2.

2 Phase II: Defining the integration levers

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In Phase II, the focuses of the integration are determined
Determine integration goals
and time schedule
• Define sub-processes
• Define and quantify goals
and measurement variables
• Ascertain base quantities on
day X
• Determine time schedule
Define the integration levers
Define fields of integration Establish project
Success factors
organization
• Integration management • Staff Transition Teams
• Top-management
• Strategy
participation
• Organization • Apply company-wide project
• Transparency of the
coordination
integration targets
• Personnel/management
systems
• Top-quality staffing of
the Transition Teams
• Communication and cultural
change
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Determining the goals and time schedule of the integration

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Defining the areas of integration

• PMI project comprises 5 fields of integration

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The PMI project comprises 5 areas of integration

Integration management

Key functions

Strategy Personnel
Business systems management/
/ processes management
Organization system

Business volume/planning/goals

Management requirement
(as situation arises/general)

Communication and cultural change

- 32 - MUC-0143-97098-02-03b
Module 1: Integration management

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The PMI project requires supporting integration management for the
coordination of the modules, that takes cultural influences into account

• Integration management considers both "hard" and "soft" factors in the merger process

• Transition Teams make both fundamental decisions and decisions on day-to-day business

• Tasks and work plan for the Transition Teams

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Integration management considers both "hard" and "soft" factors in the
merger process

Integration management

"Hard factors" "Soft factors"

Goal:Control of functional issues and Goal: Control/forcing of non function-

project organization oriented integration issues

• Project organization Cultural fit

• Definition of sub-project goals

Values
• Coordination/cross coordination Communication
on conceptional issues

• Milestones and project controlling Conflict management

of the fields of integration Goals
– Strategy
– Organization
Management concept
– …

Change process

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Transition Teams make fundamental decisions and decisions on day-to-day
business

1. Joint identification of the commercial and functional synergy potentials

when joining the two companies (1 + 1 = 3)

• Minimum required harmonization

• Additional effects

2. Clarification and recommendation of important fundamental issues, especially

• Reorganization of the cooperation

• Joint (new) business policies and strategy
• Assignment of performance and cost
• Locational questions

3. Recommendation on the organizational integration and reorganization for the new

international company

4. Decision on important ongoing business occurrences and issues that relate to the
respective field of work of the TT
(reaching a functional new management structure or new assignment of business)

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 Tasks and work plan for the Transition Teams

TT 10
Example Organizational
requirements

1. 2. 3. 4. 5. 6. 7.

Identification Recommenda-
of the Choosing Reallocation of Commercial
Fact-finding Strategic tions for a Implementation
coordination the responsibilities, effects and
and situation reorientation long-term by
and integration functions, implementation management
audit organizational
integration concept projects planning
structure
requirement

• Business/fields of • Functional • Need for change Options: • Function • Business • Quantitative Supporting:
activity strategies • Cost/benefit organization processes synergy effects • Implementation
A Stand alone
– Customers/regions • Key areas of • Synergy effects • Management • Functions/areas • Business subplan/ control
– Products/services expertise • Concept B Functional organization of expertise • Development/ • Budgeting
• Business volume/ • Key capacities • Strategy/ • Location • People/managers reduction potential • Adjustment/inte-
fusion
system/plan • Key processes philosophy organization • Goals/tasks • Investment gration into the
• Processes/systems • Volume plan • Basic questions C Best-practice • Need for required management
• Projects • Areas of staff adjustment • Effect on earnings system
integration
• Current organization responsibility • Implementation (net)
D Zero-base checkpoints • Realization plan
design

Clarification/decision on important, ongoing business issues/occurrences

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Module 2: Strategy integration

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Based on the company model, the joint strategy provides the foundation for
integration into the other PMI modules

• The strategy team develops ways to exploit identified synergy potentials

• Individual Transition Teams answer strategic key questions for each business unit and
define framework conditions for the business plans of the SGE

• A procedure based on portfolio methods is recommended for the work in teams on

positioning/selection

• PMI modules influence each other with lead functions of the strategy module

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The Strategy Team develops ways of exploiting the identified synergy
potentials

Formulate strategic
Analyze initial situation Define target situation
procedure

Portfolio analysis
Actual Goal

4 3 $
Strategic
gap

1 5 ?
2 Strategies
A B C
Competitive advantages New products
• Define SGE • Determine key areas of • Define success factors
expertise
• Determine position • Develop ways of closing the
• Derive target situation from "strategic gap"
vision
• Carry out SWOT analysis
• Carry out GAP analysis • Assess and select options
• Derive success factors ("establish strategic gap")

Exploitation of identified synergy potentials

- 40 - MUC-0143-97098-02-03b
The Strategy Team takes into account internal and external influences when
formulating business plans for the strategic Business Units
Back up

1 Define Business Units Define relevant markets

2 Determine the position of the Market Technology Society

SGE

3 Identify strategic success

Determine strategic directions and goals
factors, set goals

4 Formulate ways of achieving

Use of own resources Inclusion of external partners
the goals

5 Issue framework data for Develop business plans

detailed planning

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Individual Transition Teams answer key strategic questions for each Business
Unit and define the framework conditions for business plans

Project example

Strategic key issues Tasks and team structures

3
2
1
• Product range Team

4
• R&D portfolio Team

7
2
1 Strategy team
• Production sites Team

8
• Procurement policy Team

6
5
• Target customers and Team
markets
• Segmentation of the market/customer activities • Business volume/plan
• Adjustment/integration of the business systems • Market/strategy concept
Tasks, e.g. • Order and market scenarios as basis for organization concept
• Collecting/prioritizing the ongoing/new projects
• Ordering and redimensioning the capacities/resources
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A procedure based on portfolio methods is recommended for the work in
teams on positioning/selection

