developing a post-acquisition strategy - completion and beyond

DEVELOPING A POST-ACQUISITION STRATEGY: COMPLETION AND BEYONDCase studies, Concepts, and Debatable Ideas

Kenny OngCNI Holdings Berhad

www.myCNI.com.my www.OOBEY.com

http://www.mycni.com.my/

http://www.oobey.com/

1. The first 100 days

2. In-house systems synergy

3. Staff, Compensation and Benefits




Rewarded vs. Unrewarded M&As

From: “Habits of the busiest acquirers”, Robert Palter and Dev Srinivasan, McKinsey Toronto




1. The First 100 Days




Strategies for M&A

1.Base Retention

2.Share Gain

3.Positioning4.Adjacent Market

5.New Business

GROWTH

“Double-Digit Growth”, Michael Treacy




Post M&A Type 1: Buying Market Share

IntegrationOperating

Model

PricePremium

Buying Market Share

Net Cost per Customer < Direct Acquire

No evidence of previous company

One Kingdom

Pre-integration Blueprint

Slow Trigger, Fast Bulletwww.myCNI.com.my www.OOBEY.com



• Make or Buy?1. It is easier to meet the standards of

competition if you buy an existing player

2. Adjacent acquisitions must remain as a SEPARATE ENTERPRISE

3. Integrate Management Control (systems, technology)

4. Inter-transfer of management talent, knowledge and capability are important

Post M&A Type 2: Invade Adjacent Markets




Post M&A Type 3: Acquire New Business

1. No core advantage to bring in

2. Investors mind-set vs. Managers mind-set

3. Value unlocking via operational improvements

4. Invest in Management/Leadership

5. Premium = Combined value > stand alone




First 100 Days: Conflict Points

1. Leadership style differences

2. Who’s is charge? (Who won?)

3. Organic vs. bureaucratic cultures

4. Open vs. closed communication

5. Decision making speed & style

6. Collegial vs. competitive

7. Structures that don’t match

8. Values incongruence




The First 100 Days

25 50 75 100

Save Star Performers

Revise Strategy/Value Maps

Staffing Plans

Assess HR Value

Re-align Strategy

Coaching/Team Dev

Restructure

Capabilities Audit

Culture Integration



2. In-house systems synergy




Operational Excellence(low cost producer)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

Product Leadership(best product)

Customer Intimacy(best total solution)

Strategy: Disciplines, Priorities, and KPIs




Operational Excellence

• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'


• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization

Strategy: Disciplines, Priorities, and KPIs






Customer Intimacy

Customer Intimacy

Product Leadership

Product Leadership

Organization, jobs,skills

Management systems

Information and systems

Culture, values,norms

Each Discipline Requires Different Priorities & Resources



•Central authority, low level of empowerment•High skills at the core of the organization

•Disciplined Teamwork•Process, product- driven•Conformance, 'one size fits all' mindset

• Integrated, low cost transaction systems•The system is the process

•Command and control•Quality management


•Central authority, low level of empowerment•High skills at the core of the organization

•Disciplined Teamwork•Process, product- driven•Conformance, 'one size fits all' mindset

• Integrated, low cost transaction systems•The system is the process

•Command and control•Quality management

Organization, jobs, skills

Management systems






Management systems



Product Leadership

•Ad hoc, organic and cellular•High skills abound in loose-knit structures

•Concept, future-driven•Experimentation and 'out of the box' mindset

•Person-to-person communications systems•Technologies enabling cooperation

•Rewarding individuals' innovative capacity•Risk and exposure management•Product Life Cycle profitability

Product Leadership

•Ad hoc, organic and cellular•High skills abound in loose-knit structures

•Concept, future-driven•Experimentation and 'out of the box' mindset

•Person-to-person communications systems•Technologies enabling cooperation

•Rewarding individuals' innovative capacity•Risk and exposure management•Product Life Cycle profitability




Management systems



Customer Intimacy

•Empowerment close to point of customer contact•High skills in the field and front-line

•Customer-driven•Variation and 'have it your way' mindset

•Strong customer databases, linking internal and external information

•Strong analytical tools

•Customer equity measures like life time value•Satisfaction and share management•Focus on ‘Share of Wallet’

Customer Intimacy

•Empowerment close to point of customer contact•High skills in the field and front-line

•Customer-driven•Variation and 'have it your way' mindset

•Strong customer databases, linking internal and external information

•Strong analytical tools

•Customer equity measures like life time value•Satisfaction and share management•Focus on ‘Share of Wallet’



Post M&A: 4-Wheels Model

Culture

Business

ObjectiveM&A

Strategy

StructureResources

Leadership

Person




Post M&A : Framework

• Joint-Boards• Org Structure• Job Design• C&B• Policies & procedures• Decision making• Transition/Integration Team• Revise structure to strategy• Process alignments

