CORPORATE STRATEGY BOARD

Executive Inquiry • January 1999

A HOUSE UNITED
Overcoming the Challenge of
Acquisition Integration

• Argument in Brief
• Report from the Front
• A Closer Look
This project was researched and written to fulfill the research request of several members of the Corporate Executive Board and
as a result may not satisfy the information needs of all member companies. The Corporate Executive Board encourages
members who have additional questions about this topic to contact their research manager for further discussion. The views
expressed herein by third-party sources do not necessarily reflect the policies of the organizations they represent.
Catalog No.: 071-217-198
 iii

TABLE OF CONTENTS

WITH SINCERE APPRECIATION iv

ARGUMENT IN BRIEF 1

REPORT FROM THE FRONT 2

A CLOSER LOOK 8

Integration Leadership 14

Strategy Alignment 18

Key Talent Identification 22

Employee Communication 26

BIBLIOGRAPHY 32
iv

WITH SINCERE

SPECIAL THANKS
The Corporate Strategy Board would like to express its gratitude to the following individuals
who were especially giving of their time and insight in the development of this study:

Mr. Ronald N. Ashkenas Mr. Kenneth W. Smith

Managing Partner Partner
Robert H. Schaffer & Associates Mitchell Madison Group
Four High Ridge Park One University Avenue, Suite 1900
Stamford, CT 06905 Toronto, ON M5J 2P1
(203) 322-1604 (416) 603-7476

Mr. Brian H. Dovey Mr. David R. Willensky

General Partner Managing Director
Domain Associates Strategems, Inc.
1 Palmer Square 16299 California Street
Princeton, NJ 08542 Omaha, NE 68118
(609) 683-5656 (402) 493-6296

Mr. Mark L. Feldman

Partner
Author of Five Frogs on a Log: A CEO’s Field Guide to Accelerating the Transition in
Mergers, Acquisitions, and Gut Wrenching Change
PricewaterhouseCoopers LLP
555 California Street, Suite 3600
San Francisco, CA 94104
(415) 657-6305
 v

APPRECIATION

ADVISORS TO OUR WORK

The Corporate Strategy Board expresses its appreciation to all of the individuals and
organizations who have so generously contributed their time and expertise to our work. Their
contributions have been invaluable, and we extend our sincere thanks to all of these advisors:

Mr. Dave Bolhuis Mr. J. Brad McGee

Kimberly-Clark Corporation Tyco International Limited

Mr. C. Cato Ealy Mr. Joe Mahoney

International Paper Company KN Energy, Inc.

Mr. Doug Grant Mr. Jonathan Mason

Fleet Financial Group Xpedx

Mr. Greg Griffin Mr. Robert Redgate

Monsanto Company Talisman Energy, Inc.

Mr. John Hovis Mr. Meade Rudasill

Avnet, Inc. AlliedSignal, Inc.

Mr. Rich Kauffeld Mr. Terry Stone

Campbell Soup Company Monsanto Company

Mr. Tom Klevorn Mr. Robert Zatta

Monsanto Company Campbell Soup Company
 THE ARGUMENT

OBSERVATION #1 The record size and scope of mergers and acquisitions activity across the
1990s is characterized by a 313 percent increase in number and a more
than 1,000 percent increase in value since 1991; this acquisition activity
satisfies a range of strategic objectives and spans industries.

OBSERVATION #2 Substantial premiums—some exceeding market value by as much as

80 percent—impose new demands on combined company performance;
pressure builds on acquiring companies to implement an efficient
integration that avoids additional financial burdens.

OBSERVATION #3 Study of twenty-three highly acquisitive companies provides lessons for

other would-be acquirers; examination of common practices suggests
that careful integration planning and execution are the keys to enviable
financial performance.

OBSERVATION #4 Acquisition experts offer two pieces of advice to jump-start integration;

1) determine the degree of integration early to define the scope of
activities required, and 2) conduct integration planning during the due
diligence phase to expedite execution.
 IN BRIEF

OBSERVATION #5 Corporate Strategy Board research points to four leveraged areas that
should be addressed to increase the likelihood of successful integration
of acquisitions: Integration Leadership, Strategy Alignment, Key Talent
Identification and Employee Communication.

OBSERVATION #6 Integration Leadership—Incompatible demands of simultaneously

managing the integration and operating the businesses can overwhelm
busy executives; acquirers appoint a full-time integration leader
accountable for planning and executing the integration process, while the
business leader concentrates on managing overall business performance.

OBSERVATION #7 Strategy Alignment—Overwhelming number of integration activities

distracts integration leader’s attention from the tasks that generate the
most value, obscuring deal rationale; one successful acquirer mitigates
this risk by establishing an integration plan that aligns deal strategy with
critical integration activities, ensuring integration focus.

OBSERVATION #8 Key Talent Identification—Difficulty identifying mid-level talent in the

target company hampers retention of less visible leaders; innovative
companies draw on the insight of the acquired company’s senior
management and the performance of target employees early in integration
to highlight individuals the acquiring company cannot afford to lose.

OBSERVATION #9 Employee Communication—Poor communication concerning integration

processes and outcomes compounds employee distress and can trigger
turnover and productivity losses; astute integrators build comprehensive
communication plans that provide early, frequent and clear integration
messages.
 2 A HOUSE UNITED

REPORT FROM THE FRONT

OBSERVATION #1 The record size and scope of mergers and acquisitions activity across the
1990s is characterized by a 313 percent increase in number and a more
than 1,000 percent increase in value since 1991; this acquisition activity
satisfies a range of strategic objectives and spans industries.

The dramatic rise in M&A volume and value across the 1990s…

U.S. M&A Activity and Deal Value, 1991−1998

$1,250 $1,191 10,000

$1,000 8,000

Total Deal $750 $657 6,000

Value Number of
$356 $495
($Billions) $500 4,000 Deals
$227
$250 $176 2,000
$97
$71
$0 0
1991 1992 1993 1994 1995 1996 1997 1998

Total Deal Value in $Billions Number of Deals Source: Mergerstat, “More Than 30
Years of M&A Activity,”
http://www.mergerstat.com.

…supports a range of corporate growth objectives…

Cited Objectives for Initiating Merger or Acquisition, 1996

Access to New Markets 76%

Growth in Market Share 65%
Access to New Products 46%
Reduction of Operating Expenses 38%
Enhanced Reputation 37%
Access to Distribution Channels 33%
Access to Technical Talent 33%
Reduction in Number of Competitors 33%
Reduction in Distribution Costs 26%
Access to New Brands 24%
Access to New Technologies 23%
Access to Manufacturing Capacity 21%

0% 50% 100%

Source: PricewaterhouseCoopers, Speed Makes the Difference.

 REPORT FROM THE FRONT 3

…and spans industries

Breakdown of M&A Deal Value by Industry, U.S., 1998

Banking & Finance $214

Communications $170

Oil & Gas $154

Insurance $65

Electric, Gas, Water & Sanitary Services $65

Broadcasting $56

Computer Software, Supplies & Services $52

Drugs, Medical Supplies & Equipment $43

Retail $38

Autos & Trucks $31

$0 $50 $100 $150 $200 $250

Billions of U.S. Dollars

Source: Mergerstat, “Industry Rankings,” http://www.mergerstat.com.

