MA Management Playbook and Toolkit v4.1

M&A Management Playbook
and Toolkit
A Methodology for Managing Mergers and Acquisitions
Version 4.1
Copyright 2021 Deven Software LLC - All Rights Reserved

This M&A Management Playbook and Toolkit will guide your M&A activities from target
evaluation through post-merger integration. The toolkit includes tips to improve your M&A
process as well as a framework to build your own best practices. The 16 tools provided in
this toolkit are applicable to new or experienced M&A teams offering customizable
features to accommodate your company’s business process requirements.
M&A Management Playbook and Toolkit v4.1 Page: 2

Table of Contents
Introduction.......................................................................................................................... 7
1. Tools and Templates..................................................................................................... 7
START HERE – Instructions and Tips............................................................................... 7
M&A Process Map .......................................................................................................... 7
Acquisition Tracker.......................................................................................................... 7
Acquisition Ranking Tool ................................................................................................ 8
M&A Opportunity Funnel - Executive Summary ............................................................. 8
Desktop (Preliminary) Due Diligence .............................................................................. 8
Key Employee Retention Plan ......................................................................................... 8
M&A Due Diligence Checklist ......................................................................................... 8
M&A Integration Methodology (eBook) ......................................................................... 8
Communication Plan ....................................................................................................... 8
Workstream Charter ........................................................................................................ 9
Integration Playbook for Core Functions ........................................................................ 9
Integration Workplan Template ...................................................................................... 9
Workstream Cross-Functional Dependency Log ............................................................ 9
Workstream Risks & Issues Log ....................................................................................... 9
Workstream Status Report .............................................................................................. 9
2. Definitions ..................................................................................................................... 9
3. General Tips ................................................................................................................ 11
M&A Process Map .............................................................................................................. 14
Acquisition Tracker ............................................................................................................. 16
Acquisition Ranking Tool .................................................................................................... 17
M&A Opportunity Funnel ................................................................................................... 18
Preliminary Due Diligence .................................................................................................. 20
1. Goals ........................................................................................................................... 20
2. Investigation and Analysis ........................................................................................... 20
Key Employee Retention Plan ............................................................................................ 23

Due Diligence Functional Checklist .................................................................................... 26
General Discussions ................................................................................................................ 26
Sales and marketing ...................................................................................................... 26
Product development, implementation & support ....................................................... 26
Finance/ HR ................................................................................................................... 26
Legal/Corporate Overview............................................................................................ 26
Tax ................................................................................................................................ 27
Technology and Operations ......................................................................................... 27
1. Corporate Documents ................................................................................................ 27
1.1. General ............................................................................................................ 27
1.2. Claims and Litigation ....................................................................................... 27
1.3. Regulatory Filings and Correspondence ......................................................... 28
2. Financial Records ........................................................................................................ 28
2.1. General ............................................................................................................ 28
2.2. Tax ................................................................................................................... 29

2.3. Revenue........................................................................................................... 30
2.4. Expenses ......................................................................................................... 31
2.5. Assets .............................................................................................................. 31
2.6. Liabilities.......................................................................................................... 32
3. Contracts ..................................................................................................................... 32
3.1. Corporate ........................................................................................................ 32
3.2. Customer Contracts and Licenses ................................................................... 33
3.3. Vendor Contracts ............................................................................................ 33
3.4. Government Contracts .................................................................................... 33
3.5. Licenses ........................................................................................................... 34
3.6. Alliances .......................................................................................................... 34
3.7. Employee Agreements .................................................................................... 34

3.8. Real Estate Contracts ...................................................................................... 34
4. Employees................................................................................................................... 35

4.1. Employee Census ............................................................................................ 35
4.2. Organizational Chart ....................................................................................... 35
4.3. Compensation and Benefit Plans .................................................................... 35
4.4. Personnel Policies and Records....................................................................... 36
5. Plans, Policies and Procedures .................................................................................... 36
5.1. Finance and Accounting.................................................................................. 36
5.2. Security and Privacy ........................................................................................ 36
5.3. Disaster Recovery and Business Continuity..................................................... 37
5.4. Software development Life Cycle (SDLC)........................................................ 37
5.5. Project Management ....................................................................................... 37
5.6. IT Processes ..................................................................................................... 37
6. Products and Services ................................................................................................. 38
6.1. Marketing ........................................................................................................ 38
6.2. Development and Technology ........................................................................ 38
6.3. Documentation................................................................................................ 38
7. Reports and Analysis ................................................................................................... 38
7.1. Customers ....................................................................................................... 38
7.2. Sales Pipeline .................................................................................................. 39
7.3. Operations ...................................................................................................... 39
M&A Integration ................................................................................................................... 42
1. Overview ..................................................................................................................... 42
1.1. Integration Framework Definition ................................................................... 42
1.2. Integration Planning ........................................................................................ 42
1.3. Integration Execution ...................................................................................... 42
2. Benefits of a Standardized Integration Methodology ................................................. 43
3. Critical Success Factors ............................................................................................... 44
4. Integration Framework Definition ............................................................................... 45

4.1 Structure Overview .............................................................................................. 45
4.2 Roles and Responsibilities ................................................................................... 47

4.3 Some Typical Functional Workstreams ............................................................... 51
5. Integration Process ..................................................................................................... 61
5.1. Integration Framework Definition ................................................................... 63
5.2. Integration Planning ........................................................................................ 65
5.3. Integration Execution ...................................................................................... 67
Communication Plan ............................................................................................................ 69
1. To Do .......................................................................................................................... 69
2. Notes/Thoughts .......................................................................................................... 69
3. Objectives ................................................................................................................... 70
4. Key Messages ............................................................................................................. 70
5. Communication Strategy & Timing ............................................................................. 71
6. FAQ’s .......................................................................................................................... 73
7. E-mail Communications .............................................................................................. 74
8. Media Communications .............................................................................................. 75
Workstream Charter ........................................................................................................... 76

Integration Workplans ........................................................................................................ 77
Integration Playbooks ........................................................................................................ 78
Workstream Cross-Functional Dependency Log ................................................................. 79
Workstreams Risks and Issues Log ..................................................................................... 80
Workstream Status Report ................................................................................................. 81
Resources ........................................................................................................................... 82
Devensoft ................................................................................................................................ 82

Introduction
Managing Mergers & Acquisitions can be daunting. But, doing it effectively is critical to
successful inorganic growth for an organization.
The tools in this packet focus on three areas: 1) managing the tracking and ranking of targets,
and reporting statuses to your executive team, 2) managing due diligence for targets chosen
for a deeper dive and 3) managing integration planning and execution of closing / closed
deals. Proper management of these three areas helps to ensure that the right targets are
chosen and that the value of the combining of two companies is realized.
This toolkit is designed for both the new and the experienced M&A leader. Along with the
tools and templates, there is step-by-step guidance on implementing the tools and on
managing each of the three areas above. The tools are scalable and flexible, so can be easily
customized to fit your organization’s needs.
1. Tools and Templates

This section describes the tools and templates in the package and how to use them. All tools
should be considered a starting point and are completely customizable and flexible, so should
be tweaked to work for your company.
START HERE – Instructions and Tips

This document gives an overview of each tool that is included in the package, as well as some
general tips and definitions.
M&A Process Map

This is a general high-level process map that shows responsibilities of various functions at each
stage in the M&A (Mergers & Acquisitions) process. It is always a good idea to establish a
process and tollgates for your company, and to get agreement from leadership on the process.
This helps to ensure clear definition of roles and responsibilities, and supports communication
throughout the process. A more detailed level will also need to be defined and agreed upon
for each step.
Acquisition Tracker
This is a tool to track all potential and historical targets. The first tab is an executive summary
tab that will be used for the M&A Opportunity Funnel - Executive Summary document (see
below). The second tab is to track all active targets and the last tab is to track all targets that
have been abandoned / passed on and the ones that have closed (color coded). The tracker is
very important, especially when there are multiple companies being researched. Keeping the
comments, last action and next steps fields up to date will really help in communicating to
leadership and ensuring that there is follow-through at each stage.

Acquisition Ranking Tool
This tool is useful to score and rank potential targets, to give a quantitative perspective of
which ones to focus on. This is not meant to be an absolute determination of the best
companies to pursue but is a quantitative view of how the prospective targets rank against
each other, based on criteria that you set. The criteria and scoring should be customized for
your business and its corporate strategy and vision (shown on the “Key” tab).
M&A Opportunity Funnel - Executive Summary

This is a template to use for periodic Executive Updates. It allows you to show which targets
are at which stage in the process, give a one- page summary of those targets (slide 3, which is
cut and pasted from the Acquisition Tracker (see above) and detailed company summary
slides for each company. The last slide in the appendix gives a detailed description of what is
involved at each of the 5 stages.
Desktop (Preliminary) Due Diligence

This document describes the goals and process of Desktop Due Diligence. It is a general
guideline that should be customized for your business and the specific target you are
reviewing.
Key Employee Retention Plan

This is a template to use for planning which key employees should be retained and how to
retain them. This plan should be finalized, including both companies’ key employees, soon
after the Letter of Intent (LOI) is executed for a specific deal.
M&A Due Diligence Checklist

This is a comprehensive due diligence checklist by function. You should work with each
functional leader in your organization to customize it as a standardized list for all deals for your
organization and then slightly tweak it for each target company.
M&A Integration Methodology (eBook)

This document summarizes a refined integration approach, based on best practices within
several different industries, as well as a wide range of deal sizes. It outlines, in detail, how to
implement this framework and methodology step-by-step. While the methodology is very
disciplined and structured, it is also flexible enough to easily customize and scale for each
specific deal.
Communication Plan
This is a communication plan template for a merger or acquisition. It guides you through what
you need to consider, how to keep messaging consistent and what bases need to be covered,
minimally.

Workstream Charter
This is a template for developing workstream charters. A charter should be written by each
workstream team during or shortly after the integration planning kick-off orientation. More
information about this is in the M&A Integration Methodology eBook (see above).
Integration Playbook for Core Functions

This is an integration playbook, or integration task list, for the core functions. This is meant to
serve as a starting point and is not an exhaustive list - It should be thoroughly reviewed with
each of the core function leaders and customized to use as a standardized list for all deals, for
your company. The pertinent items will be used on the functional integration work plans and
detailed out, as necessary. Additional actions, specific to a target / deal, will also be added to
the functional integration work plans. More information about this is in the M&A Integration
Methodology eBook (see above).
Integration Workplan Template

This is the template that each workstream will use to develop their integration action plans.
The first tab should be used for Phase I / Day I items. Some workstreams will not have any
actions to execute on Day 1, but many will. The second tab should be used for all other
actions. The phases can be tracked by Start Date. The level of detail under each major action is
up to the workstream leaders.
Workstream Cross-Functional Dependency Log

This log should be used by each workstream to track and resolve all cross-functional (cross-
workstream) dependencies during integration planning and execution.
Workstream Risks & Issues Log

This log should be used by each workstream to track and mitigate / resolve all risks / issues.
Workstream Status Report

This template should be used by each workstream for regular status reports to the Integration
Leader. Typically reports are submitted weekly.
2. Definitions
This section defines a few terms that are used in the accompanying documents. Some of the
terms may be used a little differently by some companies or investment bankers / brokers, but
efforts were made to ensure definitions are as consistent as possible with wider-used
definitions. Note that many of the definitions around integration roles, teams, etc. are defined
in the M&A Integration Methodology eBook (i.e. Executive Steering Committee, Integration
Leader, etc.).

