M&A and Divestitures: Integration and Disintegration – Americas
CIOs and other senior execs from 3M, Cisco, Eastman Chemical, Eaton, Hasbro, IBM, and TPG Growth were joined by academics from Tuck, Berkeley, and the University of Texas at Austin for this roundtable.
We have just been through another round of mergers and acquisition activity, the second strong run of M&A in the last ten years. From huge companies Ã¢ï¿½ï¿½merging as equalsÃ¢ï¿½ï¿½ to smaller companies being swallowed to provide R&D, a product line extension, or regional consolidation, and many forms in between, there has been plenty of activity.
While the fundamental question of merging, acquiring or divesting is an important and strategic decision for most firms, the devil is often in the integration or separation, the thought and due diligence that was given to it in advance, and the investment in it during execution.
In this roundtable, we focused on all aspects of mergers, acquisitions, and divestitures, but largely through the lens of, or with emphasis on, integration. While we discussed the rationale for and choice between affecting a merger or acquiring a company, examined negotiation and the various phases of execution and management, as well as looked at divestitures, it was with focus on integration/disintegration and associated issues, including especially the role of IT and IT integration or separation.
The participants’ experiences and views yielded the following insights (see the Overview Article for a complete summary):
- Developing consistent and repeatable M&A capabilities can be a potent source of competitive advantage. Successful serial acquirers develop strong competencies in areas like pipeline development, deal selection, due diligence, and integration planning and execution.
- The playing field has leveled dramatically for strategic acquirers relative to financial buyers. Tightening credit markets have constrained private equity leverage, causing these investors to look toward strategic acquirers as potential deal partners.
- Disciplined approaches and processes are key to successful. Methodical, rigorous and realistic planning, benchmarking and performance evaluation can greatly enhance results, especially when leveraged over time for continuous improvement.
- Integration strategy and planning should be driven by business model requirements. Plan with market and customer needs in mind, rather than deploying one-size-fits-all integration strategies.
- Pay attention to key talent and their needs. From identifying the best dealmakers to choosing the right integration leaders to harmonizing sales compensation plans, managing talent is an important M&A success factor.
- Work to ensure alignment on strategy, expectations and culture to maximize the chances of success in the first 100 days. Senior management should set clear expectations early, creating as much internal transparency as possible, but not losing sight of external communications.
- Pay close attention to HR, IP, and the financial impacts of transitional services agreements when planning divestitures. Don’t give away leverage by waiting until the last minute to negotiate TSAs, or by failing to do so with multiple bidders.
Tom Courtney, SVP, North America Finance, Hasbro (left)
Blair LaCorte, Operating Partner, TPG Growth (right)
Peter Goodson, Faculty Lecturer, Haas School of Business, UC Berkeley (left)
Keith Sturgill, VP and CIO, Eastman Chemical (right)
Jerry Erickson, CIO and Staff VP, IT, 3M (left)
Denise Clark, SVP and CIO, Hasbro (center)
Rebecca Jacoby, SVP and CIO, Cisco (right)
Dave Marguilius, moderator (left)
Moni Miyashita, Managing Director, Corporate Development, M&A, IBM (left)
Bill Blausey, VP and CIO, Eaton (right)
Keith Sturgill, VP and CIO, Eastman Chemical (left) Dave Marguilius, moderator, Moni Miyashita, Managing Director, Corporate Development, M&A, IBM (center)
Bill Blausey, VP and CIO, Eaton (right)