4 A HOUSE UNITED

OBSERVATION #2 Substantial premiums—some exceeding market value by as much as

80 percent—impose new demands on combined company performance;
pressure builds on acquiring companies to implement an efficient
integration that avoids additional financial burdens.

Significant acquisition premiums require major improvements in

target company performance…

Fortune Analysis of Five 1998 Acquisitions

Expected
Post-
Premium Growth of Required
Acquirer/ Deal Size Acquisition
Over Market Target Growth
Target ($Billions) 2 Growth
Price Before After Deal
1 Delta
Deal
Newell/
5.8 65% 13.9% 19.2% 5.3%
Rubbermaid

Conseco/
7.1 86% 0.4% 9.3% 8.9%
Green Tree

Deutsche Bank/
8.9 42% 2.6% 7.1% 4.5%
Bankers Trust

NationsBank/
14.3 44% 10.3% 14.8% 4.5%
Barnett Banks

AT&T/TCI 26.7 48% 18.1% 20.7% 2.6%

While Newell is “a master at buying
and improving small companies,” it
has never attempted to integrate
and “turn around” a company of
Rubbermaid’s size
Integration process must account
for dissimilar banking styles at
Deutsche Bank and Bankers Trust
to support 270 percent earnings
growth required by the premium
Analysis of the different products
and markets served by these two
companies reveals growing
revenues will pose significant
post-integration challenges

1
Target company’s expected ten-year annualized growth in net operating profits after taxes (NOPAT) implied by market price.
2
NOPAT growth implied by proposed price for target company.

Source: Tully, Shawn, “Premium Priced,” Fortune.

 REPORT FROM THE FRONT 5

…lending credence to the importance M&A veterans assign to integration…

THE IMPORTANCE OF INTEGRATION

“The difference between [acquisition] success and failure is spelled by integration. It is the most important
part of the process….Integration is critical and very hard to do.”

Brian Dovey
Former President
Rorer Pharmaceutical

“We believe the [acquisition] game most often is won—or lost—after the deal. The ability to manage
postmerger integration skillfully, to capture short-term opportunities and exploit long-term integration
potential, is the core competency of successful acquirers.”

Kenneth Smith and James Quella

Consultants
“Growth Through Acquisition:
The Keys to Capturing Value After the Deal”

…as one of the key factors of acquisition success

Acquirer/Target Integration Snafus Acquisition Outcome

• Inability to integrate Snapple
• Three years after its purchase of
distribution into its Gatorade sports
Snapple, Quaker Oats divests the
drink network results in the firing or
Quaker Oats/Snapple company for less than $300 million,
resignation of key Snapple employees
a loss of $1.4 billion, leading to
and damages relations with
CEO William Smithburg’s resignation
independent distributors

• Core deposits drop seven percent in

• Misunderstanding of complex systems
Wells Fargo/First Interstate
conversion results in several systems
failures negatively impacting customer
service; situation exacerbated by low
retention of First Interstate’s managers
(more than 75 percent accept
severance packages)
the first quarter of 1997 and several
key customers withdraw accounts
• Wells fails to achieve earnings targets
in four of five quarters following the
acquisition
• Wells “loses track of” $150 million and
is forced to write it off

• Failure to coordinate complex • Union Pacific estimates that integration

integration systems changes creates
tremendous service problems;
Union Pacific/
additionally, poor communication
Southern Pacific
among the companies’ employees
snarls integration activities and
problem solving
service problems resulted in
$450 million in losses in 1997
• Several prominent Union Pacific
customers sue the company for
business interruptions caused by the
poorly executed integration

Source: Corporate Strategy Board research.

 6 A HOUSE UNITED
OBSERVATION #3 Study of twenty-three highly acquisitive companies provides lessons for
other would-be acquirers; examination of common practices suggests
that careful integration planning and execution are the keys to enviable
financial performance.
Successful acquirers rise to the integration challenge…
Company Acquisition Experience
• Tyco has pursued acquisitions as an
integral component of its growth strategy
since the 1950s.
Tyco International Ltd. • Tyco has acquired nearly 100 companies
since Dennis Kozlowski’s ascension to
$12 Billion CEO in 1992.
Diversified Manufacturing
• Under Kozlowski’s tenure, Tyco has
increased revenues every year, while
increasing its market capitalization from
$1.8 billion to $31 billion.
• Newell has completed more than
75 acquisitions, both domestic and
Newell Company
international, during the past 30 years.
$3 Billion • Newell carefully evaluates and divests
Consumer Products acquired companies’ business units that
do not fit its overall business strategy,
pooling the proceeds to fund future
acquisitions.
• Emerson’s numerous acquisitions of
small firms in the last decade have
contributed $2 billion in revenue streams
Emerson Electric Co.
since 1993; acquisitions have also
supported Emerson’s 40 consecutive
$12 Billion
years of increased earnings.
Diversified Manufacturing
• Emerson screens more than 600
acquisition targets each year, typically
purchasing less than 10.
Integration Approach
• Tyco avoids the “synergy trap” by
focusing its acquisition assessments
solely on projected cost savings, not
revenue growth. As a result, the
company directs the majority of its
integration effort at rationalizing
production costs.
• “[We do not] let people simmer in doubt
about whose job is in danger and whose
isn’t….Our obligation is to get the cost out
and get that over with quickly so we can
move on from there and get the growth
going in the company.”
Dennis Kozlowski
Chief executive officer
• Newell employs a systematic integration
process referred to colloquially as
“Newellization.” As such, it imposes its
support services and business systems
on acquired companies.
• “None of the companies I follow has been
as effective as Newell at integrating
acquisitions. They have a very
disciplined approach.”
Connie Maneaty
Bear, Stearns & Co.
• Every Emerson acquisition undergoes
a two to three year systematized
integration process that prescribes a
complete conversion of acquired
companies’ management systems and
processes.
• “My perception is that you do not fail in
[acquisition] planning. You fail in
implementation; that is the graveyard of
corporate America.”
Chuck Knight
Chief executive officer
Source: Corporate Strategy Board research.
 REPORT FROM THE FRONT 7

…and reap the rewards of their efforts

CASE BACKGROUND: CISCO SYSTEMS

Cisco Systems, with 1998 revenues of more than $8 billion and a market capitalization of more than $150 billion, is
the world’s leading supplier of networking products for the Internet. More than 25 acquisitions have fueled Cisco’s
growth since 1993.

“[Cisco] management believes there are two keys to a successful acquisition integration:
doing the homework to select the right company and applying an effective and replicable
integration process once the deal is struck.”