Day 1 Readiness Review: A detailed review of the Day 1 Workplan (action plan) by the
Integration Leadership Team with the Executive Steering Committee (ESC) and Executive
Sponsor (ES) (these roles and others are defined in the document “M&A Integration
Methodology”). This review should happen 10-14 days before closing of the deal / Day 1, but
there should be no big surprises. The ESC and ES should be aware of all critical / Level 2
decisions (see below) by this point. This is just the final review of all Day 1 actions for any final
tweaking and discovery.
Day 1: The first day after closing of the deal. It is referred to as “Day 1”, because it is the 1st
day that the two businesses are acting as one. “Day 1” is used to mark the execution of several
actions such as communications to employees, etc.
Level 1 / Level 2 Decisions: Criteria for Level 1 and Level 2 integration decisions should be
defined during the Integration Framework Definition (defined in the document “M&A
Integration Methodology”), to outline which types of decisions can be made by the Integration
Leadership Team (ILT) and Workstreams vs. the Executive Steering Committee (ESC) /
Executive Sponsor (ES). Typically, only critical decisions like Organizational Structure, closing of
facilities, etc. are escalated to the ESC / ES, but decision autonomy differs by organization, so
must be clearly defined.
Phase I, II, III, IV and V Integration Workplans: This refers to a phased approach for
developing and executing Integration Workplans (action plans). This helps to organize and
prioritize actions, as well as to coordinate some of the more complex actions cross-functionally.
In this methodology, we define the phases as follows:
Phase I = Day 1
Phase II = Days 2-30
Phase III = Days 31-90
Phase IV = Days 91-180
Phase V = Days 180+
Workstream: Sometimes called “functional team”, this refers to a “stream” of work related to
the due diligence and integration planning efforts. The business leaders should decide on
which workstreams are necessary for their business. Common workstreams are Finance, HR, IT,
Legal, Marketing, Sales, Engineering and Product Development. “Subteams” of workstreams
are used if a further breakdown makes sense. For example, under Finance, there may be A/P,
A/R and Procurement subteams. A workstream leader should manage the overall efforts for all
subteams reporting to that workstream.
Desktop Due Diligence: Also known as Preliminary Due Diligence or Pre-Diligence. The
preliminary review of a company through evaluation of data and documents, internet research,
etc., to determine whether the company is a good fit strategically, financially, culturally, etc.
typically happens before the Letter of Intent (LOI) is signed, but after it is established that there
is interest by both companies. The depth of research at this stage varies, based on many

factors, such as company size, complexity of the business, whether there is a broker and a book
prepared, etc., but requires a Non-Disclosure Agreement (NDA) to be signed, so that financial
information can be shared. In most cases, the target company does not share specifics about
customers, for example, but may be willing to share the total revenue for their top 10
customers (but not share the names of those customers). This phase assumes that there are
other potential buyers still in the running.
Letter of Intent (LOI): A Letter of Intent (or sometimes called Letter of Interest) or LOI is an
agreement between a purchaser and a seller used to outline the initial terms of a merger or
acquisition transaction. It typically details the estimated purchase price or range, the target
close date, structure of the deal, and other terms, and is signed after Desktop Diligence and
before full Due Diligence. The LOI is also a commitment by the purchaser to move to full due
diligence and an indication of intent to close, although terms are included in the LOI to allow
either party to back out of the deal with specific restrictions and/or penalties. The acceptance
of the LOI by the seller indicates that only that buyer is in being considered and other
interested parties are no longer in the running, unless and until the LOI is void.
Financial Model: This is a model built, usually starting during Desktop Diligence and is a
working document (updates / additions continuing through to final valuation and offer letter to
selling business), that models how buying the company will affect your business financially. It
typically includes how synergies and revenue uplift will affect the combined organization over
time, as well as predictions on how current products will perform (considering that some may
be sunset, combined into one product, etc.). The more that is learned during Due Diligence
and the more that the two leadership teams can collaborate on ideas during that period, the
more accurate this model becomes. Leadership of the acquiring company must typically
commit to this model before a valuation of the target company can be completed and an offer
made.
Valuation Model: Valuation is the process of determining the value or worth of a business.
There are various valuation models such as Discounted Cash Flow, EBIDTA Multiple, etc.
Typically, an organization’s finance team will use multiple methods to value a target business,
based on all the findings from Due Diligence and from the financial model, to determine a
range and then the final offer. Guidance on valuation is not included in this toolkit, as it is a
very specialized area and should be handled by the finance experts in your organization or by a
third party.
3. General Tips
A. Ensure that your M&A Due Diligence checklist is solid. You should start with our standard
list and tweak it as a start for all deals (already customized to fit what you need to know,
based on your organization), but will need to add or remove some entries, to customize it
for a particular target company. You should work with each functional leader in your
organization to ensure that all bases are covered.

B. Start planning for integration as early as possible. It is best if general planning and team
development for integration planning can start very shortly after a Letter of Intent (LOI) has
been signed, in parallel with Due Diligence.
C. If possible, it is ideal to assign one Due Diligence / Integration Leader to manage the due
diligence process, as well as the overall integration. The leader is usually from the acquiring
company, but if the companies are similar in size, it can be from the acquired company. If
the deal is a merger, the leader can come from either company. It is also possible to have
co-leaders, one from each company, as long as there is true collaboration. This leader
should be someone in a high leadership position and is usually someone in a product or
business leadership role. The bandwidth needed is dependent on the deal but is usually
about 50% during due diligence and 75-100% during Integration Planning and Execution. If
the same person cannot be used for both due diligence and integration, the Integration
Leader will need to become involved as early as possible during due diligence, in order to
fully understand the acquisition strategy, any material findings, etc.
D. Assign a functional leader for each workstream established. The functions represented and
therefore the number of workstreams, is dependent on the many factors and should be a
decision made by the executive leadership team(s) (see the definitions page). It is best if
the same leader for each workstream leads that workstream for both due diligence and
integration planning / execution. For example, you’ll probably elect to have an HR
workstream, so will need one HR leader to lead both the due diligence and integration
planning efforts for the HR workstream. This helps with transition and makes the process
more effective and efficient. The bandwidth varies but is typically 30- 50% during due
diligence and 50-75% during integration planning and execution.
E. Establish an Executive Steering Committee (ESC) immediately after the signing of the Letter
of Intent. This committee should be made up of leadership from both companies, and
generally includes the Integration Leader, CEOs, COOs, CFOs, etc., but there are generally
executive representatives from HR, sales, legal and IT, as well. It’s best if the team is no
more than 12 or so members. The Due Diligence / Integration Leader should report to the
ESC weekly during both due diligence and integration planning / execution. Any material
findings, risks, potential show-stoppers, decision points and progress should be presented,
discussed and decisions made, so that these decisions can be taken back to the
workstreams. It generally makes sense to have longer monthly updates that include all or
select workstream leaders, so that any detailed discussions can take place.
F. Include employees from both companies in the ESC and in every workstream. It is critical
that there is a message of inclusiveness and collaboration from the very beginning. Be very
careful not to make all leaders of the combined company from one company, even if the
deal is an acquisition with one company being much larger. This sends the wrong message.
Focus on skills and experience.
G. Communicate as often and as much as possible to employees throughout the process

(once it is appropriate to share that the merger or acquisition is happening). Lack of

communication and silence sends the message that there is something going on that the
employees should not know. This causes fear and anxiety, and therefore reduction in
productivity. Include employees from all levels on the workstream teams. Although they
should be led by more senior employees, it is critical to have the “hands-on” knowledge on
all the teams.
H. Always be completely honest and open in communications. The communications sub-team

(usually in the Marketing workstream) should be very proactive in developing a solid
communications plan (a template is included) to ensure that what is communicated is
honest, open and consistent. If you aren’t able to answer questions from employees, just
say that you can’t answer the question at that time and will answer it as soon as you can or
have the answer. That level of honesty goes a very long way.

M&A Process Map
M&A Process Map

Functional Processes for Mergers and
Acquisitions
This is a general high-level process map that shows responsibilities of various functions at
each stage in the M&A process. It is always a good idea to establish a process and
tollgates for your company, and to get agreement from leadership on the process. This
helps to ensure clear definition of roles and responsibilities, and also supports
communication throughout the process. A more detailed level will also need to be defined
and agreed upon for each step.

Acquisition Tracker
Acquisition Tracker
Track all potential and historical targets
This is a tool to track all potential and historical targets. The first tab is an executive summary
tab that will be used for the M&A Opportunity Funnel- Executive Summary (see below). The
second tab is to track all active targets and the last tab is to track all targets that have been
abandoned/passed on and the ones that have closed (color coded). The tracker is very
important, especially when there are multiple companies being researched. Keeping the
comments, last action and next steps fields up to date will really help in communicating to
leadership and ensuring that there is a follow-through at each stage.
The Acquisition Tracker spreadsheet is a separate file that would

have been downloaded with your purchase
!


Score and Rank Potential Targets
This useful tool scores and ranks potential targets to provide a quantitative perspective
of which ones to focus on. This is not meant to be an absolute determination of the
best companies to pursue but is a quantitative view of how the prospective targets rank
against each other, based on the criteria you set. The criteria and scoring should be
customized from your business and its corporate strategy and vision.
The Acquisition Ranking Tool is a separate file that would have

been downloaded with your purchase

M&A Opportunity Funnel
Executive Summary
This is a template to use for periodic Executive Updates. It allows you to show each
target and its stage in the process, give a one-page summary of those targets and
detailed company summary slides. The last slide in the appendix gives a detailed
description of what is involved at each of the 5 stages.
M&A Opportunity Funnel
The Opportunity Funnel Summary is a separate file that would


Preliminary Due Diligence
Overview and Guide
Preliminary or “Desktop Due Diligence” is the initial review of a company through

evaluation of data and documents to determine whether or not a company is a good
match financially, culturally and strategically, before committing to a costly full due
diligence effort.

Preliminary Due Diligence
1. Goals
a. Determine how serious the seller is in selling the business and why they are selling.
b. Start developing a relationship with leaders of the company.
c. Minimally visit the company’s headquarters and observe operations. Visiting additional
sites can be important, depending on the type of business. This is the opportunity to get
detailed product demonstrations, as well.
d. Perform high-level investigation and analysis of business to determine whether it is a good

fit for an acquisition (see II below).
e. Determine what price you will offer in your Letter of Intent, if you move forward.
f. Identify any risks or any show-stoppers in buying the business.
2. Investigation and Analysis

Since at this stage, there may be other prospective buyers, you will not be allowed to contact
customers, suppliers or partners. You will also only be able to speak with very few leaders of
the company and no other employees, since it will still be in confidential status. So, most of
your information will come from the site visit(s), interviews with the appointed leaders and your
own research of the industry and company.
Keep in mind that the point of Desktop Diligence is to get crucial information to decide as to
whether or not to move forward with the Letter of Intent (LOI), committing to full Due
Diligence, which is costly. Desktop Diligence should be the right balance of gathering enough
information, but not going deeper than needed at this stage, and therefore costing the
company more than necessary.
While this list is by no means comprehensive, some of the documents that you will most likely
want to request are below. The seller may not be willing to share all that you request, but you
should develop your list based on what you absolutely need to know in order to make a go /
no-go decision for a LOI.
a. Financial statements for the last 3 – 5 years
b. Financial projections
c. Employee benefits package information
d. Redacted customer list for top 20% of revenue

e. Employee salary information
f. Real estate information (owned properties, leased properties, etc.)
g. IRS records
h. Union contracts, if applicable
i. Information on any law suits or pending litigation
j. Information on any environmental studies
You will probably want to submit a list of questions to the seller, as well. Some examples are
below, but the questions need to be tailored, depending on the type of business, acquisition
strategy, etc.
a. Describe the nature of any central shared service support that is provided on behalf of the
various operating locations.
b. Please describe the company’s customer ordering platform. Is it automated or manual? Is it

centralized or decentralized? What is the nature of the platform(s) used for order
distribution, production planning and accounting?
c. Does the company negotiate supplier pricing and contracts materials and transportation
(UPS, FedEx, etc.) at the facility or corporate level?
d. To what extent would the corporate executives consider being retained in a change of
ownership and under a potential earn out structure?

Key Employee Retention
Plan
Template and Instructions
Retaining important employees is a crucial step in making a merger or acquisition

successful. By creating and plan of who to retain and how to do so in the initial stages
of this process, will help ensure a successful lasting merger.

