M&A thought leadership: Frontloading makes sense in M&A processes

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Failing early is cheap

We know from software engineering and design thinking that failing early in the process is cheaper than failing in later stages. We adapt this thinking to the M&A process and care for ensuring merger integration success during due diligence. I call this frontloading.

Successful integration and synergies as an objective in all phases of the M&A process.

So, why are we doing frontloading? Frontloading is driven by the objective to prepare and run a successful merger integration project. All detectable risks, efforts and obstacles are identified and taken care of during due diligence already. These risks, efforts and obstacles relate to the target and the acquirer, too.

Mitigations or eliminations for risks are planned or executed during due diligence. Merger integration efforts are being estimated and planned. Any obstacles we could run into during merger integration are being identified and elimination or mitigations are planned. Examples for obstacles are missing resources or missing budgets for merger integration. While missing resources could be mitigated by leveraging additional resources or adaptation of the merger integration plan, missing budgets could be planned for already during due diligence.

Effects of frontloading

There are several positive effects of frontloading for the operations of mergers and acquisitions business:

• A more realistic evaluation if the merger makes sense at all. Clarity on adverse topics like risk and obstacles completes the managerial view to take an informed decision about a merger. Frontloading increases the ability to get a complete and holistic view of the planned merger and merger integration.

• A more appropriate expectation setting with executives monitoring the merger integration. When the executives approve the merger, they know about the potential risks, issues and obstacles that were or were not mitigated.

• More realistic integration plans and integration speeds. When you know what to do in merger integration and you have enough capacity and ability to integrate quickly, all is fine. If this is not the case, you risk failing during merger integration or creating bad integration decisions and results. Frontloading helps to avoid some of these adverse events.

• a clearer picture of risks and mitigations earlier in the process.

• Less bumping into obstacles. Let us be clear. Nobody likes to run into a roadblock like missing budgets and losing momentum of integration efforts. This is why we care for identifying and eliminating obstacles. Are we able to eliminate all roadblocks in merger integration? Definitely not. But we reduce the sheer number of obstacles and we can dedicate more of our time and attention to the remaining obstacles.

As a consequence, all companies should adopt frontloading in due diligence, no matter if the deal is an asset deal or a share deal, if the target is a public company or not.

How well does that resonate with you? Please let me know your thoughts.

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Two best practices for managing the integration project

Best practices in merger integration have to include many aspects like timing, project management, handling exceptional situations and decisions and when to end the integration project.

In merger integration activities timing is essential. So when is the right point in time e.g. to merge teams of acquirer and target that do similar things? When is the knowledge of the acquirer complete to integrate HR functions of the acquired company? When is the right time to end the integration project?

Merger integrations are also high-risk, high effort topics that have to manage numerous exceptional situations. Project management practices are made for such projects. But there is the risk of keeping project members hostage in reporting activities instead of focusing on resolving issues and completing tasks. So a key aspect is to find the right dose of project management for keeping project control by providing appropriate follow-up and execution of critical tasks and minimizing the project management workload on project members.

Let us quickly look at the topics:  “When to mix up teams working on the same topics?” and “When to declare the end of the integration project?”

When to mix up teams working on the same topics?

So when is the right point in time e.g. to merge teams that are working on the same tasks, selling to the same customers, producing similar work results? We discussed different aspects.

The first one is that the acquirer has to have sufficient knowledge about all departments or teams that have to be integrated. Without that knowledge it is impossible to plan and execute change management needed for the transition into a merged team.

The second aspect is if the time is right to integrate if the immediate value of integration is maximized or the confusion and trouble is minimized. One example is the immediate integration of finance activities for maximizing the value for the acquirer to be in control of finance. Another one is integration of sales teams to avoid having two different, competing sales teams as “one” face to the customer.

When to declare the end of the integration project?

Ending the integration project makes sense when at least one or more of the following goals have been reached:

·         integration plan has been fully executed,

·         benefits of the acquisition have been reached or

·         organizational performance (fully functioning and stable merged organization) is ensured.

The selection of one or more of these goals depends very much on attributes of the merger, specifically on the department (or corporate function) to be integrated, on the culture of the target and the acquirer and on the integration strategy, like e.g. if the target should stay separate or should be fully integrated into the acquirer. Depending on the size of the M&A and merger integration team, the support of these teams might end earlier due to high workload or focus on new, different M&A and integration projects.