Glenn Rifkin
Author
“Growth by Acquisition: The Case of Cisco Systems”

Cisco Revenues, 1994 -1998 Cisco Market Capitalization, 1994 -1998

$10,000 $200
$8,459
$152.7
$8,000 62% CAGR $160
$6,440
130% CAGR
Millions $6,000 $120
Billions
of US$ $4,096 of US$
$4,000 $80
$53.5
$1,979
$33.4
$2,000 $1,243 $40
$15.3
$5.4
$0 $0
1994 1995 1996 1997 1998 1994 1995 1996 1997 1998

CISCO’S ACQUISITION AND INTEGRATION STRATEGIES

• Buy mostly small, privately held technology companies that fill a specific product or technology niche
• Integrate acquisitions rapidly and strive to ship the acquired company’s products under the Cisco label
by deal close
• Encourage employees of acquired companies to participate in subsequent integration efforts, as these
individuals possess important insights into the challenges and fears elicited by integration
• Measure acquisition success, in part, by tracking retention of acquired managers and engineers; work
hard to retain intellectual capital
• Refuse to terminate newly acquired employees without the approval of both companies’ CEOs

Source: Rifkin, Glenn, “Growth by Acquisition: The Case of Cisco Systems,”

http://www.strategy-business.com/thoughtleaders; Corporate Strategy
Board research.
8 A HOUSE UNITED

A CLOSER LOOK
OBSERVATION #4 Acquisition experts offer two pieces of advice to jump-start integration;
1) determine the degree of integration early to define the scope of
activities required, and 2) conduct integration planning during the due
diligence phase to expedite execution.

The degree of integration ranges from complete absorption…

FIRST THINGS FIRST

“The objectives for integration include, first and foremost, addressing the question, ‘What level
of integration is the company looking for?’”

Rich Kauffeld
Vice President, Corporate Development
Campbell Soup Company

SCENARIO #1: ABSORB AND ASSIMILATE

Description
Acquiring firm heavily or fully
X X assimilates target firm's
Y Y
operations into its own
Y organizational structure and
processes

X = Target Firm
Y = Acquiring Firm

CASE EXAMPLE: NATIONSBANK AND BARNETT

NationsBank’s 1997 purchase of Florida’s Barnett Banks extended its impressive streak of acquiring and
integrating regional banks in growing to be the third largest bank in the U.S. The Barnett brand name and
reputation for customer service had contributed greatly to the bank’s success; nevertheless, NationsBank
determined it could retain customers and expand its business while eliminating the Barnett brand. However, even
as it absorbed Barnett into the NationsBank “family,” the acquiring company pledged to take a “balanced
approach” in its assessment of the products and services Barnett offered.

“The Barnett brand will go away in October [1998].”

Hugh McColl
Chairman
NationsBank Corporation

Source: Ernst & Young, Mergers and Acquisitions, 237-239; “Barnett Deal Remains on
Schedule Despite Bank of America Merger,” Broward Daily Business Review ;
Corporate Strategy Board research.
 A CLOSER LOOK 9

…to a more autonomous model

SCENARIO #2: AUTONOMY OR SEMI-AUTONOMY

Description
Acquiring firm allows target
X Y X Y firm full or primary control of
its operations; combining
firms may consolidate basic
functions

X = Target Firm
Y = Acquiring Firm

CASE EXAMPLE: IBM AND LOTUS

Industry experts anticipated that IBM “would crush Lotus’s free-spirited culture” during the integration process
following the company’s $3.5 billion acquisition in 1995. However, IBM predicated its integration plan, and
acquisition success, on the need to retain the distinctive entrepreneurial environment that had allowed Lotus to
create its spreadsheet and Notes software.

“We [IBM] made the decision early on—even before acquisition—to operate Lotus as
a separate entity under Lotus management.”

Lee Dayton
Vice President, Corporate Development
IBM

Source: Ernst & Young, Mergers and Acquisitions, 237-239; Marchetti, Michelle,
“The Honeymoon’s Over,” Sales & Marketing Management ; Corporate
Strategy Board research.
 10 A HOUSE UNITED

Successful acquirers pull integration planning forward into due diligence…

CASE BACKGROUND: KN ENERGY
• KN Energy is a $2 billion revenue energy services company involved in exploration, development and processing
of natural gas and related products and services. KN operates the second largest U.S. pipeline system, by volume,
consisting of 27,000 miles of pipeline in 15 states.
• KN Energy has completed more than two dozen acquisitions in the 1990s, realizing a 425 percent increase in
net income since 1990 and a 629 percent increase in market capitalization.
• KN Energy has developed a process whereby a “MAD” Team (Mergers, Acquisitions and Dispositions) aims to
complete all integration planning by the time the deal closes (“Time 0”).

Two $100 Million Acquisition Scenarios—Without MAD Team and With MAD Team*

❶ Acquisition Without
Deal closes,
MAD Team Deal Driver begins “Time 0,” at Integration
integration planning Week 11 completed

Time in 2 4 6 8 10 12 14 16 18 20 22
Weeks

“Deal Driver” conducts majority of due Implementation and operational issues

diligence, valuation and negotiation across the not captured by Deal Driver during due
first seven weeks; Deal Driver’s desire to make diligence and planning emerge during
the purchase may compromise integrity of pre- integration, slowing the process
deal evaluation of potentially damaging issues considerably

Additional 10 weeks required

❷ Acquisition With to execute integration
MAD Team without MAD Team and
early integration planning

“Deal Driver,” “Due

Diligence Driver” and MAD Team resolves issues
“P&L Driver” convene identified as stumbling blocks; Integration
to select MAD Team Integration planning begins completed

Time in 2 4 6 8 10 12 14
Weeks

By the end of Week 3, MAD “Time 0” occurs

Team has visited target
company, completed due
diligence and developed a
list of issues that could
adversely affect the deal
at Week 8
*Acquisition timeline without the MAD Team is based on
KN Energy estimates. Acquisition timeline with the MAD
Team is based on an actual KN Energy purchase.
Source: KN Energy.
 A CLOSER LOOK 11

…while companies that stumble coming out of the gates…

ARNOLD COMPANY’S FAILURE TO PLAN FOR INTEGRATION

• Yeats Company,* a diversified manufacturing company with revenues exceeding $5 billion, sold a business unit
to Arnold Company in early 1998. The acquiring company anticipated implementing a 100-Day Integration Plan
upon completion of the deal but failed to develop a plan prior to close.
• Arnold Company had “no idea” what integration activities it needed to pursue and spent approximately 30 days
developing a plan post-close. During this period, the target company employees’ level of uncertainty and
discomfort concerning their future in the new organization rose as they received little integration information
from the acquiring company.
• The Vice President of Business Development at Yeats Company notes that ultimately, Arnold Company lost a
“fair number” of employees because of its failure to acknowledge and implement an integration plan soon after
the close of the deal.

*Pseudonym Source: Yeats Company.

…set themselves up for a post-acquisition penalty

Illustrative Calculation of Post-Deal Productivity Loss in an Acquired Company

Estimated Hours Number of Hourly Revenue Revenue Loss

Lost per Week per Employees Generated per per Week
Employee Employee

5 × 670 × $75 = $251,000

Time lost as employees Figure does not include Based on model

perform job searches, opportunity cost of lost assumptions, this figure
discuss rumors with customers, slower new represents more than
colleagues, take “sick” product development, training 13 percent of weekly
days and the like for employees in new company revenues
positions and other such
losses

ACQUIRED COMPANY ASSUMPTIONS

$100 million revenue company

$150,000 annual revenue per employee
670 employees

Source: Corporate Strategy Board research.