Key Employee Retention Plan
The leadership team should be proactive and build the retention plan very soon after the Letter
of Intent (LOI) is signed. The execution of the plan should begin immediately after the
announcement of the deal. The matrix on the next page should be used to outline the key
employees that you want to retain. Below are field descriptions for the planning matrix.
1. Loss Impact – Determine and document how critical each key employee is to the merger /
acquisition or to the business overall.
1 = Critical – The employee is critical to the integration or the business going forward.
It would jeopardize the success of the business if this person left and it would be nearly
impossible to replace him/her.
2 = Important – This employee is very important to the integration or the business

going forward. It would be very hard to replace him/her and it would cause delays or
potential quality issues if this person left.
2. Retention Category
" Transitional – Do you only need this person to be retained through the closing of
the merger/acquisition and integration of the businesses? Or do you only need
them for a specific amount of time after closing (6 months, 12 months, etc.)?
" Long-term – Or do you need to retain this person long-term?
3. Employee Motivators – Identify what motivates this employee. Why makes them tick?
What makes them want to work for a company. This could be financial, but may also be
“soft motivators”, such as: Security, Inclusion, Autonomy, Recognition, Loyalty, etc.
4. Plan – Determine the plan / action to retain that employee. Again, actions do not have to
be monetary. It can be a call from the CEO saying that “you are critical to our combined
organization”, a small change in role or title, more authority, etc. The solution depends on
the loss of impact level, the company motivators, etc.

!

M&A Due Diligence
Functional Checklist
Due Diligence is arguably the most important step when it comes to a merger.
Planning which specific documents and data to request from the target company
can save a lot of time and money, ensuring that you gather all critical information to
make an educated decision on whether or not to acquire the business.

Due Diligence Functional Checklist
<Project Name>: Information request
(Initial priority items show in red)
General Discussions
Sales and marketing
" Product demonstration
" Sales organization structure and incentive plan
" Major accounts
" Pipeline review
" Market strategy and plans
Product development, implementation & support

" Software development and technology Inventory
" Professional services and implementations for new customers
! Support for existing customers
Finance/ HR
" Comprehensive review
" Payroll, compensation and benefits
Legal/Corporate Overview
" Corporate overview
" Intellectual property
" Contracts
" Employment matters
" Regulatory issues

" Claims, disputes, litigation
Tax
" Federal and state tax
" Sales and use tax
Technology and Operations

" Data center and application hosting
" Internal information technology
" Security and privacy
1. Corporate Documents
1.1. General
1.1.1. Provide a comprehensive Company chart of entities and ownership.
1.1.2. Provide minutes of the Boards of Directors (and all Committees thereof) and
stockholders of the Company for last 3 years and YTD.
1.1.3. Provide all agreements relating to the purchase, ownership or sale of, or voting rights
pertaining to, the capital stock of the Company, including any shareholders’
agreements, voting trust agreements, restricted stock agreements, and registration
rights agreements, and all agreements or arrangements relating to the
issuance/disposition of additional shares of the Company, including any warrants,
options, or pledges.
1.1.4. Provide a list of jurisdictions in which the Company is qualified to do business or is

otherwise operating.
1.1.5. Provide any information memoranda or similar documents provided to lenders or

potential investors relating to the Company.
1.2. Claims and Litigation

1.2.1. List and describe all material litigation, proceedings, investigations, claims or inquiries
currently pending or threatened, as well as any material judgments, injunctions, orders
or settlement agreements affecting the Company.
1.2.2. Provide all letters from the Company's legal counsel to the Company's independent
auditors regarding litigation.

1.2.3. Provide summaries of and documents relating to material claims with respect to
intellectual property that have been asserted by or against the Company.
1.2.4. To the extent not included elsewhere, list and describe any pending, past, or
threatened litigation, claims, or protests by any employees against the Company in the
past 5 years. (e.g. all labor and employment matters relating to wrongful termination,
discrimination, sexual or other forms of harassment, EEOC, OFCCP, DOL, OSHA, FLSA,
etc.). Privileged material may be redacted. If any exist, provide list of actions and status.
1.2.5. List and describe all intellectual property disputes, threatened or actual.
1.3. Regulatory Filings and Correspondence

1.3.1. Provide copies of all material correspondence (including comment letters) from or to
any federal, state, local or foreign regulatory, governmental or administrative authority
or stock exchange (whether pending or resolved), including any documents concerning
any alleged violation or infringement or any law, rule or regulation, all consent decrees
as well as copies of any compliance policies or other material related documents.
1.3.2. Provide a schedule of material governmental permits, licenses, authorizations etc. used
or held for use in connection with the Company.
1.3.3. Provide a list of all permits, licenses, authorizations etc. which have been revoked or
suspended in the past five years.
1.3.4. Provide a schedule of any federal, state, local or foreign governmental consents that
would be required for the consummation of the proposed transaction.
1.3.5. Provide copies of all regulatory audits for last 3 years and YTD.
2. Financial Records
2.1. General
2.1.1. Provide audited financial statements for the last 3 years. Include any external audit
reports and passed audit adjustments.
2.1.2. Provide a schedule of charges that may not continue under different ownership as well
as any additional charges that may result from new ownership (e.g. change in control
costs or replacement cost for shared services).
2.1.3. List and describe all other significant inter- and intra-company, related party and
shareholder transactions.
2.1.4. Provide current financial outlook with revenue, expense, capital expenditure (including
capitalized labor) and headcount detail for the next 3 years including a bridge analysis

from the current year to the projected years showing expected revenue impact from
wins, losses and other revenue changes as well as related expense changes.
2.1.5. Provide budget for last 3 years and YTD that shows actual results compared to budget
for each year and quarterly, if available.
2.1.6. Internal audit reports for last 3 years and YTD.
2.1.7. Copies of account reconciliations for the current balance and prior year end.
2.1.8. Provide copies of any reports and management letters from the auditors to the
Company and any management representation letters by the Company to the auditors.
2.1.9. List and describe payroll related information (pay cycle, use of third parties, etc.),
including payroll processes, payment frequency, dates, and paid current or in arrears.
2.1.10. List and describe all commercial insurance policies, including description of coverage,
premiums, and term.
2.1.11. Provide five year loss history for workers compensation, auto liability, general/product
liability and as applicable, professional, technology and privacy liability claims. For each
policy year, indicate the applicable retention level by line of coverage.
2.1.12. Trial balances for the years last 3 years and YTD
2.2. Tax
2.2.1. A summary of the book and tax bases of assets by major category.
2.2.2. Copies of federal tax returns for the Companies, or in which any of the Companies was
included, for the last three fiscal years.
2.2.3. Copies of all state, local and foreign tax returns for the Companies, or in which any of
the Companies was included, for the last 3 fiscal years.
2.2.4. Copies of any tax returns filed with respect to foreign jurisdictions for all years for which
the statute of limitations is not closed.
2.2.5. A list of the amounts of any settlements with any foreign tax authorities, including a
description of the settlement.
2.2.6. A description of all audits of any of the Companies by the Internal Revenue Service or
any other federal, state, local or foreign taxing authority, which description should
include the dates of the audits and a summary of each audit.
2.2.7. Copies of all correspondence between any of the Companies, as taxpayer, and the IRS
with respect to any pending tax case.

2.2.8. A list of all countries in which the Companies are doing business or are otherwise liable
for taxes, including a list of countries and amounts involved where inventory is held on
consignment.
2.2.9. A list of states in which the Companies have qualified to do business.
2.2.10. A list of states in which the Companies have registered for sales tax purposes.
2.2.11. Copies of all state and local real, personal, and intangible property tax returns and/or
assessments within the last three years.
2.2.12. A list of all state payroll/unemployment tax filings within the last three years.
2.2.13. A list of states where the Companies have offices and/or employees.
2.2.14. A list of states where property is owned or leased (including inventory on consignment
or stored in a public warehouse).
2.2.15. A list of states in which the Companies’ significant customers are located.
2.2.16. A copy of any state and local tax apportionment schedules (e.g., property, payroll, and
sales) by state for the past three years.
2.2.17. Copies of all revenue ruling requests and any rulings received, or any correspondence
received denying rulings requested by any of the Companies relating to the tax
consequences of operations (past, present or proposed).
2.2.18. Copies of any tax sharing or tax allocation agreement involving the Companies or other
members of an affiliated group, including any joint venture agreements that have the
effect of tax allocation agreements, and a statement setting forth how any agreement
was implemented for the last five tax years.
2.2.19. Copies of all legal or accounting tax opinions received by any of the Companies during
the last three calendar years from outside advisors that relate to any Company's tax
reporting.
2.2.20. Copies of all agreements and undertakings, including indemnification agreements,

between any of the Companies and any third party relating to tax matters, including
undertakings or agreements in connection with an acquisition or disposition.
2.2.21. List and describe any state or local grants or tax related incentives.
2.3. Revenue
2.3.1. Provide revenue and profitability by product or SKU for last 3 years and YTD.
2.3.2. Provide revenue and profitability by source (recurring license, one-time fee, services
contract, etc.) for last 3 years and YTD. Note which sources are not included in backlog
calculations.

2.3.3. Provide current backlog of closed sales not yet reflected in revenue. Provide current
backlog by product or source (recurring license, one-time fee, services contract, etc.)
with schedule of expected revenue runoff (or waterfall) by year.
2.3.4. Provide accounts receivable (A/R) aging schedule.
2.3.5. Deferred revenue detail for last 3 years and YTD.
2.4. Expenses
2.4.1. Provide detailed breakdown of expenses by type and/or functional area for last 3 years
and YTD.
2.4.2. Provide a detailed breakdown of expenses by vendor for last 3 years and YTD.
2.4.3. Provide capital expenditures (including any capitalized labor expenses) with description
of purpose for last 3 years and YTD.
2.4.4. List and described planned capital expenditures for this year and next, including routine
equipment replacement cycle.
2.4.5. Provide accounts payable (A/P) aging schedule.
2.4.6. Provide a schedule of restructuring activities, non-recurring or one-time charges over

the last 3 years including costs already incurred and any costs yet to be incurred.
2.4.7. Provide a schedule of restructuring activities, non-recurring or one-time charges

planned for this year and next.
2.5. Assets
2.5.1. Provide a schedule of fixed assets by location showing acquisition date, original useful
life, book and tax depreciation method, original and tax cost, accumulated
depreciation, current net book value and tax basis. Include and indicate as such, any
fixed assets that are considered idle or held for sale. Provide a list of fixed asset
impairments and accelerated depreciation recorded for last 3 years and YTD and the
results of the last physical inventory.
2.5.2. Provide a schedule of any material equipment or other material personal property used
by the Company, indicating the ownership and nature of such equipment and the
material terms of any related finance lease or security agreements, and any related
material correspondence.
2.5.3. Provide monthly, or quarterly, detailed balance sheets for last 3 years and YTD.
2.5.4. List and describe all intellectual property, indicating whether it is owned or licensed,
including without limitation: (a) patents filed or approved, including the jurisdiction (if

other than United States), date filed and patent number; (b) patent applications under
development; (c) copyrights claimed or filed; and (d) trademarks or service marks.
2.5.5. List and describe any employee invention/intellectual property assignment agreements
and any other assignment/work-for-hire agreements for non-licensed intellectual
property
2.5.6. List and describe any planned or proposed dispositions or purchases of real property,
including any plans to construct new facilities.
2.5.7. For all real estate (leased or owned), provide square footage and configuration and any
property appraisals.
2.5.8. List and describe licensed assets or products
2.5.9. Provide the most recent inventory breakdown, including reserves for obsolete and slow-
moving inventory.
2.5.10. Accounting lease schedules that support the balance sheet amounts.
2.6. Liabilities
2.6.1. Provide a schedule and explanation for any unrecorded contingencies
2.6.2. Provide notes payable details.
2.6.3. Provide a schedule of indebtedness (or guarantees thereof), including any "off balance
sheet" arrangements.
2.6.4. Provide agreements, instruments and material correspondence related to outstanding

debt or other financing arrangements, including any arrangements providing for a
pledge of assets or securities.
2.6.5. Provide agreements and instruments evidencing or otherwise related to any derivative
securities, forward contracts or hedging arrangements.
2.6.6. Provide agreements and instruments evidencing or otherwise related to any inter-
company loans or debt-related agreements with affiliates or employees.
3. Contracts
3.1. Corporate
3.1.1. Provide a company history, including any acquisitions or dispositions of any business or
entity or the purchase or sale of assets or securities

