Before technologists can educate – they must be educated themselves. If no in-house Divestiture experience exists, hire an expert on your staff or hire a consulting company to help guide you through the process. The benefits will far outweigh the cost.

Topics technology organizations need to be at a minimum knowledgeable in:

1) Divestitures in general and the potential impact to technology resources
2) Legal, Compliance, Regulatory, Risk and Information Security requirements as related to separating the business unit
3) Divestiture Due Diligence process
4) Transition Service Agreement (TSA)
5) Licensing Agreements

Once technology organizations have been educated on the above topics, the below areas need to be in place or documented prior to approaching the Deal Team:

1) Executive Sponsorship
It is important that technology organizations have the appropriate executive sponsorship and involvement that can provide the Deal Team with guidance on contractual obligations being considered in the APA.
2) TSA Services
Prepare of list of TSA services that are typically included and excluded in a divestiture and brief rationalization or impact. The excluded services may include electronic mail, mobile phones, and desktops.
3) Licensing
Hardware and software licensing can be a considerable expense if included in the deal and can have real impact to the bottom line of the deal. There is a distinct difference between a Right to Use license versus transfer of a license.
4) Technology Assets
Prepare a list of infrastructure and/or application assets that cannot be included in the deal. These assets may include computers that are leased or applications that span other areas of the company that must remain behind to support the remaining business.
5) Timelines required to complete separation
Depending on the requirements from Legal, Compliance, Regulatory, and Information Security, there may be significant amount of work required to separate the business unit prior to the Closing Date. Activities may include movement of people, application logical or physical separation, and data/voice network installations.

In closing, it is important that the team that is negotiating the Deal with the buyer must understand the implications from a monetary as well as timing perspective prior to signing the Asset Purchase Agreement. It is the responsibility of the Technology leadership to understand the scope of the Divestiture in terms of people and technology, and weigh in on the impacts on the ability to execute the pre-LD1 activities.  Not to do so, may result in increased expense to the selling company and inability to meet the contractual obligations.

A few years ago, I was discussing this phenomenon with the CEO of one of our clients. His company had grown almost entirely through acquisition, and for several years the company had experienced revenue growth rates exceeding 20%. However, the company had plateaued with respect to earnings, and looking at their overall performance it became clear to him (and to the Wall Street analysts that watched his company) that a great deal of money had been left on the table. Working with that CEO, I developed a model called the ACL Life Cycle. Understanding and using the ACL Life Cycle has proven enormously beneficial to clients depending on an M&A strategy for continued growth.

The ACL Life Cycle

The ACL Life Cycle describes the maturation process of companies who grow substantially through acquisitions and mergers. Using the ACL model, we can clearly identify the company’s current position. Knowing that position, and then looking forward at the company’s financial objectives through the lens of their business strategies, the specific actions that are needed become clear. Those actions can then be formed into an executable plan with associated performance measures, and managed through completion to bring the overall enterprise to heightened levels of financial performance. It is important for acquisition-oriented executives to understand the major phases and characteristics of the ACL Life Cycle.

Businesses who have survived one or more acquisitions and/or mergers are usually left with some degree of disintegration among their processes and systems. A company’s success in reaching the financial objectives of the merger or acquisition is directly correlated with the degree to which that disintegration has been replaced by a set of business processes and information systems that are common enough to generate enterprise-wide leverage. Implicit in that commonality is enterprise-level direction and guidance, manifested in company-wide business strategies and performance measures that align all of the combined business units. These businesses move, in this post-acquisition or post-merger environment, from an acquisition-based operating model to one characterized by shared services and a general commonization, to a stage where the enterprise “whole” really is able to become something greater than the sum of its business unit “parts”. It is more than the typical cost-reduction synergy anticipated in most of these transactions; it is a new platform for innovation, and an even higher level of innovation-based leverage.

Companies who experience substantive growth as a result of business acquisitions typically follow the ACL life cycle. ACL in this context stands for: Acquisition, Commonization, and Leverage. Many companies never leave the first stage of this maturity scale, and still more remain at the second stage. The most successful companies are usually those who recognize the importance of moving through all three stages, and consistently implement a structured process for doing so.
All companies experience pressures that push them toward decentralized operations, including idiosyncrasies of specific market niches served, the uniquenesses of isolated business processes, unusual needs of specific customer populations, and natural organizational entropy. At the same time, most of the companies that are successful in achieving the financial performance objectives established for the newly merged enterprise manage to overcome those challenges, electing to pursue the advantages of leverage, including:

