Companies that have a solid M&A playbook usually avoid the morass of an integration gone bad.
Acquisition, merger or divestiture activities often prove challenging because many times there can be a general misunderstanding of the critical process interdependencies. This can be compounded by a lack of clear definition of roles and responsibilities once integration begins. There can also be a confusion regarding priorities and milestones with no standard process to gather critical technical, functional and process details needed to expedite integration/separation efforts.
During recent discussions among NeuGroup Peer Members, it was agreed that having in place a strong M&A integration plan is critical; many members call this an M&A Integration Playbook. The M&A Playbook contains rigorous documentation tools and company-wide standards for identifying integration tasks and its use is prudent to ensure proper a timely successful business integration.An M&A playbook can contain rigorous documentation tools and company-wide standards for identifying integration tasks and creating and using one is prudent to ensure proper a timely successful business integration.
Often, Treasury is one of many areas that participates as a member of the M&A Transition Team from the early stages of project kick-off through phases of periodic due-diligence status reviews, all the way through completion of the final tactical treasury integration steps.
Treasury often has a primary focus on performing a comprehensive review and discovery of P&L and the balance sheet, along with entity structure, all cash and debt positions, bank accounts, financing facilities, indemnifications outstanding, derivatives, and the like. Integration Team participation generally includes one Assistant Treasurer and at least one Manager (or above) from one or more Regional Treasury Centers (if applicable). If needed, and depending on the size or complexity of the integration, direct interaction with the target/entity’s Treasury/Finance team may be arranged.
Based on group discussions, NeuGroup members have identified three primary integration approaches:
1) Full Target-Entity liquidation and adoption of acquirer’s systems immediately upon close (or as soon as reasonably feasible).
2) Adoption of a Transition Services Agreement where target-entity operates “as is” for limited period, (e.g. 6 months), after which full integration into the acquirer’s systems can occur.
3) Maintain all legacy structures and operate as a standalone business for the foreseeable future with no definitive plan to integrate activities.
Documentation tools are critical
For those companies just beginning to prepare their M&A Integration Playbook, they are encouraged to spend significant time in developing the necessary documentation tools to ensure a smooth integration. These tools should include a pre-close process questionnaire, a deal sheet, and a contact list to help treasury communicate with other departments as part of the integration process. These documents are kept on file and are updated with new questions they may have learned from previous acquisition integrations.
It’s important to remember that there is no one-size-fits-all answer. The specific tasks and level of detail on the integration task list will differ from company to company. One NeuGroup member’s integration team has come up with 200+ key questions that need to be answered during each integration. The document doesn’t stay static, but instead the team continues to update the questions as they learn from new deals and tailors the questionnaire to the individual needs of each integration. Other members’ playbooks include a written document detailing each stage, dashboards and schedules reflecting timelines, goals, and relevant notes.
It is important to create strong integration timelines based on pre- and post-close dates, with a checklist of activities incorporating various process and system documentation deliverables. It is recommended that a 30- to 60-day pre-merger timeline be created; this is considered critical, especially when having to work with non-treasury or non-finance teams. This way, companies are a little bit more prepared when the inevitable surprise question or situation crops up.