3.1.2. Provide all agreements relating to acquisitions or dispositions of any business or entity
or the purchase or sale of assets or securities, and any current plans relating to the
same (“company history”).
3.1.3. Provide all joint venture and partnership agreements, or any other agreements
requiring significant investments or asset contributions by the Company.
3.1.4. List and describe agreements containing “most-favored nation”, non-competition, non-
solicitation or exclusivity provisions.
3.1.5. Provide agreements containing “most-favored nation”, non-competition, non-

solicitation or exclusivity provisions.
3.1.6. Provide agreements containing material indemnification or warranty provisions.
3.1.7. List and describe standard contract provisions regarding privacy/data security, including
contracts which provide for recovery for data breaches beyond actual damages.
3.1.8. Provide material or form of confidentiality or non-disclosure agreements.
3.1.9. Provide agreements with "change of control" or other provisions that could be
triggered by, or may otherwise require consent in connection with, the proposed
transaction.
3.1.10. Provide any other contract or understanding which is material to the Company.
3.1.11. Provide agreements with third parties involving intellectual property, including license,
settlement, confidentiality and other agreements, as well as any representative form
agreements.
3.2. Customer Contracts and Licenses

3.2.1. Provide copies of standard customer contracts and licenses.
3.2.2. For top 25 customers, provide copies of contracts and licenses in effect.
3.2.3. Provide copies of all software escrow agreements (on behalf of customer)
3.3. Vendor Contracts

3.3.1. Provide copies of all vendor contracts.
3.3.2. Provide copies of all software escrow agreements (on behalf of Company).
3.4. Government Contracts

3.4.1. Provide copies of contracts with any federal, state, or local governmental, government-
controlled, or government-regulated entity.
3.4.2. List and describe certifications by any federal, state, or local governmental,
government-controlled, or government-regulated entity.

3.4.3. List and describe any required registrations, certifications, or approvals that are
required to perform services or license products to any federal, state, or local
governmental, government-controlled, or government-regulated entity.
3.5. Licenses
3.5.1. Provide copies of all open source 3rd party software licenses, including maintenance
and support agreements, if applicable.
3.5.2. Provide copies of all paid software licenses, including maintenance and support
agreements.
3.5.3. Provide copies of all other licenses.
3.6. Alliances
3.6.1. List and describe all reseller, private label or distributor relationships.
3.6.2. Provide a copy of all related contracts.
3.7. Employee Agreements

3.7.1. Provide all stock purchase, stock option or profit-sharing plans, programs, agreements
or arrangements sponsored or maintained by or on behalf of the Company.
3.7.2. Provide copies of all employment agreements, confidentiality or non-compete

agreements, and any other agreements between any executives or employees and the
Company.
3.7.3. Provide copies of or list and describe any agreements of any kind with any executives or
other employees not disclosed elsewhere including stay or retention bonuses.
3.7.4. List and describe any non-competition or confidentiality agreements current employees
have with previous employers.
3.7.5. List and describe any agreements with employees for future promotions, salary or other
compensation changes that have been agreed to by management but not executed.
3.7.6. Provide collective bargaining agreements (if any), material grievances, correspondence
or other documents relating to union activity or labor relations.
3.7.7. Provide copies of bonus plans and sales commission plans.
3.8. Real Estate Contracts

3.8.1. Provide copies of all lease agreements (including equipment leases), describe any
restrictions on assignment of the leases, and note any tenant allowances, rent holidays
or asset retirement obligations.
3.8.2. Provide copies of all documents for the purchase or sale of any real property.

3.8.3. Provide a schedule of owned and leased real property and copies of any material
agreements or other documents relating thereto (including leases, sale-leaseback
arrangements, title insurance policies, appraisal reports, surveys, mortgages, liens or
other encumbrances and any related material correspondence).
4. Employees
4.1. Employee Census
4.1.1. Provide an employee census (list) of all employees with: name, title, hire date, location,
department, exempt/non-exempt status, current salary, bonus opportunity if applicable,
history of bonuses and other compensation, benefit elections and premiums, paid time
off allotted and paid time off used, including clarification of any bonus plan(s) which
employees are eligible for, and census of employee benefit elections and premiums.
4.1.2. List employees on leave and leave status
4.1.3. List employees on leave of absence for any reason.
4.1.4. List employees currently working under an employment visa such as H1-b or L visa with
names, type of visa, and status.
4.1.5. List and describe overall voluntary turnover rate and information regarding turnover of
key employees in the past year.
4.1.6. List and describe consultants and contractors for last 3 years and YTD with annual
spending.
4.1.7. Provide copies of succession plans and departure risk assessments if available.
4.2. Organizational Chart

4.2.1. Provide organizational chart of employees and positions for entire company.
4.2.2. Provide list of job titles and job descriptions for each position, if available.
4.2.3. List and describe open positions by title, location, and recruiting status (e.g. offer made,
interview completed, etc.)
4.3. Compensation and Benefit Plans

4.3.1. Provide all plans, programs, agreements or arrangements sponsored or maintained by
or on behalf of the Company, relating to (i) employee benefits and compensation,
including bonuses, deferred compensation and incentive compensation, (ii)
hospitalization or other medical, dental, vision, life or other insurance programs or (iii)
pension / retirement

4.3.2. Provide time off policies and practices, benefit/premium costs (employee and
employer), 401(k) match if applicable or other similar pension / retirement employer
contributions, and other benefit plan provisions and summary plan description.
4.3.3. Provide copies of benefit enrollment materials or benefit summaries provided to

employees.
4.3.4. Provide disclosure of any executive benefits or perquisites that may be offered to key
employees.
4.3.5. Provide a schedule of outstanding stock options, restricted stock and other equity-
based grants, current valuations, and the material terms thereof.
4.3.6. List and describe employees and terms of any continuing or outstanding severance
obligations.
4.4. Personnel Policies and Records

4.4.1. Provide copies of personnel policies, manager guides, personnel manuals and
employee handbooks.
4.4.2. Provide copies of severance, termination or retention policies, plans, agreements or

arrangements to include outplacement programs.
4.4.3. Provide copies of all required compliance documents (EEO-1, Vets 100, Affirmative
Action, etc.) and if Affirmative Action is applicable, discuss documentation concerning
any internal compliance review or governmental audit of the program.
5. Plans, Policies and Procedures

5.1. Finance and Accounting
5.1.1. Provide documentation of accounting policies and procedures, including but not
limited to, policies regarding revenue recognition, software development costs, fixed
assets, goodwill and intangibles, reserves / allowances, and inventory.
5.1.2. List and describe the tools and processes used to quote, sell, fulfill and bill customers.
5.2. Security and Privacy

5.2.1. Provide copies of documented security practices and procedures, including physical
and information security.
5.2.2. Provide copies of SAS-70 controls, policy and audit results for last 3 years and YTD.
5.2.3. List and describe other compliance policies and practices required (Cybertrust, PCI,
etc.) with audit results for last 3 years and YTD.
5.2.4. Provide a copy of any 3rd party security assessment.

5.2.5. Provide a copy of any 3rd party source code review.
5.2.6. List and describe any privacy or security breaches, including response, status and
outcome.
5.2.7. Provide copies of all privacy policies with effective dates.
5.3. Disaster Recovery and Business Continuity

5.3.1. Provide copies of disaster recovery and business continuity plans, if any.
5.3.2. Describe back up and redundancy for all off-site storage procedures.
5.3.3. Provide copies of disaster recovery and business continuity plans of mission critical
vendors, if any.
5.4. Software development Life Cycle (SDLC)

5.4.1. For each product, provide copies of SDLC documentation or describe the standards,
tools, processes and testing results (if applicable and available) including the following:
i. product roadmap
ii. development environment with version
iii. requirements
iv. Configuration management tools and processes
v. Database management
vi. User interface design
vii. Quality Assurance
viii. Support and maintenance
5.5. Project Management

5.5.1. Provide a list and description of active and planned software and/or product
development projects for this year and next 2 years, to the extent available.
5.5.2. Provide a list of active customer implementation projects and status.
5.5.3. Provide a list of pending customer implementation projects with contract date and
projected start and finish dates.
5.6. IT Processes
5.6.1. Provide copies of any documentation for internal IT processes such as incident or
change management.
5.6.2. List and describe standard configuration for workstations, laptops and servers.

6. Products and Services
6.1. Marketing
6.1.1. Provide copies of marketing plans.
6.1.2. Provide copies of marketing materials, sales collateral and advertising copy.
6.1.3. Provide copies of corporate and/or product presentations.
6.2. Development and Technology

6.2.1. For each relevant product, provide detailed software architecture, including 3rd party
software utilized, software language, development environment, version, database
software, and middleware.
6.2.2. List all mission critical source modules.
6.2.3. List of all open source software applications, programs, packages or libraries, that have
been used to develop any of the relevant software, or that have been incorporated into
the software.
6.3. Documentation
6.3.1. Provide copies of all user guides.
6.3.2. Provide copies of all technical support documents such as FAQs or help files.
6.3.3. Provide copies of all training manuals or other materials, such as recorded web-based
training.
7. Reports and Analysis

7.1. Customers
7.1.1. List Top 25 accounts by revenue for last 3 years and YTD. For each account and each
year, list annual revenue amount, contract type (license, term, or other as appropriate),
contract start date and contract expiration. For current customers only, list products
each customer licenses.
7.1.2. List customers where contract renewal is expected in the next 24 months and list
customers at risk for any reason.
7.1.3. List and describe of the customer wins and losses along with effective date and revenue
for last 3 years and YTD.
7.1.4. Report the number of customers by state.

7.1.5. List number of customers for each product or SKU.
7.1.6. Provide copies of any customer satisfaction surveys.
7.2. Sales Pipeline

7.2.1. Provide current sales pipeline with account, account manager, state, district, stage of
sales process, contract value, expected close, and probability of close
7.2.2. Describe the tools and processes used to track marketing and sales activity and
individuals.
7.3. Operations
7.3.1. List and describe all vendors with annual spend and contract expiration.
7.3.2. List and describe internal IT infrastructure used for general business operations,
including the following:
i. Email
ii. Employee collaboration
iii. Voicemail
iv. Telephony
v. Financial (AR, AP, Purchasing, FA, GL, Invoicing, etc.)
vi. Sales force automation
vii. Customer support
viii. HRIS (payroll, benefits, time entry)
ix. Customer Support
x. HRIS (Payroll, benefits, time entry)
xi. Project Management
xii. Desktop applications (Office suite?)
xiii. Mobile/portable device support
xiv. Data Warehouses, BI systems
xv. ecommerce
7.3.3. Provide sample copies of available standard weekly, monthly or quarterly reports that
management uses to manage the operations of the business.

7.3.4. Provide schedules or reports demonstrating capacity, cost productivity and quality year
over year trends.
7.3.5. List all products provided to customers developed in part or whole by outsourced
development firms. Identify the outsourced components.
7.3.6. List all services provided to customers that are outsourced.
7.3.7. Provide reports of service level agreements (SLA’s), key performance indicators, cycle
time objectives or general contract performance monitoring for vendors
7.3.8. Provide reports of service level agreements (SLA’s), key performance indicators, cycle
time objectives or general contract performance monitoring for customers
7.3.9. List and describe all tools used to manage IT resources and processes including
internal/back office systems and customer-facing resources.
7.3.10. Network diagrams showing the WAN (if applicable), LAN and ISP. Include interfaces
with external parties (customers and suppliers) as Extranet diagram.
7.3.11. List and describe data center operations, including location, number of servers, number
of racks, SANS, off site backups, encryption of storage, square footage, power sources,
telco sources, fire systems and security controls.
7.3.12. Provide any reports or documentation regarding scalability of the environment

(previous throughput compared to current). Include any notes about scalability
limitations if known and any designs that allow scalability.
7.3.13. Provide software and hardware incident reports and service metric for last 12 months.