 12 A HOUSE UNITED

OBSERVATION #5 Corporate Strategy Board research points to four leveraged areas that
should be addressed to increase the likelihood of successful integration
of acquisitions: Integration Leadership, Strategy Alignment, Key Talent
Identification and Employee Communication.

I. II.
Integration Leadership Strategy Alignment

Challenge
Business leaders are often responsible for both
business performance and integration;
consequently, they devote only a portion of their
time to the complex demands of integration.
Challenge
Integration activity lists become so
overwhelming that integration leader loses
sight of acquisition’s strategic drivers.

Impact
Part-time integration leadership hinders
completion of integration process, stymieing
achievement of financial and/or strategic
objectives associated with acquisition.
Impact
Integration team and task forces spend
disproportionate amount of time executing
activities with minimal strategic impact, diverting
resources and attention away from the projects
that constitute the rationale for the acquisition.

Profiled Practice Profiled Practice

DEDICATED INTEGRATION LEADER VALUE CAPTURE SUMMARY

The complexity of integration program
management requires a full-time leader who
focuses exclusively on directing the process.
Creating and disseminating a document that
focuses the integration team on the acquisition
value drivers ensures prioritization of critical
activities. Regularly requiring the integration
leader to apprise the CFO and Board of
Directors of progress against documented
strategic integration activities mitigates the risk
of task misprioritization.

III.
Key Talent Identification
Challenge
Acquired companies possess mid-level
personnel who provide “quiet” leadership.
Integrators often fail to identify these individuals
in a timely manner.
Impact
Failure to identify critical middle managers and
implement targeted retention packages leads to
defection. Loss of accompanying institutional
knowledge and leadership manifests in project
delays, employee uncertainty and low morale.
Profiled Practice
TWO-PRONGED TALENT SEARCH
1) Interviewing senior executives in the target
company regarding key mid-level personnel,
and 2) evaluating employees’ performance on
integration teams increases the probability of
identifying “hidden” talent, enabling the
acquiring company to target and retain these
valuable employees.
A CLOSER LOOK 13
IV.
Employee Communication
Challenge
Acquirers are aware of the importance of
communication when integrating an acquired
company; however, navigating the minefield of
potential communication errors proves daunting.
Impact
At minimum, communication missteps create
uncertainty among employees and result in
depressed productivity. Perhaps most
damaging is the cost of employee defection
associated with communication errors.
Profiled Practice
COMMUNICATION GUIDELINES
Building comprehensive communication plans
that provide early, frequent and clear messages
facilitates a smoother and more productive
integration process.
14 A HOUSE UNITED

I. INTEGRATION LEADERSHIP

Already overwhelmed by a tremendous number of responsibilities …

Sample Calendar for Business Executive

Customer Business Staff

Commitments Development Management

Week of 12/2/98
Monday
8 Budget meeting with senior
management team
1 Lunch with key customer
4 Interview VP, Sales candidate
6 Conference call with CEO
Thursday
9 Meeting and presentation to
prospective customers
11
2 Meet with department directors
5 Deliver performance review

Tuesday Friday
8 Review acquisition opportunities 9
Conference call with analysts
with VP, Business Development
1 Conference call with 1 Review 1999 marketing strategy
key customers with VP, Marketing
3 Out of office: Tour site for new 2 Evaluate Chinese joint venture
manufacturing facility 5 Dinner for senior management
of newly acquired company
Wednesday
9 Meet with consultants Sat/Sun
11 Meet with VP, Operations to 9 9
review manufacturing schedule 12 12
2 Meeting with Corporate CFO 2 2
5 5 5

External
Accountability to Involvement in Strategy
Constituent
Senior Executives Infrastructure Development
Interaction
 A CLOSER LOOK 15

…business executives struggle to balance integration

and business demands
INTEGRATION DEMANDS BUSINESS DEMANDS
• Coordination of integration resources—
e.g., staff task forces, allocate
• Customer commitments
expenditures for integration tasks
• Business development
• Introduction of target company’s senior
management to the acquiring • Staff management
organization’s leaders—e.g., coordinate
• Accountability to senior
retreats, working meetings and
executives
“exchanges” for the companies’
management teams and key employees

• Development and presentation of • Involvement in infrastructure

communication plan—e.g., respond to
employee questions or concerns, ensure • Strategy development
distribution of integration updates and/or • External constituent
schedule changes interaction
• “Nuts and bolts” of integration program
management—e.g., meet with task forces,
integration team members and senior
management to check and communicate
progress
• Review of integration process—
e.g., assess progress toward achievement
of objectives and milestones

DIVIDING THE WORK

“We believe wholeheartedly that measuring the synergies and thinking about paying back the premium
is absolutely a fundamental driver of success [in acquisitions]. The problem is the inherent difficulty in
this, and that is why there are people who drive the P&L versus people who drive the integration.”

Vice President & General Manager, Advanced Technologies

Coleridge Company (pseudonym)
Source: Corporate Strategy Board research.
 16 A HOUSE UNITED

OBSERVATION #6 Integration Leadership—Incompatible demands of simultaneously

managing the integration and operating the businesses can overwhelm
busy executives; acquirers appoint a full-time integration leader
accountable for planning and executing the integration process, while the
business leader concentrates on managing overall business performance.

Successful acquirers appoint a dedicated integration leader…

Sample Calendar for Integration Leader

Week of 12/2/98
Monday Thursday
8 Integration Team Meeting— 7 Breakfast meeting with
Review task force performances “Change Champions”
Integration 10 Review, update and edit
1 Lunch with disgruntled VP Oversight of
Performance integration Web site
3 Review resource allocation plan Integration
Accountability 2 Meet with VP, HR
5 Conference call with business- Communication
Review employees’ first 100-day
unit head and corporate CEO 4
performance evaluations
Tuesday Friday
7 Out of office: Day of meetings 8 Meetings with task force leaders
and workshops at newly to review integration progress
acquired company
1 Integration Team Meeting— Integration
12 Update integration agenda for Program
2 the following week
5
Management
Organizational 5 Dinner for senior management
Networking of newly acquired company
Wednesday
8 Out of office: Meetings Sat/Sun
1 Meet with IS director—Discuss 9 9
IS conversion problems 12 12
3 Meet with R&D directors 2 2
5 5 5

…who meets a rigorous set of standards…

Composite Profile for Integration Leader

Program and/or Employee : Nick Hayes Career Indicator :


project management
experience is crucial
prerequisite for
integration leaders.
Integration leader
exhibits effective
interpersonal skills and
an ability to work with
external constituencies.
In addition, integration
leader has credibility
among the various
stakeholders and
integration participants.
Early Middle Late
Professional Experience : One interviewed
• Engineer, James Motor Company (JMC), 1983-Present business executive
• Chief Vehicle Engineer, Trucks, 1996-Present stresses that the
• Steering Committee member, JMC Quality 2000 Program, integration leader
1994-1997 must be someone in
• Team Leader, J-200 Truck, 1992-1996 “the mid-stream of
• Team Leader, J-170 Truck, 1989-1992 his business career.”
• Redesigned “J” series dashboard module in conjunction with This person will have
OEM and customer groups, 1986-1988 accumulated
sufficient business
Additional Experience : wisdom while
• Founder and Director of JMC’s Engineering Mentor Program,
remaining receptive
1990-Present
to “new” and evolving
• Member, National Truck Advisory Panel, 1995-Present
• Chairman, Truck Safety Board of America, 1993-1996
business practices.
• Ph.D. (expected) in Materials Science, 1999
• JMC’s “Engineer of the Year” in 1990, 1992 and 1996

Source: Corporate Strategy Board research.