• broad synergistic brand recognition, enabling cross-selling, bundling of products and services, and improving revenue
• interchangeability of business process resources, enabling the company to reduce its asset base
• commonality and scalability in equipment / skills / facilities, facilitating innovation and growth into additional markets
• higher utilization of business assets, reducing unit cost
• lower levels of redundancy, resulting in reduced operating costs

These companies also typically find that maintaining compliance with financial reporting standards such as Sarbanes-Oxley requirements are enhanced as a result of strengthened internal controls.
Some companies make a deliberate decision to remain “holding companies”, which simply buy and sell diverse businesses that have only marginal relationships with one another. These conglomerates prefer to manage the portfolio through buying and selling components, and allowing the leadership teams at the individual companies to manage ongoing operations from strategy through execution. A few of them have been quite successful, and this article is sometimes not as directly applicable to those at a corporate level. It works very well, however, for their major divisions. Companies that benefit most from understanding the three stages of the ACL Life Cycle are those companies who have decided to focus on a single core industry – Aerospace & Defense, Automotive, Chemicals and Polymers, Textiles, Electronics, Telecommunications, Consumer Products, Medical Equipment producers, Healthcare providers, and Financial Services providers are all good candidates.

The Acquisition Stage of the ACL Life Cycle

Companies in the Acquisition Stageof their life cycles are usually focused on revenue growth, and capturing market share. They are characterized by high levels of autonomy in management, in the reporting of site-level data to the corporate parent, and in the design of their business processes and systems. Companies who remain in this stage for long periods of time following acquisitions usually act as holding companies, with the corporation allowing individual divisions or sites to operate almost as independent companies with their own P&L, strategic plans, and market-facing branding. Often, companies in the Acquisition stage lack a common vision of the future of the overall business, and tend to operate at cross-purposes among the operating units. They sometimes even compete against one another for the same customers. They share little operating information, making it nearly impossible to coordinate and deploy “best practices”, effectively distribute work load, utilize general market intelligence, and grasp other elements that could provide corporate-wide leverage of the businesses’ assets and resources. A few industry-specific examples here should help to illustrate the situation:

Manufacturing companies in the acquisition stage are usually characterized by redundancies in raw materials, equipment, staffing, and other business resources. Because manufacturing companies are relatively material-intense, a great deal of cost can be tied up in raw materials, work-in-process, and finished goods. Since acquisition stage companies have so little visibility between business units, there is little opportunity for them to reallocate these assets in order to use them effectively. As a result, the most costly resources remain the most underutilized. In addition, acquisition-stage companies have not centralized the management of even commodity-level business processes, such as finance, human resources, and information technology. This lack of centralization leaves additional inefficiencies in place around accounting staff, employee benefits provider subscriptions, business software applications, data centers, and computing equipment.

Telecommunications companies in the acquisition stage also have unrealized opportunities for greater leverage from their business assets, but these more often take the form of redundancies in network equipment, network coverage, retail outlets, partner agreements related to the sale of their products, and interconnection agreements with other carriers. In addition, acquisition stage telecom companies often have a substantial amount of unrealized leverage in the lack of integration among the data bases and information of their various divisions that could enable shared service operations for commodity-type processes such as billing and cross-selling of products and services. Like manufacturing companies, telecom companies in the acquisition stage also typically have unexploited opportunities around the consolidation of data centers and related equipment and staffing.

Healthcare providers in the acquisition stage usually find opportunities in different areas of their businesses, because of the differing cost structure of their operations. The bulk of their costs and their opportunities while in the acquisition stage of maturity in the ACL Life Cycle are related to employee salaries & benefits, and to medical supplies and drugs. It is less common for these businesses to be able to effectively share inventories and equipment, since the nature of their business is rooted in community health care that requires local service provision. The opportunities that do exist, which are typically not exploited well in acquisition stage health care companies, are related to centralizing commodity type business processes such as finance, human resources, and information systems, and leveraging required service and supply procurement across the enterprise.

Financial Services providers, such as banks, brokerages, credit unions, financial planning companies and tax & audit services exhibit yet another cost profile, with the largest elements typically including personnel and occupancy costs. In these businesses, like health care provision, being where the customers are is critical. The companies’ ability to understand the changing demographics and match up their branches as well as their skills to the targeted customer base is often a differentiator between the companies that succeed and those that fail. Financial services providers who are still in the acquisition stage of maturity in the ACL Life Cycle often do not have the commonality in fundamental business processes and systems to readily reconfigure their operations to meet the changing needs of their marketplace. Their acquisitions or mergers have enabled them to grow horizontally, typically into adjacent markets. However, lacking an adequate foundation of commonality in processes and systems, there is substantial money left on the proverbial table as a result of ineffective resource deployment, and delays in the reporting of operational performance data that would enable the company to be more responsive. These companies also fail, in their acquisition stage, to take advantage of their larger purchasing power to gain leverage around purchased services spanning items as diverse as employee health care and branch-level office supplies.