M&A Integration
A Proven Methodology
This document summarizes a refined integration approach, based on best

practices within several different industries, as well as a wide range of deal sizes.
It outlines, in detail, how to implement this framework and methodology step-by-
step. While the methodology is very disciplined and structured, it is also flexible
enough to easily customize and scale for each specific deal.

M&A Integration
1. Overview
The realization of strategic and synergistic goals defined by management during due diligence
and valuation, is what essentially determines the final success of an acquisition. A standardized
and well-defined M&A Integration Methodology is critical achieving these goals. Properly
executed, the combination of the two companies will yield a new enterprise that delivers
robust, innovative solutions relevant across the industry. Leveraging the best of its
predecessors, it will deliver more compelling solutions for clients, better customer support for
clients, more rewarding careers for employees, and more attractive returns for shareholders.
This document summarizes a refined integration approach, based on best practices within
several different industries, as well as a wide range of deal sizes. While the methodology is
very disciplined and structured, it is also flexible enough to easily customize and scale for each
specific deal.
The Integration Methodology is divided into three phases:
1.1. Integration Framework Definition

Integration Framework Definition should begin as soon as possible after detailed Due
Diligence is underway. The objectives of this phase are to clearly and effectively structure the
integration teams and special purpose teams, and to determine the leaders and members, as
well as outline the hierarchy and the roles and responsibilities for the integration teams.
1.2. Integration Planning

Once the Framework is defined and in place, Integration Planning should begin, continuing
through Day 1 (closing of the deal). It is important to begin Integration Planning as early as
possible, so that the transition from Due Diligence to Integration is seamless and effective.
The timing is also very important in ensuring that all merger objectives are planned for and
realized. Each company continues to operate independently during this phase, making its own
business decisions in a manner that protects its own interests. Information exchange is guided
by the legal principle that neither company should empower the other to become a more
effective competitor should the transaction not close.
Note: The extent of Integration Planning is dependent on time between the beginning of Due
Diligence and Day 1, resources dedicated to integration, the size/complexity of the deal, etc.
The general goal should be to minimally plan for through Day 30 before the deal closes. After
Day 1, execution begins and extended planning continues.
1.3. Integration Execution

Once the deal has closed, Integration Execution begins. At this time, the legal and business
interests of the combining companies merge. Issues of independent decision-making and

control that exist during the planning phase disappear, and the new organization is free to
begin implementing the plans made in the prior phase of activity. Some of these plans, such
as those pertaining to finance and HRIS systems, are typically executed on or near Day One
after the transaction closes. Others, such as those pertaining to product and technology
integration, have longer horizons because the proprietary information needed for these efforts
should only be shared after the companies become one.
2. Benefits of a Standardized Integration Methodology

A standardized and well-defined integration methodology provides clear direction in ultimately
meeting all merger objectives. This methodology structures the management and information
in a way that gives clear visibility to all areas of the integration. The high-level benefits of this
methodology are:
a. Integration Quality
# Supports logical identification and management of tasks and milestones
# Provides transparency into all integration areas for identification of issues and risks, as
well as cross-functional dependencies
# Increases overall quality of integration through proactive management and structured

reporting
# Ensures that integration requirements are addressed in a systematic manner, and that
scarce resources are properly focused to achieve overall integration priorities
b. Financial & Strategic Goals
# Provides tracking of integration budget and ensures that it is properly managed
# Allows synergy targets to be proactively addressed by functional leaders and closely

managed by the integration team, increasing likelihood of meeting goals
# Supports methodical management and attainment of strategic goals set forth by

executive leadership
c. Communication / Executive Reporting
# Gives complete visibility into all functional areas of integration, allowing early
identification and management of issues and risks, cross-functional dependencies and
critical decision points
# Enables prompt and clear communication to Executive Steering Committee on

potential roadblocks to meeting strategic or synergy goals

# Facilitates escalation and prompt assessment and conclusions on critical decision points
d. Schedule / Planning
# Results in more efficient project flow, by giving more priority and focus to integration
activities
# Supports timely awareness and proactive mitigation of schedule / timeline risks
e. People / Culture
# Helps to manage associate expectations of both the acquiring and acquired

organizations
# Encourages focus on the people and cultures of both organizations, and ultimately a
“combined organization” tone
# Encourages inclusion from both companies for both integration planning and execution
f. Information Sharing
# Gives guidance in properly documenting and sharing the “right” information between
the two organizations, to ensure an optimally combined business
# Steps the functional teams through transitioning from Due Diligence and assessing what
additional information is needed to successfully integrate the businesses
# Gives structure to timely reporting of material findings and any issues or risks
3. Critical Success Factors

Below are elements critical to the success of any integration. These items need special
attention in the beginning stages, to ensure that the best resources for the integration are
allocated and that the right tone is set for the integration, as teams begin developing.
a. Strong executive sponsorship and frequent access to the Executive Sponsor and Executive
Steering Committee by the Integration Leader
b. Identification of an Integration Leader in the early stages of Due Diligence, so that he/she
can understand the strategy and material findings early on and start on the Integration
Structure Definition as early as possible
c. Adequate resources for the workstream teams to achieve the expected goals and timeline;
Dedicated time for the Workstream Leaders and team members must be thoroughly
assessed early on to determine % time of dedication needed at each stage

d. Clear roles and responsibilities defined for the integration in order to assure accountability,
ownership, and quality
e. Timely, fact-based decisions at all levels
f. A thorough understanding of the merger strategy by the Integration Leader and

Workstream Leaders
g. A well-defined transition from Due Diligence to Integration Planning - Appointment of an

Integration Leader that has been involved in Due Diligence is ideal
h. A clear and thorough understanding by the Executive Steering Committee and the
Integration Leader, of potential integration risks and assumptions defined during Due
Diligence
i. Knowledge of core business functions and future business requirements by all integration
team members
j. Significant involvement of target-company personnel on the integration teams at all levels

and all stages, and total collaboration between organizations on all integration activities
k. Executive/leadership support of the disciplined process and the acquisition strategy
l. Communication and “lead by example” on the value and respect of all employees in both
organizations
4. Integration Framework Definition

4.1 Structure Overview
Probably the most complex and critical part of the Integration Framework Definition phase is
the structuring of the teams and the hierarchy and process for approvals and decisions. The
below diagram illustrates the team portion of the Integration Framework and the high-level
flow.

The remainder of this section details the roles, responsibilities and skill sets of the different
components of the team. Some typical functional workstream teams are also described below.
*Note: Criteria for Level 1 and Level 2 decisions should be defined during Framework
Definition, to outline which types of decisions can be made by the ILT and Workstreams vs. the
ESC / ES. Typically, only critical decisions like Organizational Structure, closing of facilities, etc.
are escalated to the ESC / ES.

4.2 Roles and Responsibilities
Executive Steering Committee (ESC)
" Typically made up of company / divisional senior executives and includes the Executive
Sponsor. Generally, includes executive representation from legal, finance IT and
operations
" The level of involvement and committee membership varies depending on the size,
strategy and complexity of the transaction
" Provides overall governance to the integration process
" Defines strategic intent for combined organization and identifies business imperatives
driving the integration
" Approves integration approach, strategy, benefits, synergy targets, expenditures and
overall scope
" Makes key business decisions in a group committee environment
Executive Sponsor (ES)

" Typically, the GM of the division sponsoring the transaction, but could be another
divisional executive
" Provides executive level ownership of the project, owns development of common vision
and strategy for the combined organization and identification of business imperatives
" Communicates priorities to the Integration Leader and provides support necessary to
ensure success
" Manages communication with senior corporate executives and the corporate Board of
Directors
" Maintains ultimate integration authority and responsibility, while leveraging the
Integration Leader for decision-making and day-to-day integration management
" Has a thorough understanding of the company’s overall corporate vision and strategy, as
well as the strategy for the acquisition
Product Advisory Committee (PAC)

" This committee may be needed for product-based deals and/or product intensive
companies
" Typically, executive and senior management representation from product strategy and
product technology areas

" COO, CIO and/or CTO are also frequently part of this committee
" Provides executive level guidance for product strategy and technology, to ensure proper
fit and coordination with overall business and acquisition strategy/budget
" Makes executive level decisions related to product integrations, offerings, retirements,
sun-setting, maintenance/support models, etc.
Integration Leader
" Typically, a Senior Manager or above in the division sponsoring the transaction
" Should become involved during the due diligence phase and understand the strategic
intent and overall goals driving the acquisition
" Is typically fully dedicated to the integration through the first 100 days post-closing
(minimally)
" Works closely with the Executive Sponsor (in many cases daily)
" Is the liaison between ES, ESC and PAC, and the workstream teams. Disseminates
communications from each to the workstream teams, and keeps each briefed on the
status of the integration progress
" Is responsible for leading the day-to-day activities of the Integration Leadership Team
(ILT), such as overall integration planning and management, risk mitigation and
escalation, and timely resolution of risks/issues, cross-functional and cross-divisional
coordination, organizational structure design, project resources, scope, communications,
reporting, etc.
" Tracks and manages overall actual integration execution, operating and capital expenses,
as well as synergy target realization, against budget/model, reporting any variances or
risks to each to ES/ESC
Project Manager
" The Project Manager works closely with the Integration Leader and assists with the day-
to-day operations of the ILT
" Is typically fully dedicated to the integration through the first 100 days post-closing
(minimally)
" Assists workstream teams in developing and updating Integration Workplans, and helps
each team to manage progress of milestones and tasks
" Assists workstream teams in developing timely status reports and other deliverables to
the ILT

" Maintains the integration risks/issues and cross-functional dependency log, and works
with appropriate teams to resolve each item
" Owns administrative tasks, such as maintaining distribution lists, master calendar of
workstream team meetings / team schedule, contact list, development of presentation
materials, coordination and planning of workshops, etc.
" Maintains integration team’s document management database
" Understands the strategic intent and overall goals driving the acquisition, has strong
project management skills and understands the stakeholder population
Integration Leadership Team (ILT)

" Consists of the Integration Leader, Project Manager, functional workstream team leaders,
as appropriate, and outside integration consultants/advisors, as required
" Functional workstream team leader’s appointment to the team should be based on
factors such as acquisition focus / strategy / structure, potential areas of risk (HR, Legal,
etc.), etc.
" Typically, also includes one or more representatives from the target company
organization
" Becomes involved with due diligence efforts, to ensure smooth transition
" Coordinates with ES and ESC and leads Integration Framework design
" Assists workstream teams in making Workstream-Level (Level 1) decisions, as well as

formulating recommendations for Executive-Level (Level 2) decisions
" Ensures cross-functional dependencies among the workstreams are understood and
coordinated
Functional Workstream Leaders

" Each workstream typically should include two co-leads, one from the acquiring and one
from the target organization
" Ultimately owns the development and successful execution of all workstream team
deliverables, including Status Reports, Charters and Workplans
" Determine needed resources, builds and manages the workstream team
" Develop team Charter, including scope, goals and objectives (by phase), issues/risks,
cross-functional dependencies and team members

" Compare and identify differences between the two organizations (organizational
structures, processes, etc.), to determine which pieces need to be integrated and
develop a tactical plan to accomplish
" Track and manage individual workstream’s integration workplan, operating and capital
expenses, as well as synergy target realization, against budget/model, reporting any
variances or risks to each to ILT
" Contribute specific functional expertise and knowledge
" Coordinate with other workstream team Leaders on cross-functional items, as required
Functional Workstream Team Members

