Analyze

The greater the cultural differences between the two companies involved in a merger or acquisition, the more difficult it will be to achieve integration of business operations.  Before target selection, it is important to know the cultural differences that may present obstacles to strategy execution and the time and cost involved in risk mitigation.

 

 

Stabilize

Cost reduction and improved efficiency are almost always perceived as best approaches to maximizing performance.But change always creates some degree of uncertainty.  Uncertainty means “risk” because there’s no guarantee that the new way of doing things will work as effectively as the former way.  In fact, there’s no guarantee that the new way will work at all, especially if people resist the changes required. As a result, the first step in any effective integration strategy should be to stabilize existing value.



 

Maximize

An effective integration strategy is based on business intelligence that identifies the risk inherent with merging the two businesses, determines the tactics that are most likely to cushion the shocks to the people and processes impacted by required changes, recognizes and rewards people who embrace the desired changes, and then normalizes the new business operation as quickly as possible to maximize the productivity of the workforce.




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INTEGRATION SERVICES
Pre-Merger Integration Risk Analysis - Identifying Risk
The time to identify and assess the potential financial and operational impact of integration risk is before the “buy decision” is made.  It’s likely that the strategic value of the target company has been well-considered and that all critical financial and legal representations have been thoroughly scrutinized. What tends to be overlooked during due diligence is the risk inherent with attempts to execute the business strategy.  Many failed mergers are the direct result of unanticipated roadblocks to effective strategy execution.  It’s important to know in advance how many roadblocks are likely, why they are likely to occur, and how they may disrupt business operations.  Since most of these post-merger roadblocks are created by cultural differences and necessary operational changes that violate strongly-held cultural beliefs and because they are not usually apparent until after deal close, it is essential to conduct a Pre-Merger Integration Risk Analysis.  The Analysis is initiated with interviews with high-level decision-makers in the acquiring company and in the target business and is completed with the analysis of their responses to an online questionnaire designed to identify significant differences that, if unaddressed, could adversely impact strategy execution. These risks and their potential operational impact are explained in the Client’s Risk Profile Executive Summary.
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Risk Mitigation Cost Estimate - Quantifying Risk
After receipt of the Risk Profile Executive Summary, the Client may request an estimate of the cost for mitigating the identified risks. The Risk Mitigation Cost Estimate is created by a team comprised of the Consultant’s established business partners, each with demonstrated expertise in an area of risk identified on the Client’s Risk Profile. Each member of the Consultant’s Risk Mitigation Team conducts a more in-depth risk assessment in his/her area of specialty.  The Risk Mitigation Cost Estimate is a report that includes the level of risk exposure (high, medium, or low) for each risk, the recommended risk mitigation solution, the cost estimate for mitigating each risk, and the compiled estimate for mitigating all of the risks identified on the Client’s Risk Profile.  Having this business intelligence before making the “buy decision” provides documentation essential to determining the true value of the target business.
Integration - Mitigating Risk

After receipt of the Risk Mitigation Cost Estimate, the client determines whether to proceed with integration risk mitigation. The objective of risk mitigation is to allow necessary changes in the business operation to proceed in order to accomplish integration without destabilizing the day-to-day business operation. When the Client’s decision is to move forward with risk mitigation, the Consultant and the Client enter into a formal service agreement. Risk mitigation is a partnership between specific managers that the Client designates and experienced project managers assigned by the Consultant who will coordinate risk mitigation for each of the areas of risk reflected on the Client’s Risk Profile. The Consultant also assigns a Client Representative, the Lead Project Manager, who is the key contact for the Client’s Integration manager and who interacts regularly with the Consultant’s assigned project managers until the risk mitigation engagement is completed. See also Risk Management.