lean), 1962.

Short This Stock

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 spent my money to acquire 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.  I don’t pay you to do that; I 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

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?

EMC Acquisitions in a Nutshell

There’s a very good – smart, succinct, helpful – posting on the corporate blog of technology company and active acquirer, EMC Corporation, written by Matt Olton, the company’s SVP of Corporate Development.  The piece (entitled “Explaining EMC’s Success in M&A” and available here) is short and necessarily high-level but still has some juicy tidbits on how EMC acquires companies and how they manage the integration process.  Check it out.

The Merger Verger’s favorite snippet is:

A large part of EMC’s hard-earned reputation as a preferred acquirer comes from EMC’s company-wide commitment to post-acquisition success.

Enjoy (and hurry back).

WSJ: Meeting Killers in Action

Let’s face it, most merger professionals spend an inordinate amount of time in meetings: planning, coordinating, reviewing, thinking and rethinking and on and on.  So much of a meeting’s productive potential (and therefore the pleasure or frustration of participating) depends on the composition of the attendees, from the leader on down.

A recent Wall Street Journal article identifies five different types of Meeting Killers, folks that stand in the way of progress, either directly or more nefariously, and some suggested ways of dealing with them.  It’s a good, quick read.  Check it out here: Meet the Meeting Killers.Image

Who’s Wily at J. Wiley?

The Merger Verger connected recently with a senior contact at J. Wiley & Sons (NYSE: JWA, JWB), a highly-regarded publisher of books and texts, dating from 1807.  The company has recently closed on the $85 million acquisition of Inscape, a producer of digitally delivered training and assessment products to the business market.

The person with whom I spoke was receptive to talking about their integration process but suggested I call back in, say, three months when there would be more to report.  When I pressed the matter, they said that, of course, they had an integration plan “but its execution is what is only beginning.”

You can’t always tell with remarks like; you may just not be talking to the right person.  But the problem of companies seeing a deal closing date as the starting gun for integration is still surprisingly – and frustratingly – common.  In the context of Wiley, it’s even more disturbing.

Continue reading

United … Today

Tonight at midnight, United Continental Holdings, Inc. (NYSE: UAL) completes what amounts to the third phase of the merger of airlines United and Continental, the phase that from a customer’s perspective means the real deal.  Phase 1 (my term, not theirs) was the legal combination, closed on October 1, 2010.  Phase 2 was the regulatory combination, effected more than a year later, on November 30, 2011, when the Federal Aviation Administration granted the Single Operating Certificate, enabling the companies to function as one airline.  Phase 3 begins today with the conversion to a single passenger service system, allowing the company to function as a seamless whole in the eyes of its customers: one airline, one set of routes and planes, one system of booking, one of flight tracking, one website, one loyalty program.  One United, united.

It has been exactly a year and a half since the legal merger took place.  I suspect that the integration team at UAL (and it’s a huge one, trust me) is heaving an enormous sigh of relief.  But is the integration process over?  Certainly not. 

So The Merger Verger is prompted to ask, “When should a company begin to dim the stage lights on a successful integration effort and bring up the lights on growing the newly enlarged entity?”  Some of this process happens naturally as the work effort thins and people are pulled off to other projects.  And it’s almost always a judgment call. But are there landmarks, signals, subtexts that can be monitored to suggest that an integration is complete?

 

Question: What are those signals and how do you use them?  How do they differ from deal to deal?  Are they different, say, between a consumer-oriented business and an industrial one?

Fun Flashback: http://www.youtube.com/watch?v=AeXrMRf25U8

Future Post: The Merger Verger has spoken at length with the United people about their use of the United website as a tool for communications with stakeholders about the merger.  Watch for a future post on the subject in the next week or so.  

See a previous Merger Verger post on the United situation HERE