" Teams should be structured and developed based on factors such as the industry/market,
the specific deal focus/structure, and the acquirer’s and target’s current organizations
" Should include representatives from both the acquiring and target organizations
" Contribute functional, industry and company expertise
" Utilize data gathered during due diligence and identifies additional data needed to build
an effective plan
" Prepare a detailed integration workplan which considers:
- Workstream team’s recommended integration approach (after evaluating options)
- Cost/benefit analysis
- Risk identification and mitigation strategies
- Day One goals, including interim milestones
- Phased goals (Day 1-30, Day 30-90, Day 90-180 and Day 180+.), including interim
milestones
- Resources allocated to plan and to execution of the integration actions
" Identifies additional potential synergy opportunities and communicates to the ILT
" Prepare and get approval for all Day 1 items within workstream’s scope (communications,
org changes, etc.)
! Make recommendations on organizational structure specific to Workstream’s functional

area, as well as recommended mapping of associates and HR lists for interim retention
and redundancy

4.3 Some Typical Functional Workstreams
The team framework, particularly the structure of the functional workstreams, is dependent on
several factors, such as type of business, organizational structure, size of acquisition, the focus
and strategy of the acquisition (i.e. product integration, new product, strategic uplift,
synergies), etc. There are typically between six and twelve workstreams, as some of the
workstreams may be combined into one with subteams (i.e. Treasury may be a subteam of
Finance) or may not be applicable. The Integration Framework Definition process focuses on
analyzing the particular deal, in order to most effectively design the team structure.
Below are some common functional workstreams with high-level descriptions, but keep in mind
it is critical to determine which workstreams your business needs and how they should be
structured.
4.3.1 Product Strategy

The Product Strategy Workstream defines a high-level product direction for the combined
organization that will achieve industry leadership. Responsibilities include:
" Validating the overall product direction and developing a high-level product roadmap
" Defining feature and functionality requirements and desired timeline for implementation
in order to accomplish goals (i.e., market leadership within 12 months)
" Determining how the target’s releases impact acquirer’s desired future features and
functionality
" Developing plans to offer combined products
" Defining strategies for legacy clients and those currently in the process of being
implemented
" Managing the product message in the market place
4.3.2 Product Technology & Operations

The Technology & Operations Workstream designs a go-forward Technology and Operations
organization that can support the development requirements as outlined by the Product
Strategy Workstream and the client delivery requirements outlined by the Product Strategy and
Sales Workstreams. Additionally, they need to ensure the retention of key talent required to
preserve intellectual capital. Responsibilities include:
" Developing recommended organization structures and strategies for Client Services,
Customer Service and Product Development organizations; Identifying key resources
required to support existing products (including Client Services, Customer Service and
Product Development organizations)
" Securing existing acquirer and target software documentation

" Completing software documentation where deficiencies are identified
" Developing a high-level product development plan based on the Product Strategy
Workstream team’s defined features and functionality; Addressing expectation gaps, as
appropriate
" Assessing the capabilities of the target development organization to achieve the desired
product plan
Identifying key resources in the Customer Services organization to execute the Client Contact
Plan
4.3.3 Sales
The Sales Workstream works in conjunction with the Client Retention Workstream (can be
combined into one team) to mitigate the risk of client and prospect defection and develops a
world-class sales organization by combining the best practices of both the acquirer and the
target. Responsibilities include:
" Ensuring contract and approval processes are implemented and applied to both
organizations
" Identifying best practices and implementing a common sales management process
" Reviewing the target pipeline to ensure consistency to acquirer’s standards, and, if
necessary, recommend steps to reconcile between the two
" Integrating the target and acquirer sales teams consistent with management’s desired
structure
" Executing the client and prospect contact plan developed by the Client Retention
Workstream:
- Identifying and mitigating defection of key prospects
- Identifying a mitigating defection of key sales personnel
" Developing cross-selling strategies for complimentary products
4.3.4 Client Retention * Can be combined with the Sales Workstream

The Client Retention Workstream develops a comprehensive strategy for mitigating the risk of
client and prospect defection. Responsibilities include:
" Developing a segmentation analysis of the target organization’s clients and prospects;
prioritizing most “growable” and most valuable clients and prospects (Tiers 1 – 3)

" Developing a contact plan for each client and prospect segmentation, including key
messages for each; determining communication media and frequency (e.g., Tier 1 should
be a telephone call or personal visit, while Tier 3 may be initially notified by email.)
" Defining retention goals for each client and prospect segment (e.g., 100% retention of all
Tier 1 Prospects with a greater than 50-percent probability of closing, etc.)
" Identifying key resources (e.g., Sales and Customer Service) based on segmentation
analysis (which includes assigned resources) and communicating to Sales and Product
Technology & Operations teams, as appropriate
" Identifying overlapping clients and prospects and determining who from acquirer and/or
target should make the initial contact.
" Involving the Sales Workstream team and Customer Support personnel in reviewing the
draft of the contact plan in order to obtain input into the overall process
" Planning a sales meeting with all sales associates to outline strategic objectives
" Developing an Early Warning System to monitor risk of client defection
" Developing monitoring reports associated with Client Contact Plan execution and
commencing reporting to executive management
4.3.5 Marketing & Communications

The Marketing & Communications Workstream proactively manages messaging around the
transaction by developing a series of frequent and consistent messages for the acquirer’s and
the target’s legacy customers, clients currently going through implementation, prospects,
employees and external stakeholders (i.e. vendors, partners, etc.). Responsibilities include:
" Developing and maintaining an impactful communications campaign including Day One
messages and post Day-One messages.
" Developing sales collateral
" Developing training materials and toolkits
" Obtaining inputs from the Culture Workstream team in order to more effectively tailor
internal messaging
" Preparing FAQs
" Updating internal and external Web presence
" Assessing effectiveness of internal and external messaging and revising if necessary
" Developing combined organization’s marketing and brand strategy

4.3.6 Human Resources / People Retention
The Human Resources Workstream is charged with developing a key employee retention plan
as well as aligning the pay and benefit structures between acquirer and the target.
Responsibilities include:
" Working with functional areas to identify key employees of both organizations
" Developing and executing a retention plan to retain key employees
" Involving target organization personnel early in the integration process to provide input
to the key messages (interdependency: Culture Workstream team)
" Working with Marketing and Communications Workstream, addressing “me” FAQs no
later than Day One (e.g., benefit plan strategy, reporting structure, overall integration
approach, timing of any contemplated reductions in force, transition plans for those not
remaining long-term with the organization, etc.)
" Maintaining an internal communication campaign for acquirer and target through the
transition process
" Ensuring alignment of pay and job classification between both organization’s employees
" Ensuring alignment of benefits (insurance and retirement) between both organization’s
employees
" Working with functional areas to identify employees who will be transitioned and those
who will be severed
" Developing and executing a transition and severance plan
" Defining a formal intellectual property capture plan
" Developing and executing a plan for ongoing monitoring of employee retention and
employee satisfaction
4.3.7 Culture * Can be combined with the Human Resources

Workstream
The Culture Workstream is essential on transactions to understand differences, leverage
commonality and ensure a smooth transition of the target company into acquirer’s culture.
" Developing an understanding of the unique attributes of each company and identifying
best practices and attributes to implement
" Providing input to the Communications Workstream

" Determining lessons learned from prior transactions
" Interviewing select target personnel to gain a better understanding of the target’s culture
4.3.8 Information Technology

The Information Technology Workstream will assess existing systems (hardware and software)
of the combined organization as well as related policies and procedures and develop a go
forward strategy to support the organizations business strategies. Due to the volume of
activities of the Information Technology Workstream, acquirer may consider dividing this team
into smaller, more manageable sub-teams. Responsibilities of the Information Technology
Workstream team include:
" Linking email systems
" Arranging interim connectivity
" Completing network connection between key facilities
" Developing an ERP integration plan
" Communicating data center protocols (i.e., processing, storage, back-up, maintenance,
disaster recovery)
" Defining PC hardware and software platform for future purchases
" Identifying and assessing user applications for both organizations and determining (1)
surviving applications for the target’s organization and (2) associated support
requirements
" Reading and analyzing contracts for software licensing, desktop, call center, specialty
applications, etc. and proposing a rationalized integration strategy into acquirer’s master
agreements (including remedying any deficiencies)
" Identifying the target’s registered domains and associated expiration dates
" Assessing the current hardware and assessing the ability to support acquirer’s processing
requirements
" Evaluating human resource access services/software (plus tie-ins) and proposing an
integration solution to acquirer’s core HR package
" Evaluating finance and accounting software and proposing an integration solution to
acquirer’s core finance package
" Determining the best integration strategy as it relates to infrastructure management and
oversight

" Evaluating and proposing solutions for internal knowledge sharing
" Evaluating and proposing solutions for network, file and print server support for the
target
4.3.9 Facilities and Physical Security

The Facilities Workstream will coordinate the physical consolidation of the combined
organization’s operating locations. Responsibilities include:
" Cataloguing all real property, including square footage and lease terms
" Changing office signage
" Preparing preliminary office consolidation plan
" Preparing relocation timetable for key functions
" Assessing telecommunications (long distance and local lines) and proposing an
integration solution for the target
" Determining mail processing and distribution plan for Day One
" Determining and planning for Physical Security needs at target’s facilities
" Determining go-forward real estate and facilities needs and preparing preliminary office
consolidation plan
" Preparing estimates of cost savings and associated one-time costs
" Developing synergy plans and determining timing of synergy realization for Real Estate /
Facilities (closing and consolidation of office locations)
4.3.10 Sourcing & Procurement

The Procurement Workstream will assess the future contract and commitments of the acquirer
and the target, and leverage the purchasing power of the combined organization.
" Assessing significant purchasing contracts and commitments
" Identifying and quantifying any potential synergies
" Communicating the purchasing process to the target’s employees
4.3.11 Legal
The Legal Workstream defines the legal entity structure for the combined organization and
ensures all legal and compliance issues are addressed in a consistent manner between acquirer
and the target. Responsibilities include:

" Defining appropriate Day One procedures
" Providing standard terms and conditions to the target and working with Executive
Sponsor, negotiating terms and conditions
" Assessing and rationalizing the legal department responsibilities of the target and
determine the appropriate integration strategy
" Assessing and rationalizing the compliance department responsibilities and functions of
the target and determining the appropriate integration strategy
" Determining the protocols for legal matters within the combined organization for the
following areas:
- Contract review
- Contract maintenance
- Trademarks
- Licensing
- Regulatory Issues
- Litigation
- Other (governance, employment law, etc.)
4.3.12 Finance
The Finance Workstream prepares timely management reports that enable management to
make relevant business decisions and evaluate financial performance. Responsibilities include:
" Prepare financial model for combined organization including projected synergies,
revenue uplift, new products, etc.
" Preparing monthly management reports and associated financial and trend analysis
" Providing adequate insight into the target’s financial performance in order to proactively
address potential issues
" Preparing budgets and forecasts for the combined organization
" Valuation of target company
4.3.13 Accounting
The Accounting Workstream implements consistent reporting standards and policies.
Responsibilities of the Accounting Workstream team include:

" Ensuring consistent financial statement presentation and classification, facilitating
consolidated reporting
" Applying consistent accounting policies from Day One forward
" Developing closing procedures sufficient to ensure quality and consistency of reported
results
" Completing required regulatory filings (Form 8-K, UK statutory audit, etc.) on timely basis
4.3.14 Treasury
The Treasury Workstream manages and safeguards the financial assets of the combined
organization. Responsibilities include:
" Identifying new lockboxes
" Preparing instructions to sweep all target’s cash accounts into acquirer’s concentration
account on Day One and going forward
" Establishing ZBA disbursements and payroll accounts for the target within acquirer’s cash
account structure
" Revising signature cards and providing to banks
" Revising remittance instruction letters prepared for the target’s clients
" Providing target with instructions for funding ZBAs (when making disbursements and
funding payroll)
" Preparing a go forward strategy to ensure the combined organization has the financial
assets necessary to execute against its operating plan
4.3.15 Tax
The Tax Workstream will ensure compliance with all taxing authorities. Responsibilities include:
" Assessing the status of all returns (federal, state, foreign, payroll tax, sales and use,
franchise, property, and other taxes) and resources required to complete all open returns
" Determining which party will complete the stub period return
" Evaluating the tax implications of the target’s legal entity structure
" Determining if any changes in tax planning strategies are needed as a result of the
transaction.

