POSTMERGER INTEGRATION

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POST-MERGER INTEGRATION DOs
DONTs
and DUE

DILIGENCE
L. J. Bourgeois
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Number of Acquisitions gt 5 MM in
Value 1998 10,459 1999 9,129 (1.3 Tr.
in value) 2000 8,505 (1.7
Trillion) 28,093
If past experience prevails, 18,260 to
23,880 of these transactions will fail to
deliver their anticipated value
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Fisher Price
Mattel
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POST-MERGER INTEGRATION
I. Purpose of the Project and Framework for
Assessing Mergers II. Three Companies
and Their Stories III. Mergers Due Diligence
Analytical Techniques Used IV. Post-merger
Integration Behavioral Dos Donts
L. J. Bourgeois
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POST-MERGER INTEGRATION
I. Purpose of the Project and Framework for
Assessing Mergers II. Three Companies and
Their Stories III. Mergers Due Diligence
Analytical Techniques Used IV. Post-merger
Integration Behavioral Dos Donts
L. J. Bourgeois
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I. Purpose of the Project A. How Does Value
Get Realized (Captured)?
Sales
Time
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• Purpose of the Project

B. Questions We Are Addressing
2. Communications Strategies
3. Ethics of MA
4. Transfer of Capabilities
6. Acquisition Types PMI Practices
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I. Purpose of the Project Framework for
Assessing Mergers C. A Framework for
Diversification

L. J. Bourgeois
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POST-MERGER INTEGRATION
I. Purpose of the Project and Framework for
Assessing Mergers II. Three Companies and
Their Stories III. Mergers Due Diligence
Analytical Techniques Used IV. Post-merger
Integration Behavioral Dos Donts
L. J. Bourgeois
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II. Three Companies and Their Stories A.
BIC B. Yamaha C. Banc One
1
2
3
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(No Transcript)
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II. Three Companies and Their Stories A. Bic
Pen Company
P,M,T
M,T

• P-Hose

M,T
M,T
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II. Three Companies and Their Stories B.
Yamaha Corporation
Home Furnishings
Home Entertainment
Musical Instruments
Pianos
Acoustic Instruments
Sporting Goods
Lifestyle
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II. Three Companies and Their Stories
C. Banc One
1. Uncommon Partnership -- Community Banks

2. Mentor Banks
3. Banc One Services Corp.
4. Share and Compare
5. MICS
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What weve learned . . . . . . . Works
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What weve learned . . . . . . . Works
ASSET
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What weve learned. . . . . . . . . . . Fails
Perceived
Real
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POST-MERGER INTEGRATION
I. Purpose of the Project and Framework for
Assessing Mergers II. Three Companies
and Their Stories III. Mergers Due Diligence
Analytical Techniques Used IV. Post-merger
Integration Behavioral Dos Donts
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III. Mergers Due Diligence Analytical
Techniques Users
A. Financial DCF, NPV, P/E
B. Strategic Fit
C. Organizational Fit
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III. Mergers Due Diligence Analytical
Techniques Used
B. Strategic Fit
1. Portfolio approaches (McKinsey Matrix)
2. Indirect Linkages (GE)
3. Direct Linkages (BIC, Yamaha)
4. Value Chain (internal and external)
5. Strategic Capabilities Audit
6. Combination Benefits Non-embedded
resources Embedded resources
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III. Mergers Due Diligence Analytical
Techniques Used
C. Organizational Fit 1. Corporate Culture
Common Practices Values
2. Human Resource Practices Salaries,
benefits, retirement (401k) Training and
promotion
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POST-MERGER INTEGRATION
I. Purpose of the Project and Framework for
Assessing Mergers II. Three Companies
and Their Stories III. Mergers Due Diligence
Analytical Techniques Used IV. Post-merger
Integration Behavioral Dos Donts
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IV. Merger Dos Donts
A. Planning the Merger
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4. Decide degree of integration and identity
change
Cash Flow Transfer of Best Practices/
Mutual Learning Takeover Build New
Capabilities Together
Hold Retain or Preserve Absorb Meld
Autonomous Independent ID Loss of ID New
ID


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• Identify non-embedded resources
• - administrative redundancies
• - systems (P/R, HRS, MIS)
• - inbound (purchasing, finance)
• - outbound (distribution)

• Identify (valuable) embedded resources
• - skills
• - culture attitudes
• - capabilities
• - potential new capabilities

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• Appoint integration team for each project
• - timeliness and deliverables

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IV. Merger Dos Donts
B. Executing the Integration
2. Prosecute focused and coordinated
initiatives 3. Recognize and deal with
resistance to change 4. Identify, recognize
and transfer best practices 5. Dont avoid or
postpone tough decisions - assets, people,
positions - systemic perceived fairness
impossible - implement and abide by them
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IV. Merger Dos Donts
B. Executing the Integration (continued)
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References
1Christensen, C.R. and E. L. Rachel, BIC Pen
Corporation (A), HBS case 9-374-305.   2Bourgeoi
s, L. J. and A.W. Spreadbury, Yamaha Corporation
and the Electronic Musical Instruments
Industry, Darden case UVA-BP-0348.   3Liedtka,
Jeanne M. Banc One Corporation The Evolution of
Partnership, Darden case UVA-BP-0335.   4Haspesl
auth, Philippe C., and David B. Jemison, Merging
Acquisitions (New York Free Press,
1991).   5Drucker, Peter, The Five Rules of
Successful Acquisition, Wall Street Journal,
October 15, 1981.   6Ibid.   7Galpin, Timothy J.,
and Donald E. Robinson, Merger Integration The
Ultimate Change Management Challenge,
Mergers Acquisitions, Jan.-Feb. 1997 (Vol. 31,
No.4).   8Peterson, Greg, PricewaterhouseCoopers,
personal communication. 9Various sources
emphasize speed. For example, Bourgeois, L. J.,
Luis Franco and Margaret Cording, Note on the
Accelerated Transition, Darden case
UVA-BP-0427. Feldman, Mark L., and M. L. Spratt,
Five Frogs on a Log (NY Harper Business,
1999). Galpin and Robinson. Pritchett, Price,
and Ron Pound, Smart Moves (Dallas Quicksilver
Press, 1989).  
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10Galpin and Robinson.   11Drucker.   12Galpin
and Robinson.   13Ashkenas, R.N., L. J. DeMonaco
and S.C. Francis, Making the Deal Real How GE
Capital Integrates Acquisitions.
Harvard Business Review, Jan.-Feb.
1998. 14Pritchett and Pound.