A smart M&A strategy

10 Nov 2008

M&A integration involved a lot more than just complex project management. As the buyer brings together companies with potentially differing cultures, differing operating models and differing approaches, the challenge is trying to match those without destroying the value of the company being acquired.

There are a lot of elements in M&A that are unusual - not least the people and the change management challenges, says BT Global Services' VP for M&A integration practice David Furniss. 'You have to be alert to those challenges and design approaches that allow you to release the capabilities of the company being acquired.'

He noted that it's important to mesh the company into your underlying operating model.

BT focuses on implementation and quickly realizing the value of the new company while many companies focus on the deal. 'The deal part is easy - sort of,' he said. 'The day you acquire the business is when the real work starts, which is why we focus so much on the implementation phase.'

One of the key reasons for setting up the integration center was to recycle learning so they don't make the same mistakes again and develop best practice and domain expertise. 'We set up the center to anchor that learning and ensure we could deploy it repeatedly transaction after transaction,' he explained.

BT also looks outside and talks to other 'serial acquirers' like HP, Cisco and the Royal Bank of Scotland to understand their approach and incorporate the best parts of their strategies into its M&A approach.

The objective in approaching M&A in a repeatable way, he said, is to have a high level of consistency when you're reporting and measuring so you know where you are at any given time and have a good idea of what the outcomes will be.

Standardized approach

He said BT has demonstrated that it's quickly moving to some degree of standardization and accelerating the speed of alignment, which has enabled the sales teams of the acquired businesses and BT Global Services to quickly execute new transactions.

He attributed BT's high success rate in integrating new businesses is the fact that it starts planning early. He claims many businesses start to worry about integration the day after they buy the business. 'We start when we're doing due diligence - way back during the pre-transaction phase.'

He calls the implementation an exceptional period of time because the business is in a true state of transition. 'We try to get to business as usual - a continual operating model where the business has been meshed in with BT's operating model - as quickly as possible because the shorter you make that exceptional cycle the less uncertainly you create for employees and customers.'

A clear measure of the success of an integration is customer retention. 'A good sign in any acquisition is when a customer resigns after we've acquired that business. A major customer resigning with us is a strong measure of confidence in a new business,' he said.

Furniss said a lot of this is about people as it's increasingly important to retain staff, who are the main value in most acquisitions, as well as ensuring they are motivated and positive.

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