4.3.16 Internal Audit
The Internal Audit Workstream will combine auditing processes and ensure audit compliance.
" Comparing and contrasting acquirer’s and the target’s policies and procedures and
identifying those that need to be addressed by Day One
" Standardizing critical policies and procedures between acquirer and the target
" Assessing the target’s existing control environment and determining potential issues or
deficiencies associates with SOX compliance and associated mitigation strategies
" Assessing the feasibility of integrating the target into acquirer’s existing control
environment, including costs associated with the transition, anticipated timeline,
resources required, and costs associated with maintaining a separate environment.
4.3.17 Synergy Management and Realization

Each Workstream team is responsible for the capture of synergies identified with each
transaction, related to their functional area. Typically, key synergies include the consolidation
of offices and the rationalization of personnel. However, each specific transaction must be
evaluated to determine the key value drivers and related synergies. For example, for
manufacturing companies, a large percentage of synergies may come from consolidation of
sourcing with vendors and/or evaluation of alternative parts for products.
In this section are some tips on the most common and complex area for synergies,
organizational structure/personnel rationalization. The overall ownership and coordination of
this should lie with the HR Workstream, however, each Workstream should be responsible for
evaluating the organization in their functional area, determining the future personnel needs
and making recommendations on structure and how the positions are filled.
The high-level steps that need to occur are:
" Assessment of current organizational structures (both organizations)
" Defining optimal organizational structure for the combined organization - This is often a
good opportunity for the acquiring organization to make internal organizational
improvements, as well
" Definition of a Day One interim organizational structure, so that each new employee will
know where he/she fits into their new company
" Determining whether the Day One interim organizational structure will create any
potential cultural issues and make plans to address/mitigate

" Developing of the Day 1 communication for the interim organization, as well as the
upcoming action announcement – This should be as clear and open as possible, in giving
a timeframe and setting expectations
" Identifying if/where the first 2-3 levels of the target’s management fits into the new
organization
" Determining go-forward personnel requirements, based on redundancy, product

roadmaps, long-term locations/relocation restrictions, etc.
" Recalculating and validating synergy numbers identifies during Due Diligence
" Finalize where each person fits into the organization and which employees will be
released from each organization and when - Determine timing of synergy realization and
associated one-time costs (severance, retention, etc.)
!

5. Integration Process
The diagram below illustrates the general timing of the three phases of the Integration
Methodology and outlines the major milestones for each phase. The following sections further
detail the tasks of these major milestones.

!

5.1. Integration Framework Definition
A. Appoint Executive Sponsor (ES) and Assemble Executive Steering Committee (ESC)
Owner: Company Executive(s) (typically CEO and/or COO)
Definition: The ES is typically the GM of the division sponsoring the transaction but could be
another divisional executive. This person provides executive level ownership of the
integration, owns development of common vision and strategy for the combined organization
and identification of business imperatives. The company CEO and or COO typically appoints
this person.
The ESC is typically made up of company / divisional senior executives and includes the
Executive Sponsor. Other executives appointed generally includes representatives from HR,
sales, legal, finance and IT, but the level of involvement and committee membership varies
depending on the size, strategy and complexity of the transaction. This committee provides
overall governance to the integration process.
B. Identify Integration Leader (IL) & Assemble Integration Leadership Team (ILT)
Owner: Executive Sponsor
Approvals: ESC
Definition: The IL is typically a Senior Manager or above in the division sponsoring the
transaction and is the liaison between Executive Steering Committee, Executive Sponsor and
Product Advisory Committee, and the workstream teams. This person is ultimately responsible
for managing all aspects of the integration and reports to the Executive Sponsor.
The ILT Consists of the Integration Leader, Project Manager, functional workstream team
leaders, as appropriate, and outside integration consultants/advisors, as required. Functional
workstream team leader’s appointment to the team should be based on factors such as
acquisition focus / strategy / structure, potential areas of risk (HR, Legal, etc.), etc. It is the
team that helps make Level 1 decision, as needed, and helps to formulate recommendations
for Level 2 decisions.
C. Determine need for Product Advisory Committee (PAC)

Owner: Integration Leader
Approvals: Executive Sponsor
Definition: A PAC may or may not be needed, depending on the businesses, the industry and
type of acquisition. Very product-intensive companies or acquisitions that are dependent on
product strategies will most likely need a PAC.
D. Identify Functional Workstream Leaders & assemble teams

Approvals: ESC
Definition: Each workstream typically should include two co-leads, one from the acquiring and
one from the target organization. These are typically managers or above in their functional
area. These leaders ultimately own the development and successful execution of all
workstream team deliverables, including Status Reports, Charters and Workplans.
E. Develop Reporting / Escalation Plan, Level 1 & 2 Decision Criteria and Meeting
Cadence
Approvals: ESC
Definition: The IL is responsible for defining how progress reporting to ESC will be handled, as
well as regular communication with the ES. He/she will also need to define how risks and
issues will be escalated to the ESC/ES and how the feedback loop to the workstreams will
happen.
Secondly, the criteria for Level 1 and Level 2 decisions need to be defined, to outline what
types of decisions can be made at the workstream / ILT level and which ones need to be
escalated to the ESC/ES.
F. Develop Transition Plan for moving from Due Diligence to Integration

Definition: If the IL was also the Due Diligence Leader, this is not as critical. If not, it is critical
that the IL work with the Due Diligence Leader on a transition plan to ensure that all material
findings, potential risks, etc. are documented and communicated to the IL. The DDL will need
to be available through closing of the deal, to ensure proper support.
G. Finalize Integration Framework

Approvals: ESC
Definition: The IL is responsible for tweaking and finalizing, documenting and communicating
the integration framework, which includes all the other components in this section.
H. Develop Integration Planning Kick-off materials and plan for session

Definition: With the help of the Project Manager, the IL is responsible for planning the kick-off
workshop for integration planning with all workstreams. The purpose of the kick-off is to give
an overview of the acquisition, the acquisition strategy, align the teams on their scopes and
goals, to give an overview of the tools (integration workplans, charter document, issues/risks

tracker, etc.) and to have break-outs by workstream to have the charters developed. This
workshop could take up to 2 days but can normally be done in one.
5.2. Integration Planning
A. Hold Integration Planning Kick-off / Orientation Workshop

Definition: See H in previous section.
B. Workstream Charters Developed and Approved

Owner: Functional Workstream Leaders
Approvals: Integration Leader & ESC
Definition: Workstream charters should be completed during or shortly after the kick-off
workshop and approved within a few days. Some may need to be re-worked after IL / ESC
review.
C. Begin ESC, ILT and Workstream cadence

Owner: Integration Leader, Functional Workstream Leaders (respectively)
Approvals: Integration Leader & ESC
Definition: Meeting cadence should be established for the ESC, ILT and each workstream
during or shortly after the kick-off workshop. This varies by company, by deal size/type and by
phase/stage of integration planning and execution, but general guidelines during integration
planning are once a week or bi-weekly for the ESC, weekly for the ILT and twice a week for
workstreams. In determining this, “E” in the previous section should be considered, so that
material findings can be escalated between meetings, if needed (or emergency meetings
called).
D. Phase I & II Workplans Developed and Approved

Owner: Functional Workstream Leaders
Approvals: ILT
Definition: Phase I & II workplans (Day 1 and Day 2-30) should be developed and approved
immediately after charters are finalized and approved. This is, of course, an iterative process
and the workplans are living documents, but getting the first two workplan phases as solidified
as early as possible is crucial to success. There are many dependencies in the early stages (i.e.
organizational changes, communications, etc.), so no time should be wasted in getting them
started. For the core functions, many / most of the workplan entries will come from the
appropriate Integration Playbook.

E. Hold Cross-Functional Dependency Workshop(s)
Owners: Functional Workstream Leaders / Integration Leader
Definition: As necessary, cross-functional workshop(s) should be held to discuss any cross-
functional dependencies on Phase I & II workplans, to decide timing, owners of each action,
etc. The first workshop should happen immediately after workplans have been reviewed by the
ILT and are considered 80% finalized. The workplans will most have to be tweaked after the
workshop(s), so close coordination is required.
F. Finalize Day 1 Actions, Interim Organizational Structure and Day1 Communications /

Packages
Owners: Functional Workstream Leaders / Integration Leadership Team
Approvals: IL
Definition: All actions that need to be executed on Day 1 (Phase I workplans) need to be
finalized at the detail-level in the workplans. This usually only includes a handful of things, like
Interim Org Structure, communications (see Communications Plan), any town hall meetings,
employee “welcome” packages, etc. Some/all of what is implemented for Org Structure may
be permanent, but not many changes have to be implemented immediately. For example,
you may only opt to announce who the CEO of the combined company is and what role the
former CEO of the other company is and indicate that other changes will come in the next 30
days.
G. Hold Day 1 Readiness Review with ILT and ESC

Approvals: ESC
Definition: This is a formal session, sometimes lasting up to half a day, to review all Day 1
(Phase I) actions with the ESC. Nothing reviewed with them should be a surprise, as material /
Level 2 decisions should have already been escalated to the ESC. However, many times there
may be details that need to be worked out, such as exact timing of communications to
employees of each company, the press releases, etc.
H. Execute all Day 1 Actions (Phase I)

Definition: Execution of all Day 1 actions on Day 1. This is a coordinated and combined effort
of all workstreams, the ILT and ESC.

5.3. Integration Execution
A. Execute all Phase II actions (Day 2-30 actions)

Owner: Functional Workstream Leaders / Integration Leader
Definition: After Day 1 fanfare is over, the execution of Phase II workplans (Day 2-30) should
begin. It is important that these plans are finalized and approved before Day 1, so the
execution can happen starting Day 2.
B. Finalize and Implement Final Org Structure

Owner: Functional Workstream Leaders / Integration Leadership Team
Approvals: ESC
Definition: Recommended organizational structures and recommendations on which roles are
redundant for each function, should come from each corresponding workstream. These
recommendations must be approved by the ESC before being implemented. The executive
level organizational structure recommendation should come from the ILT, but most decisions
usually happen during regular ESC meetings. The timing of implementation depends on many
factors, but generally, the new organization should be completely in place within 60 – 90 days
of closing. Open and honest communication to employees about potential redundancies / lay-
offs, changes in structure, etc. is critical in maintaining employee morale.
C. Develop Phase III, IV & V actions and get approval, then execute (Day 30-90, 90-180 &
180+ actions)
Owner: Functional Workstream Leaders / Integration Leader
Approvals: ILT
Definition: Development and approvals of Phase III, IV and V workplans should start
immediately after Day 1, in parallel with the execution of Phase II workplans. For the core
functions, many / most of the workplan entries will come from the appropriate Integration
Playbook. Execution of each should start at appropriate time intervals.
D. Phased Transition to Business as Usual

Definition: Transition of each major task to Business as Usual should be part of all workstream
workplans. It is important that this transition for each major area of integration, for every
workstream, be considered part of the integration workplan, to ensure smooth transition to
Business as usual. Some pieces may move to BAU within the first 30 days, while some may
take much, much longer. This has to be closely managed.

Communication Plan
To Announce Merging Companies
This is a communication plan template for a merger or acquisition. It guides you

through what you need to consider, how to keep messaging consistent and what
bases needs to be covered, minimally.

