After many failed M&A deals, practitioners are catching on to the idea that integration is where everything happens. How well you integrate the acquired business will dictate the value that you get out of that transaction. But focusing on integration early on is very different from executing integration after the deal closes. Cisco is one of the world’s largest acquirers. In this article, you will get a glimpse into how they commit to integration, featuring their Vice President of Corporate Development Integration, Karen Ashley.
“Having clarity around all the elements of the strategy allows us to be on the road to success, right from the beginning around integration.” - Karen Ashley.
Integration, as we know, needs to start early in the process, but Cisco takes it one step further. They have corporate development and integration partnered up so that the integration will understand the strategy behind every deal. They try to understand why they are looking at a particular company and what they plan to do with it long-term.
As soon as corporate development starts sourcing a deal, integration is there to understand its rationale. They commit to meetings with the business leaders to have a high-level understanding of the initial integration strategy. Having strategy sessions is how they achieve initial alignment. Everyone needs to buy into the integration plan, the value drivers, and how they will measure success. At the end of these meetings, everyone needs to commit to the direction of the whole deal.
According to Karen, they have three success metrics; technology integration, financials, and talent retention. But what they have come to realize is that you can’t achieve the other metrics without talent retention. And in the interest of making the value drivers guide their integration planning, employee retention is what they focus on these days.
To avoid more than 20% attrition, they have come up with early indicators for employee retention. They use poll surveys to see how the people are feeling as a part of Cisco. They gauge if the people are progressing in the organization, whether they have one foot out the door or are genuinely interested in being there. So far, they have been very successful at retaining people post-acquisition.
During diligence, they have five to six workstream tracks. Among those tracks, the integration team leads the operational diligence. This will take them to the definitive agreement so they can validate their strategy thesis.
After they have completed the diligence process, the integration team runs an executive diligence readout. They bring the business leaders and sales leaders together and inform them of the diligence findings, the risks they are taking on, and suggestions on how to mitigate those risks.
The corporate development and integration team holds three alignment meetings to avoid confusion or any misinterpretation of the deal strategy. The first and the second meetings are with all the business leaders, and they discuss the outcome they want to achieve in the transaction.
The third meeting is with the target leaders before the deal closes. Validating their assumptions through the target leaders is one of the things that makes them successful. Karen believes that the target knows more about their business, so getting their approval on their thesis is crucial as they approach closing.
Fully committing to integration starts with a deep partnership between corporate development and integration. That partnership requires collaboration and planning to achieve alignment, but it will improve the speed of your deals and the likelihood of success at the end of the day.
This episode is sponsored by S&P Global Market Intelligence. Access the most up-to-date and accurate data on private companies in a single web-based platform so you can get all the resources you need to create a winning pitch.