 A CLOSER LOOK 17

…and is held responsible for the integration process, not

business performance

CASE BACKGROUND: GE CAPITAL

• GE Capital is a $33 billion revenue subsidiary of General Electric offering personal and business financing
worldwide.
• Since 1993, GE Capital has acquired more than 100 companies that have increased the company’s employee
count by 30 percent and resulted in a doubling of net income.
• While developing its acquisition integration competency across the 1990s, GE Capital identified the role of
the integration leader—a full-time, dedicated position concentrating on integration process, not business
performance—as a key component of a successful integration program.

CASE-IN-BRIEF: THE EVOLUTION OF INTEGRATION LEADERSHIP AT GE CAPITAL

The Painful Realization The Evolution of a Role

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

• GE Capital acquires
Burton Group Financial
Services (BGFS), the
largest operator of
retail credit cards in
Europe, for
$330 million
• GE Capital’s retail
credit-card business
integrates BGFS
without a dedicated
integration leader;
retail business head
oversees the process
• BGFS remains plagued by • Since the company’s
poor performance and 1994 re-integration of
fails to meet GE Capital BGFS, every GE
expectations two years Capital acquisition has
after its initial integration benefited from a full-
time integration leader
• GE Capital re-integrates
the unit, appointing a
dedicated integration
leader to manage the
process

Business and Integration Business Leader Integration Leader

Leader

Source: Ashkenas, Ronald, et al., “Making the Deal Real: How GE

Capital Integrates Acquisitions,” Harvard Business Review.
18 A HOUSE UNITED

II. STRATEGY ALIGNMENT

Strategists pursue acquisitions with high-level objectives in mind…
Deal Rationale for Keats Company’s Acquisition of Whitman Foods*

Our acquisition of Whitman Foods

enables us to enter new frozen food
product categories. In addition, we are
acquiring an organization that will help
strengthen our food service business.

ACQUISITION VALUE DRIVERS

• Unique custom recipe capabilities (new product development)
• Direct sales model that facilitates close customer relationships

Strategists at Keats Company • Distribution model that employs next-generation automated tracking

*Case disguised

…leaving the integration team to contend with a plethora

of post-acquisition activities

SELECTED INTEGRATION ACTIVITIES

Acquisition value driver

Integration Leader
Link
Link business HRIS
Link reporting systems
planning
Transfer next-generation calendars Meet
distribution technology Replace
with
company
Integration Team union
signage
Member leaders
Devise Revise
new sales
Select salary territories
new Redesign workspace scales Transfer
advertising to accommodate new 401K Convert
firm employees plans Integration Team business
Member forms
Meet with employees
Introduce new product to address concerns Apply
development teams and Link and answer questions new
begin to integrate payroll direct
Initiate systems sales model
onboarding
program

Acquisition value driver Integration Team Acquisition value driver

Member
 A CLOSER LOOK 19

The critical integration tasks compete for time and resources…

Integration activities that drive acquisition

success, which are often challenging tasks, do
Employees involved in not receive the necessary support and attention
integration can lose track
of the acquisition’s
strategic goals and
complete the “easy” tasks
Transfer next-generation
distribution technology

Introduce new product

development teams and
begin to integrate

Apply
new
direct
sales model

…and failure to prioritize them can doom an acquisition

THE PERILS OF POOR PRIORITIZATION

“Not having the signs on the door is a ‘nuisance factor.’ It will get in the way, it will slow things down, it is
an annoyance. But if the signs get on the door a week late, it is not going to kill the deal. However, if the
sales forces do not get combined and you have people selling multiple products under different brand
names, confusing the customers, then that can kill a deal and it can kill the integration.”

Ronald Ashkenas
Managing Partner
Robert H. Schaffer & Associates

“Companies very rarely have a clear sense of priority. They pursue ‘obsessive listmaking’ and develop
encyclopedic, comprehensive lists of things to do. The list becomes so overwhelming that people pick off the
easy things to do, and not necessarily the things that are going to generate value. People waste time and
resources on these activities, and pretty soon the whole integration falls through the cracks….Successful
acquirers employ ruthless prioritization of integration activities.”

Mark Feldman
Partner
PricewaterhouseCoopers
Source: Corporate Strategy Board research.
 20 A HOUSE UNITED

OBSERVATION #7 Strategy Alignment—Overwhelming number of integration activities

distracts integration leader’s attention from the tasks that generate the
most value, obscuring deal rationale; one successful acquirer mitigates
this risk by establishing an integration plan that aligns deal strategy with
critical integration activities, ensuring integration focus.

Monsanto’s Value Capture Summary links the strategist’s

vision with the integration leader’s priorities…
CASE BACKGROUND: MONSANTO COMPANY
• Monsanto is a $7.5 billion revenue company active in three principal business areas: agriculture, pharmaceuticals
and food ingredients.
• Monsanto’s Value Capture Team is a small group of employees who possess extensive business experience
within a number of functional areas critical to integration success. This team assists the integration leader in
compiling the Value Capture Summary, which furnishes Monsanto executives with an acquisition “snapshot.”

CASE-IN-BRIEF: MONSANTO’S USE OF THE VALUE CAPTURE SUMMARY

Integration Planning Integration Execution

Summary Creation Dissemination Accountability

Integration
Leader

Due Diligence Team

VCS VCS VCS
,,

The integration leader works with
the due diligence team to compile
the Value Capture Summary
(VCS) and develops a clear
understanding of the acquisition
value drivers
Integration leader distributes
pertinent portions of the VCS to
integration team members with
value activities prioritized; the team
discusses impact of VCS targets
on integration execution
The integration leader should
report integration progress
vis-à-vis the VCS targets to
Monsanto’s CFO four times per
year, and this information is
reported to the Board of Directors
twice per year

VALUE CAPTURE SUMMARY BENEFITS

“The Value Capture Summary allows team members to focus on issues that they need to tackle during integration.
It is a focus document that reminds everyone what they need to be doing so that the company can start making
some money from the deal—it helps the team reduce the process to actionable integration activities.”