Communication Plan
1. To Do
• What will we have in place to ensure feedback?
# People need to be heard and may have good ideas/suggestions.
# We need to have multiple ways for employees to give us feedback.
• Get email addresses for all employees of each company (two separate lists)
• Communication Matrix Developed
• Obtain a list of vendors with addresses for vendor communication
2. Notes/Thoughts
• “If you feel as though you are completely overwhelming your employees with information
and updates about the merger, then you are probably communicating about the right
amount.”
• No communication with employees or customers will be made until certainty of deal
• Give employees regular updates (suggest weekly) – Status of integration, issues being
resolved, accomplishments, etc.
• Make sure rumors do not become main source of information
• Establish and reinforce expectation for employees, partners, etc.
• Always be consistent, honest and as open as possible in all communications People are
smart and if you are not honest or at all misleading, it will be translated very negatively.
• Link messages to strategic objectives when possible
• Use various channels for communications (email, intranet, town halls, etc.)
• Organize a ‘road show’ for leadership team to visit all locations / plants very soon after
announcement.
• Day 1 should be celebratory!!

3. Objectives
General
• Convey to key audiences that COMPANY A and COMPANY B are merging to deliver
new and extraordinary levels of value for customers
• Highlight how the new combined company will….
• Generate awareness and enthusiastic buy-in with employees, clients and suppliers
• Highlight that COMPANY B represents an opportunity to diversify into new markets and
offer additional services to existing markets.
Customers
• Manage perception
• Be proactive in communicating value that the combined company will bring.
• Give them a way to get questions answered timely and accurately
• Give them a clear and honest analysis of how the merger will affect them
Employees
• Reduce fear and change of unknown
• Clearly communicate merger goals and measures
• Understanding top-line structure and key policies
4. Key Messages
To create cohesive and consistent messages, all communications created should incorporate
these important themes. Note that messages will be tailored depending on audience:
Examples:
• This move positions COMPANY B, one of the country’s leading….
• As a result of this merger, COMPANY A:
# Solidifies its…
# Expands resources devoted…
# Offers the ability to…

• This new entity combines expertise, enhances market knowledge, expands contracting
capabilities, increases scale and positions COMPANY A and COMPANY B to develop
innovative forward-thinking offerings.
• This new entity combines expertise, enhances market knowledge, expands contracting
capabilities, increases scale and positions COMPANY A and COMPANY B to develop
innovative forward-thinking offerings.
• For suppliers, this transaction will …
• COMPANY A and COMPANY B are better positioned to exceed …
• COMPANY B will continue to serve …
• COMPANY A and COMPANY B will ensure a smooth business relationship for our
suppliers as well as …
• …
5. Communication Strategy & Timing

General
• convey positive messages
• attempt to preemptively address their questions/concerns
• manage fear of change and customer perceptions
• update frequently
• Day 1= 1st day post-closing of deal

!

6. FAQ’s
General
• Why is COMPANY A & COMPANY B merging?
• What is the timeline and process for integration of the two organizations?
• Will COMPANY B continue to focus on the … market?
• Will COMPANY B continue to focus on … businesses?
• How will the merger impact COMPANY A and COMPANY B names?
• Will contract pricing for the products in the portfolio change for either COMPANY A or
COMPANY B?
• What effect will this change have on existing supplier contracts?
• How will this impact COMPANY A and COMPANY B suppliers?
• What impact will this have on the Product Lines?
• Will the new consolidated COMPANY B team relocate to another office complex?
Customer FAQ’s
• What additional value will the merge have on my company?
• Will there be cost decrease? Increases?
• Who will convey my account (Company A or Company B sales rep)?
• Which product is better (previous competitors)
• Which product are you going to keep?
• Where should I send my Purchase Orders?
• What effect will this change on existing customer contracts?
Employee FAQ’s
• When will I learn more?
• What level of involvement will you need from me?
• Are jobs being eliminated and or roles changing?
• With the new activities surrounding the integration, how will this affect our remaining
201X goals and incentives?
• What is the interim management structure and whom do I call for questions?

7. E-mail Communications
Company Employee E-mail
COMPANY A has finalized its agreement to …
This new entity combines the expertise, market knowledge and contracting capabilities of
COMPANY A and COMPANY B to develop innovative forward-thinking offerings that will help
members lower their supply costs. In addition, COMPANY B … The acquisition was effective
Month, Day, 201X, and no financial terms were disclosed.
We’ve promised current COMPANY A and COMPANY B clients they will not notice any
interruption in value or service as a result of this transaction, and we are committed to working
with our internal teams to ensure a smooth transition for COMPANY A employees to
COMPANY B so that clients and suppliers will remain confident in our ability to serve them.
Attached is a press release about the COMPANY B transaction. If you have general questions
about this announcement, please contact anyone on the leadership team. If you have supplier-
related questions about this transition, direct those to …..Thank you.
COMPANY B Employee E-mail

COMPANY B has finalized its agreement to …
Email to Channel Partners

COMPANY A has finalized its agreement….
COMPANY A will leverage …
NewCo will be charged with …
Current COMPANY A and COMPANY B clients will not notice any interruption in value or
service as a result of this transaction. We are committed to working with our internal teams to
ensure a smooth transition for COMPANY A employees to COMPANY B so that clients and
suppliers will remain confident in our ability to serve them.
Attached is a press release about the COMPANY B transaction. If you have questions about
this announcement, please contact …
Name
Contact Number

8. Media Communications
Media Statement
(in case we have to respond to media inquiries prior to Press Release)
In a bold move, COMPANY A Inc. has signed a letter of intent with … to merge with
COMPANY B, one of the country’s leading … This new entity combines expertise, enhances
market knowledge, expands contracting capabilities, increases scale and positions COMPANY
A and COMPANY B to develop innovative forward-thinking offerings. This move also expands
resources …
COMPANY A and COMPANY B will combine the work teams that have been concurrently
working to serve … COMPANY A expects to finalize the transaction with COMPANY B by the
middle of December
###
Press Release
Media Contact: Name, Contact Number
COMPANY A Merges with COMPANY B to …
Litchfield, MO (December 12, 20XX)
COMPANY A Inc., …
With this move, COMPANY B becomes a …
• Solidifies its supply chain management leadership position …
• Expands the resources devoted to …
• Creates the opportunity to provide new services …
The acquisition was effective December 12, 20XX, no financial terms were disclosed.
“As …COMPANY A and COMPANY B will be well positioned to … COMPANY A and

COMPANY B will bring together the employees …
###
About COMPANY A
COMPANY A Inc., based in Litchfield, MO…
About COMPANY B
COMPANY B is one of the country’s leading

Workstream Charter
Workstream Development
This is a template for developing workstream charters. A charter should be written by

each workstream team during or shortly after the integration planning kick-off
orientation. More information about this is in the M&A Integration Methodology
portion.
Workstream Charter
The Workstream Charter document is a separate file that would


Integration Workplans
Integration Workplans
For Core Functions
This is an integration task list for the core functions. This is meant to serve as a
starting point and is not an exhaustive list- it should be thoroughly reviewed with each
other of the core function leaders customized to use as a standardized list for all
deals, for your company. The pertinent items will be used on the functional
integration workplans and detailed out, as necessary. Additional actions, specific to a
target/deal, will also be added to the functional integration workplans.
The Integration Playbook spreadsheet is a separate file that would


Integration Playbooks
Integration Playbooks
Template for Workstreams
This is the template that each workstream will use to develop their integration action
plans. The first tab should be used for Phase I/Day I items. Some workstreams will
not have any actions to execute on Day 1, but many will. The second tab should be
used for all other actions. The phases can be tracked by Start Date. The level of
detail under each major action is up to the workstream leaders.
The Integration Workplan spreadsheet is a separate file that

would have been downloaded with your purchase

Workstream Cross-Functional Dependency Log
Workstream Cross-
Functional
Dependency Log
This log should be used by each workstream to track and resolve all cross-
functional (cross-workstream) dependencies during integration planning and
execution.
The Workstream Cross-Functional Log spreadsheet is a separate

file that would have been downloaded with your purchase

Workstreams Risks and Issues Log
Workstreams
Risks and Issues Log
This log should be used by each workstream to track and mitigate/resolve all risks and
issues.
The Workstream Risks and Issues Log spreadsheet is a separate

file that would have been downloaded with your purchase


Template
This template should be used by each workstream for regular status reports to the
Integration Leader. Reports are submitted weekly.
The Workstream Status Report document is a separate file that

would have been downloaded with your purchase

Resources
Devensoft
In conjunction with our M&A Management Playbook and Toolkit, Devensoft offers best-in-class
M&A Management solutions to automate your methodology and playbooks taking your M&A
effectiveness to the next level. Our M&A software applications are available to help you quickly
setup a reusable template and process library. Consulting and training are accessible from our
M&A subject matter experts to help you with customization, implementation and knowledge
transfer. For more information, to schedule training or to learn about our other M&A software
solutions:
Email us at sales@devensoft.com
Call us directly at +1.571.348.3482
Visit us at www.devensoft.com

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M&A Management Playbook

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M&A Management Playbook and Toolkit v4.1 Page: 2

1. Tools and Templates..................................................................................................... 7

START HERE – Instructions and Tips............................................................................... 7

M&A Process Map .......................................................................................................... 7

Acquisition Ranking Tool ................................................................................................ 8

M&A Opportunity Funnel - Executive Summary ............................................................. 8

Desktop (Preliminary) Due Diligence .............................................................................. 8

Key Employee Retention Plan ......................................................................................... 8

M&A Due Diligence Checklist ......................................................................................... 8

M&A Integration Methodology (eBook) ......................................................................... 8

Communication Plan ....................................................................................................... 8

Workstream Charter ........................................................................................................ 9

Integration Playbook for Core Functions ........................................................................ 9

Integration Workplan Template ...................................................................................... 9

Workstream Cross-Functional Dependency Log ............................................................ 9

Workstream Risks & Issues Log ....................................................................................... 9

Workstream Status Report .............................................................................................. 9

3. General Tips ................................................................................................................ 11

M&A Process Map .............................................................................................................. 14

Acquisition Tracker ............................................................................................................. 16

Acquisition Ranking Tool .................................................................................................... 17

M&A Opportunity Funnel ................................................................................................... 18

Preliminary Due Diligence .................................................................................................. 20

2. Investigation and Analysis ........................................................................................... 20

Key Employee Retention Plan ............................................................................................ 23

M&A Management Playbook and Toolkit v4.1 Page: 3

General Discussions ................................................................................................................ 26

Sales and marketing ...................................................................................................... 26

Product development, implementation & support ....................................................... 26

Technology and Operations ......................................................................................... 27

1. Corporate Documents ................................................................................................ 27

1.1. General ............................................................................................................ 27

1.2. Claims and Litigation ....................................................................................... 27

1.3. Regulatory Filings and Correspondence ......................................................... 28

2. Financial Records ........................................................................................................ 28

2.1. General ............................................................................................................ 28

2.2. Tax ................................................................................................................... 29

2.4. Expenses ......................................................................................................... 31

2.5. Assets .............................................................................................................. 31

3.1. Corporate ........................................................................................................ 32

3.2. Customer Contracts and Licenses ................................................................... 33

3.3. Vendor Contracts ............................................................................................ 33

3.4. Government Contracts .................................................................................... 33

3.5. Licenses ........................................................................................................... 34

3.6. Alliances .......................................................................................................... 34

3.7. Employee Agreements .................................................................................... 34

M&A Management Playbook and Toolkit v4.1 Page: 4

4.2. Organizational Chart ....................................................................................... 35

4.3. Compensation and Benefit Plans .................................................................... 35

4.4. Personnel Policies and Records....................................................................... 36

5. Plans, Policies and Procedures .................................................................................... 36

5.1. Finance and Accounting.................................................................................. 36

5.2. Security and Privacy ........................................................................................ 36

5.3. Disaster Recovery and Business Continuity..................................................... 37

5.4. Software development Life Cycle (SDLC)........................................................ 37

5.5. Project Management ....................................................................................... 37

5.6. IT Processes ..................................................................................................... 37

6. Products and Services ................................................................................................. 38

6.1. Marketing ........................................................................................................ 38

6.2. Development and Technology ........................................................................ 38

7.1. Customers ....................................................................................................... 38

7.2. Sales Pipeline .................................................................................................. 39