Integration is about capturing value. More and more practitioners now realize the importance of integration and how crucial it is to plan before the deal is closed. But how do you create a successful integration plan? Joining us to discuss this topic is Jim Buckley, Vice President, Mergers and Acquisitions Integration at VMware.
“When you're navigating, and you start to a point where you are one degree off from your desired state, over time, you become further and further away from your target." - Jim Buckley
Jim has years of experience in Financial Planning and Analysis, which has dramatically helped him in his integration role. According to him, FP&A is the one place where you touch every function, cost center, top line, bottom line, and everything else that happens across the company, very similar to M&A integration.
It is more important to know the "how" and the "why" instead of the "what". Every executive has a financial model in mind that drives them to do the deal, but those numbers have additional meaning.
It is not enough to know the target's revenue. You also have to understand how the target generates that revenue, how you plan on integrating it, and why you are buying it in the first place. The projected synergy numbers aren't just for the valuation model. They also need to drive the business model. As the integration leader, you need to press on their assumptions and discover if these synergies are achievable.
In a way, it's about working backward. Executives should clearly understand what the desired end state is post-acquisition, then work their way backward on how to achieve them.
"Corp dev's primary goal is to acquire value, and the Integration team's job is to create value." - Jim Buckley
This is why integration leaders need to attend initial meetings. They should understand the "how" and the "why," not just the "what." Those conversations are not going to be a part of the LOI.
To be a successful integration leader, you need to understand how things work in your own company. You will never successfully add anything to your company unless you know the intricacies of the business and company culture. Conduct your own due diligence inside your organization.
Four principles that make up a great integration leader:
When selecting your integration leader, you need someone who has strong interpersonal skills. M&A is all about relationships and you need someone who works well with others. The deal will run a lot smoother if the target company knows more about the acquirer, so communicating and fostering trust with the target company is one of the main roles of an integration leader.
This person also has to be a trusted advisor for both parties. The target companies need to know that you are striving to make the deal valuable to them, but not to a point where you will compromise your own organization.
This is one of the most crucial parts of integration. The integration leader needs to tell the people hard facts.
Leaders have to assess the situation or the plan and course-correct when necessary. They cannot just follow a plan blindly, even if it's leading to failure.
When it comes to measuring success, it has to be documented and well-communicated with everyone. The deal's strategic rationale will have value drivers, and based on those drivers, success metrics need to be determined. The key is to make sure that the metrics are measurable and quantitative, not qualitative.