Tom Klevorn
Value Capture Team
Source: Monsanto Company. Monsanto
 A CLOSER LOOK 21

…ensuring that the integration team focuses on the critical tasks

Value Capture Summary*

I. Strategic Rationale
• Develop capability for gene sequencing that reduces product development time
• Build “bench strength” of scientists performing biomedical research
• Gain access to emerging cardiac disease-management methodology

II. Deal Terms

• Monsanto will purchase 55 percent of Tennyson Pharmaceutical for $600 million cash
• Monsanto retains an option to purchase the remaining 45 percent of Tennyson, with
stock or cash, on or before December 31, 2000

III. Deal Participants

• Business Development : Todd Bland, Beverly Coughlin, John Farber
• M&A Team : Don Stewart, Jeff Fast, Patricia Whitney, Leslie Sacks
• Value Capture Group : Melissa Simonds, James Willeford, Tom Day, Julie Evans
The strategic drivers
IV. Financial Targets
of the acquisition
The strategists and • Financial projections based on combined figures for Monsanto’s Life Sciences unit are converted into
and Tennyson Pharmaceutical
M&A team generate specific milestones
these targets, which and objectives for
serve as goals for 1999 2000 2001 2002 the integration
the integration Revenues $3,100 $3,565 $4,171 $4,963 leader and the
leader and the SG&A $988 $1,047 $1,110 $1,221 business leader to
business leader achieve during, and
R&D Expenses $248 $260 $273 $287 subsequent to,
to achieve
Net Income $140 $153 $171 $191 integration
(Dollars in Millions)
V. Milestones
These milestones
are activities that • Reduce product time-to-market by 30 percent over 3 years
• Increase number of sequenced genes by 50 percent over 3 years Critical integration
should be tracked activities and foci
• Increase number of patented gene sequences by 50 percent over 5 years
and achieved during
• Establish relationships with half of the top 10 HMOs in North America to provide emerge in the
the two to three cardiac disease-management services by 2001 “Milestones” and
years following the • Increase R&D spending 5 percent per year through 2005 “Operational
acquisition Objectives” sections
VI. Operational Objectives
• Reduce Phase 1 product development time by 25 percent within 18 months
• Reduce non-scientist headcount by 500
• Increase sales force by 100 to support cardiac disease-management system
• Develop additional lab space at St. Louis, Boston and Santa Cruz research facilities
• Consolidate redundant research facilities in Delaware and northern Virginia
• Achieve 3 percent savings in equipment procurement

VII. Integration Leadership and Plans

• Integration Leader : Edward Morris
• Business Leader : Andrew Kramer

*Hypothetical acquisition case example

Source: Monsanto Company.
 22 A HOUSE UNITED

III. KEY TALENT IDENTIFICATION

Beyond the top management level, acquiring companies

find it difficult to identify key personnel quickly…

Representative Acquisition Target Organizational Structure

Relatively easy to
identify top three to
five managers to CEO
retain…

SVP, Business SVP, SVP, Sales & SVP, Human

CFO Operations Marketing Resources
Development

…but far more difficult to

identify critical employees
lower in the organization

LOSING SIGHT OF TALENT

“Two levels into the organization, you have key players and you do not know how important they are
until they are gone. During integration, you are doing a lot of things in a short time frame…folks slip
through the net.”

Rich Kauffeld
Vice President, Corporate Development
Campbell Soup Company
 A CLOSER LOOK 23

…which leads to the potential loss of organizational “connective tissue”

Frank Peters, brand manager…

FRANK PETERS’ PROFILE

• 14 years experience at company
• Brand manager of a mature, low-profile
product line
• Rotated through six product lines before
his appointment as a brand manager
• Performance reviews note that Frank is
a “solid to above-average performer”

…resource “hound”… …networker… …and fount of institutional knowledge

ASSOCIATE BRAND MANAGER INTERNAL CONSULTANT NEW BRAND MANAGER

Brad encounters difficulty sourcing
two key raw materials for his product
line. Frank, who had held Brad’s
position several years earlier,
identifies a number of alternate
suppliers of which Brad had not
been aware.
Joan, who is trying to garner support
for a product initiative she has
undertaken, does not know anyone
on the company’s new product
development team. However, a
former colleague of Frank’s heads
the team, and Frank arranges a
meeting for Joan.
Arlene relies on Frank for help in
understanding the myriad types of
analyses necessary to build a
business case to support a
direct-mail program for the product
she manages.

THE “HIDDEN” COST OF TALENT LOSS

“When key people leave, they leave behind a learning curve, a leadership gap and stalled projects. They
take with them proprietary knowledge of how the company does business and take it to the competition.”

Mark Feldman
Partner
PricewaterhouseCoopers

Source: Corporate Strategy Board research.

 24 A HOUSE UNITED

OBSERVATION #8 Key Talent Identification—Difficulty identifying mid-level talent in the

target company hampers retention of less visible leaders; innovative
companies draw on the insight of the acquired company’s senior
management and the performance of target employees early in integration to
highlight individuals the acquiring company cannot afford to lose.

Implementing a two-pronged approach…

FIRST PRONG

❶ Assemble and train a team of three or four interviewers…

Interviewers possess
HR selects and
functional or technical
trains interviewers
expertise necessary to
identify talent

❷ …who interview top-level management as early as possible…

QUESTIONS

1. Who has the critical relationships with the company’s

Questions attempt to customers?
uncover employees 2. Who do you select to give presentations to the
who demonstrate company’s most difficult customers?
3. Who do you assign projects to when they need to be
“quiet” leadership completed quickly and thoroughly?
4. To whom do you assign the most difficult projects?
5. Who do the line employees seek out for informal
advice?

❸ …and then cross-calibrate results to identify one set of hidden talent

Employees Cited as “Critical”
n
t M ma

bs
rs

ill
ire

eo
ew
ll

s
tH

ob
te

re

Su h e r
n

la

cL
N
Pe

ro

ur

C
re
C

it
Ba

a
M

ga

n
W
n

th
k

Interviewers
sa
so
an

ot
y

ar

ar
ff

m
Am

Sc
Je

Ja
Fr

Ji

David Waters x x x
Kathy Rabin x x x
Randy Zell x x x
Dale Smith x x x
Abby Green x x x
Mike Vachow x x

Names of important contributors

and mid-level talent appear
consistently in conversations with
top management and should be
targeted for retention

Source: Ronald Ashkenas; Corporate Strategy Board research.

 A CLOSER LOOK 25

…enables acquirers to quickly identify a broad array of mid-level talent

SECOND PRONG
❶ Place mid-level employees of target company on integration teams…

Marketing Team

Benefits Team

Purchasing Team

❷ …to work on the first “100-day projects”…

Large number of projects Project Day 0 20 40 60 80 Day 100

occur during the first A1
100 days that present the A2
acquiring company with A3
B1
numerous opportunities
B2
to evaluate target C1
company employees C2
C3
C4

❸ …and then assess employee talent across the first 100 days

Performance Pat Max David Robert Jennifer Aaron

Assessment: Team A Kotok Zwain Pottharst Lundgren Zander Spenner

Problem-Solving Ability 4 2 4 3 3 4
Decision-Making Ability 4 2 2 3 2 5
Business Knowledge 3 3 4 3 3 4
Teamwork Skills 5 1 2 4 3 2
Communication Skills 4 2 3 3 3 3
Total 20 9 15 16 14 18
5 = Star Performer
3 = Average Performer
1 = Weak Performer Acquiring company conducts
post-project performance
assessments to identify key
employees who may have escaped
the purview of senior management

Source: Ronald Ashkenas; Corporate Strategy Board research.