Find more information in the book “Mergers and acquisitions in the software industry” (click here for German version) and at the German Event Denkfabrik 2019

Program of the European workshop on software ecosystems as part of the Platform Economy Summit

The European Workshop on software ecosystems will be held as part of the Platform Economy Summit in Berlin, we will have two sessions on the second day of the European Platform Economy summit.

November 21st

11:15am Challenges and success factors for creating digital platforms

14:30 Network Effects & APIs: Their role in driving platform value

The first session is called “Challenges and success factors for creating digital platforms”, moderated by me: Insights from studies, real life projects and Uberization“ and will feature three short motivating presentations by Peter Buxmann, Thomas Curran and Sebastien Dupre followed by topic-bases workshops.

Peter Buxmann, Head of Software & Digital Business Group at Technical University of Darmstadt, will present the topic “Data Economy, Platforms, and Privacy: Insights from multiple empirical studies“. He will provide insights into challenges and success factors for software platform providers regarding the value of customer data, customer privacy and tradeoffs between data privacy and data farming by platform providers.

Thomas Curran will present the transformation of a financial industry heavyweight to becoming an open, digital platform. In a traditionally closed industry, what do you do to turn a company into a digital, open platform. Thomas has done just that in a three year project and will talk about how to do that successfully.

Sebastien Dupre from Coresystems (now SAP) will present the topic “Uberization of field service: a software platform for crowdsourcing service technicians and show how companies can build an ecosystem connecting field service technicians, partners, own employees and customers to scale their field service operations, increase revenue and provide unmatched customer experience.

The second session in the afternoon is called “Network Effects & APIs: Their role in driving platform value “ and will be moderated by Slinger Jansen - Software Ecosystems Research Lab, Utrecht University. It will focus on questions like “What is the role of APIs for platforms? How do you build API-based platforms?  What are the success factors and pitfalls when building API-based platforms? How to explain their power to non-technical executives and shareholders?”

The session will start with a short introduction about APIs in general by John Nethans from Google. Then Slinger will present the essence of latest research on API approaches. After that, the panel will focus on pragmatic aspects of creating successful API platforms. After a short while, the panel will open up and take questions from the audience.

This session will feature the following speakers:

Slinger Jansen - Software Ecosystems Research Lab, Utrecht University

John Rethans - Head of Digital Transformation Strategy, Apigee, Google

Nik Willetts - President & CEO, TM Forum

Andreas von Oettingen - CTO Factor10

This session will start with short statements from the panel and will transition to a discussion with questions from the audience.

hope to see you there. please make use of discounted tickets as of below.

Dr. Karl Popp

Join now and you get a special 15% discount off the booking fee. Just quote the discount VIP Code: FKN2652EWOSEL to claim your discount.
 
For more information or to register for the Platform Economy Summit Europe, please contact the KNect365 team on: Tel: +44 (0) 20 3377 3279 | Email: gf-registrations@knect365.com | Register here.
 
Remember to quote the VIP code: FKN2652EWOSEL to claim your 15% discount.

Digitalization of M&A: See what is possible today in just one afternoon

Corporate M&A teams don´t have the time and bandwidth to research and follow up with a number of vendors and service providers to get an overview of the latest and greatest innovations for M&A processes.

To solve this issue within one afternoon, Xperience Connect organized an event at Frankfurt School of Finance last week providing several pitches of innovative products and services for next generation M&A processes.

So twenty-two corporates met to have a look at ten vendors, 15 minute pitches by the vendors helped getting an overview within an afternoon, followed by a joint dinner to discuss.

Here are my four highlights of the afternoon:

Target screening

• an interesting presentation from a researcher how to reduce the number of potential targets based on acquisition goals, they also use an augmented set of company data. This is a startup in stealth mode but they presented anyway…

Automatic contract analysis

• RR Donnelley, a vendor of data room called Venue, showed their product eBrevia, which is a tool to automatically analyze contracts in many different languages based on machine learning.

• eBrevia contains about 150 provisions it is able to find and analyze, customers can build AND share new provisions with other customers if they like to.

• eBrevia can be used with Venue, but also with other data rooms.

Digital valuation

• PWC has an open platform for valuation of startups, https://www.pwc-evaluation.com/

Smart M&A

• Midaxo did a very interesting presentation of their innovative, cloud-based, end-to-end M&A process platform.

• With this platform, all parties collaborate seamlessly following repeatable, systematic processes based on their specific, corporate playbooks.

• Several large corporates, including Daimler and Philipsh have adopted this solution.

Thank you, Stefan Gerhard Schneider for organizing this event. He offered to have follow-up meetings with deep dives, which was well received by the corporates.

If you like this content, please also have a look at www.digitalmergers.com