Potential structural portfolio

Product portfolio

Process portfolio
Returns

Costs
Plant portfolio
Market
attractiveness
Location portfolio
Size
Quality

Market
proximity

Cost position

Cost position

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PMI modules influence each other with lead functions of the strategy module

1 Strategy

2 Organization Personnel

3 Integration process

4 Communication and cultural change

• In the strategy module the requirements for the organization are ascertained

• Inputs for integration management come from the strategy module and the
organization module

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Module 3: Organization

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Integration of the organizations is the basis for a functional company with
maximum exploitation of synergy potentials

• The goal is the installment of a functional transitional model and the development of the
final organizational structure of the new company

• Organizational key issues are worked on by individual Transition Teams and should be
integrated by an organization team

• Three possibilities for the development of the final organizational structure of the new
company

• Tasks and work plan for the Transition Teams of the integration module "Organization"

• Typical steps in the development of post-merger integration

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The goal is the creation of a functional transitional model and the development
of the final organizational structure of the new company

Phases of development of the organization

Build up a functioning transition model Integration

management
• Units/management staffing AG/GmbH and control bodies
Step 1: • Kick-off training
• Coordination structures LP, GmbH, AG/Transition Teams
• Communications
• Minimum required centralized functions/management teams
concept
+ Organizational analyses/management audit • Cultural audit
• Staff survey
• Interaction training
Develop final organization structure • Job rotation
• Define business system • Cultural change
Step 2: • Management concept/structure/staffing program
• Management staffing
• Determine processes, procedures • Communication
program

• Elimination of multiple resources • Minimum necessary functional capability and personnel

• Concentration on key areas of expertise • Streamlining the existing locational and plant structures
• Systematic outsourcing where necessary • Optimization of the business processes

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Organizational key issues are worked on by individual Transition Teams and
should be joined by an organization team

Project example

Strategic key issues Tasks and team structures

• Process and structure Teams 4 – 8

organization

• DP concept Team 9 Organization

team

• Management structure Team 10

• Define key areas of expertise and key • Design the management organization
Tasks, e.g. functions • Integrate the subdivision organization
• Design the business processes • Harmonize structure, process and
• Plan the system and data migration system
• Ascertain change and management needs
• Action plans

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Three possibilities for the development of the final organizational structure of
the new company

Redesign of the zero-base

Merger by function Adoption of the stronger functions
organization (ZBO)

X Y X Y Strategy
requirements

Key functions &

processes

New ZBO
organization

Objective
staffing

Integrate system

Selection at staff level Selection at functional level

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The organizational design of the new company should be based on the ZBO
approach; goals are
Back up
• Eliminating multiple resources/capacities and concentration on technological,
functional and product-related know-how

• Concentration on key areas of expertise that are relevant to the competitive situation,
required by the market and important for keeping the market leadership

• Where necessary, systematic outsourcing or external procurement of the services

which
are not necessary for competitive differentiation and which can viably be procured
externally

• Streamlining of the remaining locational and plant structures, e.g. by forming

controlling locations for individual product groups/product ranges, clear allocation of
manufacturing tasks and product responsibility as well as adjustment to planned order
volumes

• Optimization and mastering of the business processes that are decisive in the
competitive situation

• Minimum required function and personnel for the planned business

(selective build-up possible) - 50 - MUC-0143-97098-02-03b
 Planning of tasks and work processes for the Transition Teams of the
"Organization" integration module
Organizational
Diagram
requirements

1. 2. 3. 4. 5. 6. 7.

Identification
of the need for Choosing the Recommend- Reallocation of Commercial
Fact-finding Strategic Implementation
coordination integration ations for a responsibilities, effects and
and situation reorientation by the
and concept long-term functions, implementation management
audit organizational
integration projects planning
structure

• Business/fields of • Function • Need for change Options: • Function • Business • Quantitative Supporting:
activity strategies • Cost/benefit organization processes synergy effects • Implementation
A Stand alone
– Customers/regions • Key areas of • Synergy effects • management • Functions/areas • Business subplan/ control
– Products/services expertise • Concept organization of expertise • Development/ • Budgeting
B Functional
• Business volume/ • Key • Strategy/ • Location • People/managers reduction potential • Adjustment/
fusion
system/plan capacities philosophy organization • Goals/tasks • Investment required integration into
• Processes/systems • Key processes • Basic questions • Need for • Effect on earnings the management
C Best-practice
• Projects • Volume plan • Areas of staff adjustment (net) system
integration
• Current organization responsibility • Implementation • Realization plan
D Zero-base checkpoints
design

Clarification/decision on important, ongoing business issues/occurrences

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Typical stages in the development of post-merger integration

Step 3
Step 1 Step 2
Forming a new company/
Upholding the partners' Realizing the synergy potentials
(one-firm concept)
interests

New holding Management Headquarters

holding

S/M R&D ADM

Internal
prices Global Centralized
Company 1 Company 2 sectors functions
Old companies Markets
Transition • Sites/plants
Teams • Service centers

Regions

Markets Markets

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Transitional model with national companies

Back up Project example

Board of Directors Board of Directors Advisory Council Inc.

New Company Inc. (operative holding)

Transition Teams
CEO ...

R+D
Centralized
VGF
CEO functions
Marketing

Management teams
Sales

Company X Company Y
Production GmbH
LP
operative company USA Germany

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Target model

Back up
Project example
Transnational management

Headquarters Management Teams

Key-account
Sales management R+D Production Administration
organization centers centers

national/ (Engineering) (Plants) (Central)

regional Planning

Local
Decentralized Product plants
Service
units adjustment Local Local
organization
(regional) content administration

Horizontal coordination
National companies

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