26 A HOUSE UNITED

IV. EMPLOYEE COMMUNICATION

Communication missteps have painful repercussions

THE HIGH COST OF INEFFECTIVE COMMUNICATION

“Assuming you have a [integration] plan, the biggest integration failure is failing to communicate to
people what to expect. Because no matter what your intention is, uncertainty is a far worse enemy of an
integration plan than knowledge of a clear path.”

Cato Ealy
VP, Business Development and Planning
International Paper

“Failure to communicate timely integration plans or implement integration quickly creates an air of
uncertainty around the people who might be affected by integration. So what happens is the good ones
[employees] leave….The companies who wait on this consider it a plus because they’re saying, ‘Wow,
we thought we were going to have to pay severance to all these people but attrition has taken its course.
Now our severance is only half as big and we gave employees time to find jobs.’ But really, they’re
losing the people that they don’t want to lose.”

Jonathan Mason
Integration Team Member
Xpedx

“Communication has to occur early and often—what the [integration] process is, who’s involved, when
decisions are going to be made, how employees are going to fit in…”

Robert Redgate
VP, Human Resources and Corporate Services
Talisman Energy

“The most frequent driver of [an acquisition-related] performance dip is communication—either too
little of it or too much of the wrong sort.”

A.T. Kearney
“Flawless Execution”

Source: Corporate Strategy Board research.

 A CLOSER LOOK 27

OBSERVATION #9 Employee Communication—Poor communication concerning integration

processes and outcomes compounds employee distress and can trigger
turnover and productivity losses; astute integrators build comprehensive
communication plans that provide early, frequent and clear integration
messages.

Four common communication landmines…

Landmine #1: The acquiring company limits communication with its own employees
Offering One-Time and the target company’s employees to one overwhelming
Communication “starburst” of information

Landmine #2: Management’s communication of acquisition and integration

Misunderstanding the information fails to address areas of concern and/or relevance to the
Audience audience at whom it is directed

Landmine #3: Numerous individuals are involved in communicating integration

Failing to Send a information to employees, leading to confusion regarding the
Consistent Message accuracy of messages and objectives

Landmine #4:
The acquiring company waits until it can provide answers to any and
Waiting to Craft the
all integration questions before communicating with employees
“Perfect” Message

…can have explosive cost implications

Illustrative Calculation of Costs Resulting From Post-Acquisition Middle Management Turnover

10 × $144,800 = $1.44 MILLION + ?

“Out-of-Pocket” $33,800
Replacement Costs
• Derailed projects
Lost Productivity—
Self
$45,000 • Loss of institutional
knowledge

Lost Productivity— • Loss of customer

$66,000 relationships
Others

Assumes annual salary of $60,000

Loss of just …at $144,800 each in …stacks up to a …before accounting

10 middle replacement and $1.44 million loss… for extra, indirect
managers… productivity costs… turnover costs

Source: Corporate Leadership Council, Workforce Turnover and Firm

Performance ; Corporate Strategy Board research.
 28 A HOUSE UNITED

LANDMINE #1: OFFERING ONE-TIME COMMUNICATION

Early retirement opportunities…

COMMUNICATION BREAKDOWN
Selected plant rationalization…
New senior management includes … • Company communicates soon after
Presence in 50 countries…
deal close with little or no follow-up;
No change to 401-K…
the volume of material overwhelms
Communication employees of both the acquiring and
New corporate strategic vision…
Plan target companies.

New email system…

?????? • Employees struggle to sift through
the barrage of information to find
what is personally relevant to them.
Integration cost savings of…
• Employees comprehend a fraction of
overall message; moreover they
leave the communication forum with
Employee no method for locating information
needed at a later date.

PREVENTIVE MEASURES
• Prioritize information communicated to employees—Understand the type of information that
employees need at the different stages of integration
• Communicate messages several times—Articulate integration messages to employees several times
to ensure message retention
• Establish a “transparent, ongoing and two-way” communication process—Create a process or
forum that provides employees with regular integration updates and allows them to pose questions to
the integration leader and/or team

“One of the mistakes that companies make is to think about it [integration communication] as a
one-time thing. They’ll [management] have a big starburst of communication and will start out
with a road show and town meetings and letters. They’ll get it all out there in the beginning of
the deal and then nobody hears from them for a while. So everyone sits around wondering,
‘Now what are they doing? Now they’re probably thinking about how to get rid of us.’”

Ronald Ashkenas
Managing Partner
Robert H. Schaffer & Associates

Source: Corporate Strategy Board research.

 A CLOSER LOOK 29

LANDMINE #2: MISUNDERSTANDING THE AUDIENCE

Our vision for these two

COMMUNICATION BREAKDOWN
great companies is… • Management’s integration messages fail to
address the issues of greatest importance to
employees, increasing their level of uncertainty
and confusion regarding their roles and/or
opportunities in the integrated company.
Business Leader
Will we still • Management exacerbates employee anxiety by
have a dental
plan? articulating acquisition goals and benefits, while
failing to acknowledge the difficulties and
challenges that emerge during the period of
transition.
• Acquiring company neglects to communicate
with key partners (e.g., customers, suppliers)
concerning the acquisition, resulting in the loss
and/or reduction of business opportunities.
Employees

PREVENTIVE MEASURES
• Understand the audience’s needs—Account for the different needs and priorities of the
constituencies to be addressed; for example, early in the integration process, recognize that
employees are more concerned with their job status, compensation and benefits than with deal
strategy or rationale
• Offer an honest message to employees—Communicate both positive and negative news to
employees regarding integration to build trust and credibility; employees fear uncertainty more
than bad news and will see the need for impending changes even if management fails to
acknowledge them

“Too often, the blitz of communication….involves management sending out information and
memos based on what it feels is important.”

Alan Culler
Gemini Consulting

Source: Corporate Strategy Board research.

 30 A HOUSE UNITED

LANDMINE #3: FAILING TO SEND A CONSISTENT MESSAGE

COMMUNICATION BREAKDOWN
• Inconsistency in early integration messages and
We will be information proves dangerous as employees “read
evaluating all of our site between the lines” in seeking discrepancies that
options before making any
staffing decisions. corroborate their fears; moreover, employing
numerous points of contact for communication
may compromise information integrity, causing
frustrated employees to leave the firm.
Head of Operations,
Acquiring Company We will offer early • The mixed messages that employees receive spawn
retirement packages to rumors that affect employee productivity and
employees who qualify for
them. morale, adversely impacting the integration
process.
• “Communication blockers interpret
Head of HR, [communication] activities by the post-acquisition
Acquiring Company
I heard they are
integration team in their own interest….For
closing all sites with less instance, you [acquirer] communicate that you’re
than 50 employees. But going to consolidate and reduce headcount in
they said I could keep a
few key staff, like you. finance and IT, and then at the target you get a
manager who goes out and says, ‘Yeah, I hear
?!?!
them, but I’m going to fight for your [target
employees’] jobs,’ when he doesn’t have the clout
Line Manager, to do so. So then when the deadline comes and
Target Company
you [reduce headcount], all of a sudden you face a
lawsuit or disgruntled workers because the [target
Adam Piper, company] boss said they could keep their jobs.”
Target Company Line Employee

VP & GM, Advanced Technologies

Coleridge Company

PREVENTIVE MEASURES
• Streamline information flow—Appoint a single individual (in many cases, the integration leader) to
serve as the “mouthpiece” for the communication of integration information; this person should be
identified as early in the integration process as possible and should be accessible to all integration
constituencies
• Establish a clear communication channel—Develop and publicize a clear process for information that
enables a consistent and honest response to integration questions and concerns
• Involve senior management in integration communication—Include senior management in the
presentation of the integration communication plan to ensure that the “right” messages are conveyed to
employees and to highlight management’s interest in and commitment to the integration process

Source: Corporate Strategy Board research.