Structure


1. Share Gain

2. Adjacent Market

3. New Business




• Info and Comm Technology

• Integration Cost Centers• Real Estate• Operating Assets• Procurement*• Combined Cost Savings

KPI• Product lines• Geographic Parking:

Services, Production• Customer Problems

Database• R&D

Resources


1. Share Gain

2. Adjacent Market

3. New Business



Special Note: Procurement

• Prices and Terms of current contracts• Supply market dynamics• Tactics for Supply Purchase• Consolidated spending database• Opportunities to save money• Cutting T.C.O.• Manuals on Negotiation Strategies


Activity Grid to optimize resources

Increase (↑)What are features/

activities/services to increase?

Create (+)What are features/

activities/services to introduce?

Reduce (↓) What are features/

activities/services to reduce?

Eliminate (-)What are features/

activities/services to eliminate?


3. Staff, Compensation and Benefits





• Tone, Speed, Direction, Principles, Requirements

• Post-M&A Roles & Responsibilities

• Geographic role differences

• Decision making processes

• Employee authorities• Communication*• Culture integration

sessions• Buy-in ‘Key Players’

Leadership


1. Share Gain

2. Adjacent Market

3. New Business



Communication: Internal

• What: Significance, Direction• Top Management Roadshows• Website• Web TV (Vlogs)• Employee Conventions, Re-Branding launch• Concrete, Consistent Messages• Generate Enthusiasm, allay Fears• Questions: Workforce merge or separate? Let

go? Role assignments? Compensation?


Communication: External

• Media Interviews• Media Day• Single Face to Market (single proposition)• Customer Communication Organization

(Advantages of M&A)



• Integration-era Incentives

• HR Value: Alignment• HR Value: Capabilities• HR Value: Engagement• Star (‘A’) players• Competency mapping• Culture gaps• Employee views on

new entity

Person


1. Share Gain

2. Adjacent Market

3. New Business



HR: Special Considerations

1. Frontline (Sales) is key in post-M&A

2. Targets for Competitors to poach

3. Communication: Roadshows, Repetition, Emphasis

4. Integration-era Incentives:1. Retaining key people

2. Encourage Cooperation

3. Sharing of Knowledge

4. Cross-selling

5. Temporary Management Structure:1. During transition period

2. Cut thru Red Tape

3. On-the-spot Decisions

4. Priority Access to CEOwww.myCNI.com.my www.OOBEY.com

MBO Standards

A Excellent

B Good

C Average

D Poor

E Useless




MBO Standards

A Excellent

B Good

C Average Good

D Poor

E Useless




MBO Standards

A Excellent Excellent

B Good Very Good

C Average Good

D Poor Not Good

E Useless Commit Suicide




MBO Standards

A Excellent Consistently achieved 4 for 3 quarters

B Very Good Higher than planned results

C Good Achieved Planned Results

D Not Good Did not fully meet planned results

E Commit Suicide

Unacceptable performance




What to Pay?

• Pay for Service

• Pay for Job

• Pay for Performance

• Pay for Competency




Performance and Incentives

1. Internal Equity1. Internal Job Rates

2. Performance differentials

2. External Competitiveness1. External Job Rates - Benchmarking

2. Demand & Supply




What’s the Difference?

• Increment

• Bonus

• Promotion




Compa Ratio Table

Use this if your company: • Pays for Performance, and • Pays for Job rates

Def:

Mid-Point = Mid Point of Pay Grade

Grade E2

Min RM2,000

MID RM2,500

Max RM3,000




Compa Ratio Table

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

> 1.3

5

4

3

2

1




Compa Ratio Table

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

> 1.3

5

4

3 5%

2

1




Compa Ratio Table

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

> 1.3

5 9

4 7

3 9 7 5% 4 3

2 2

1 0




Compa Ratio Table

< 0.7 ≥0.7 - ≤0.9

>0.9 - <1.1

≥1.1 - ≤1.3

> 1.3

5 15 12 9 8 7

4 12 9 7 5 3

3 9 7 5% 4 3

2 6 4 2 1 0

1 4 2 0 0 0




Employee Distinction

Group I

(Talent Pool)

Group II

( Potential)

Group III

( Performance)

Group IV

(Counseling)

2 3 4 5

23

45

PE

RF

OR

MA

NC

E

POTENTIAL• Identify




Post M&A: 4-Wheels Model

Culture

Business

ObjectiveM&A

Strategy

StructureResources

Leadership

Person




End Note for Post-M&A

“In the absence of leadership, the people will listen to

whoever speaks”A.J., from the movie “The American President”




Thank You.

soft copy of slides: www.totallyunrelatedrandomanddebatable.

blogspot.com