 A CLOSER LOOK 31

LANDMINE #4: WAITING TO CRAFT THE “PERFECT” MESSAGE

12
9 3
6

COMMUNICATION BREAKDOWN
Integration
Leadership • The acquiring company’s failure to
communicate early in the integration process
can generate rumors that hamper employee
effectiveness, decrease confidence in the
integration management team and breach the
trust of employees who feel that they have
It has been 3 weeks been excluded from the integration process.
since the deal closed,
and we have not • Integration generates many questions that
heard a word. cannot be answered definitively early in the
What are process. The acquiring company and the
they doing integration leaders must acknowledge these
in there!?
questions, even if they can not furnish
Employees
answers to them.
• Frustrated by a lack of information, key
employees (i.e., those the acquiring company
wants to retain) leave, perhaps taking
positions with the acquiring company’s
competitors.

PREVENTIVE MEASURES
• Communicate early in the integration process—Communicate with employees early, even if it
requires acknowledging that not all of the employees’ questions can be answered satisfactorily at that
point in time
• Communicate and update integration information in “real-time”—Develop a process or document
that relates integration information and updates to constituents as quickly as possible

“Eighty percent of integration problems result from the failure to communicate to people
regarding compensation, benefits, job status, etc., early enough. Employees are concerned
about their own situation and ask themselves, ‘At the end of the day, what’s in it for me?’”

Tom Klevorn
Value Capture Team
Monsanto

Source: Corporate Strategy Board research.

32 A HOUSE UNITED

BIBLIOGRAPHY
Ashkenas, Ronald, N., Lawrence J. DeMonaco and Suzanne C. Francis. “Making the Deal Real:
How GE Capital Integrates Acquisitions.” Harvard Business Review (January-February 1998).

A.T. Kearney. Flawless Execution: A Monograph on Post-Merger Integration. Chicago: A.T. Kearney,
1997.

“Barnett Deal Remains on Schedule Despite Bank of America Merger.” Broward Daily Business Review
(14 April 1998): A1.

Barr, Stephen. “The Morning After: How to Prevent a Post-Acquisition Hangover.” CFO (July 1997).

Bartholomew, Doug. “Getting Off Track?” Industry Week (5 October 1998).

Byrne, John A. “The Corporation of the Future.” Business Week.

http://www.businessweek.com/1998/35/b3593034.htm (11 September 1998).

Chakravarty, Subrata N. “Deal-a-month Dennis.” Forbes Magazine.

http://www.forbes.com/forbes/98/0615/6112066a.htm (8 September 1998).

Clark, Drew. “Merger Milestones: NationsBank Absorbs Barnett.” The American Banker (16 July 1998).

Clark, Drew. “Wells Spells Out 1st Interstate Merger Difficulties.” The American Banker (22 July 1997).

Clemente, Mark N. and David S. Greenspan. “Keeping Customers Satisfied While the Deal Proceeds.”
Mergers & Acquisitions (July-August 1997).

Corporate Leadership Council. Workforce Turnover and Firm Performance: The New Business Case for
Employee Retention. Washington D.C.: The Corporate Advisory Board Co., 1998.

Ernst & Young. Mergers & Acquisitions, Second Edition. New York: John Wiley & Sons, 1994.

Feldman, Mark. “Disaster Prevention Plans After a Merger.” Mergers & Acquisitions
(July-August 1995).

Greengard, Samuel. “You’re Next: There Is No Escaping Merger Mania!” Workforce (April 1997).

Ihle, Jon. “A Formidable Challenge.” Bank Marketing International (October 1997).

Kupfer, Andrew. “The Real King of the Internet.” Fortune.

http://www.pathfinder.com/fortune/1998/980907/cis.html (8 October 1998).

Marchetti, Michele. “The Honeymoon’s Over.” Sales & Marketing Management (June 1997).

Marks, Mitchell Lee, and Philip H. Mirvis. “Revisiting the Merger Syndrome: Dealing with Stress.”
Mergers & Acquisitions (May-June 1997).
 BIBLIOGRAPHY 33

Mercer Management Consulting. Making Mergers Work for Profitable Growth: The Importance of
Pre-Deal Planning About Post-Deal Management. Chicago: Mercer Management Consulting, 1997.

Mergerstat. “More Than 30 Years of M&A Activity.” http://www.mergerstat.com (4 January 1999).

Mergerstat. “Industry Rankings.” http://www.mergerstat.com (4 January 1999).

Norton, Leslie P. “Merger Mayhem: Why the Latest Corporate Unions Carry Great Risk.” Barron’s.
http://interactive.wsj.com/archive/retrieve (24 September 1998).

PricewaterhouseCoopers. Speed Makes the Difference: A Survey of Mergers & Acquisitions. 1997.

Rifkin, Glenn. “Growth by Acquisition: The Case of Cisco Systems.” Strategy & Business.
http://www.strategy-business.com/thoughtleaders/97209/page1.html (24 September 1998).

Rifkin, Glenn. “Post-Merger Integration: How IBM and Lotus Work Together.” Strategy & Business.
http://www.strategy-business.com/casestudy/98305/page1.html (24 September 1998).

Sirower, Mark L. The Synergy Trap: How Companies Lose the Acquisition Game. New York:
The Free Press, 1997.

Smith, Kenneth W. and Susan E. Hershman. “How M&A Fits Into a Real Growth Strategy.”
Mergers & Acquisitions (September-October 1997).

Smith, Kenneth W. and James A. Quella. “Seizing the Moment to Capture Value in a Strategic Deal.”
Mergers & Acquisitions (January-February 1995).

Talley, Karen. “Lessons from Barnett Merger for the New BankAmerica.” The American Banker
(28 October 1998).

Tully, Shawn. “Premium Priced.” Fortune (11 January 1999).

“Union Pacific Corporation.” Standard & Poor’s Stock Reports (15 August 1998).

Zweig, Phillip L., et al. “The Case Against Mergers.” Business Week (30 October 1995).
34 A HOUSE UNITED

PROFESSIONAL SERVICES NOTE

The Corporate Strategy Board has worked to ensure the accuracy of the information it provides to its members.
This project relies upon data obtained from many sources, however, and the Board cannot guarantee the accuracy of
the information or its analysis in all cases. Further, the Board is not engaged in rendering legal, accounting or other
professional services. Its projects should not be construed as professional advice on any particular set of facts or
circumstances. Members requiring such services are advised to consult an appropriate professional. Neither the
Corporate Executive Board nor its programs is responsible for any claims or losses that may arise from any errors or
omissions in their reports, whether caused by the Corporate Executive Board or its sources.