The Commonization Stage of the ACL Life Cycle

Companies in the Commonization Stage of their life cycles have usually awakened to the value of focusing on Return on Net Assets (RONA) and Return on Invested Capital (ROIC). In order to begin to capture improvements in these areas, companies in the Commonization Stage often turn to shared service models of operations for selected business processes and systems. Strategies and performance measures begin to crystallize around common themes that span multiple operating units or divisions. Among the areas of focus for a shared service model in this stage are Finance (A/R, A/P, General Ledger, and Financial Reporting), Human Resources (Payroll, Benefits, and Employment Records), and Information Technology (Computer Hardware, Network Administration, and selected Software Applications Management). Some companies in the Commonization Stage also move Procurement and other aspects of Materials Management to a shared service model, enabling the corporation to more effectively leverage its broadest possible purchasing power.

Manufacturing companies in the commonization stage of maturity typically have shared services in place for commodity types of business processes such as finance, human resources, and information systems management. As they advance through the commonization phase, some of them also begin to pull together a common platform for procurement, encompassing at least their most costly and common raw materials. A few in this stage reach a point where their data center operations are completely centralized, and may even be outsourced to a third party like CSC. Toward the end of the commonization phase, centralization of work deployment and capacity utilization as well as process quality emerge as companies begin to deploy common processes and systems in customer requirements management, enterprise requirements planning, manufacturing execution systems, and distribution management systems.

Telecommunications companies in the commonization stage of maturity also typically have shared services in place for commodity types of business processes such as finance, human resources, and information systems management. As they advance in maturity through this stage, telecoms also become aware of the available leverage in centralizing the management of some of their most valuable assets. However, unlike the manufacturer’s raw material focus, for telecommunications operations those elements are things like spectrum licenses, network equipment, connection agreements, partner agreements, distribution centers, and retail outlets. Centralizing the management of those assets to identify overlaps and redundancies enables telecoms to emerge from the commonization stage with much more effectively leveraged business assets, providing broader market coverage with a lower total asset base and generating much higher earnings on that consolidated foundation.

Healthcare companies in the commonization phase of maturity find substantial benefit in the commonization and centralization of their commodity type processes and systems.  This is primarily because of the impact on cash flow and earnings when the employee base is reduced through shared services, and employee benefits and supplies are both leveraged in terms of the broader purchasing power of the company following a business acquisition of significant size. However, there is also an especially rich opportunity available to healthcare companies in the commonization stage that stems form the leverage available related to insurance coverage – not for the employees directly, but covering the potential liability of the company itself. This category of cost is typically about the third largest slice of the pie, and significant reductions there can translate quickly to a meaningful earnings impact.

Financial services providers in the commonization stage of the ACL Life Cycle, like healthcare providers, often find substantial benefit in the commonization and centralization of their commodity type processes and systems. With roughly half of their cost of operations wrapped up in employee salaries and benefits, there is an opportunity for meaningful impact on cash flow and earnings when the employee base is reduced through shared services, and employee benefits and supplies are both leveraged in terms of the broader purchasing power of the company following a business acquisition or merger. The next significant area for financial service providers in the commonization stage is the capability for rapid reconfiguration of the business based on enterprise-wide visibility of operational data and market intelligence.

The Leverage Stage of the ACL Life Cycle

Companies in the Leverage Stage of their life cycles are usually embarked on a fierce drive toward adding real value. They are relentless in their efforts to fully utilize the assets of the entire corporation, driving out redundancy and its associated costs. They are then able to pivot on the fulcrum of those more agile processes and systems to implement innovations that foster organic growth resulting in greater market share, greater revenue, and improved earnings for their shareholders. Leverage Stage companies also establish a structured and repetitive process of assimilating new businesses, gathering and incorporating market intelligence into company-wide strategies, and innovating on the basis of these new combinations to capture additional market segments. These companies are characterized by coordination and centralization of major business functions such as the planning and allocation of R&D, production work, inventories, raw material purchases, personnel, and factories & equipment. They centrally manage a broad spectrum of common business processes and systems, including customer requirements management, product data management, enterprise requirements planning, manufacturing execution systems, and logistics management. They are constantly changing, evaluating and configuring business assets to meet future market needs, acquiring and developing new businesses, and shedding assets that no longer fit their evolving model.

Manufacturing companies in the leverage stage of maturity typically have shared services in place for most of the critical business processes of their company, having reached beyond the commodity level processes and into those which deliver the most value to their customers. Examples include sales & marketing, order entry & customer service, capacity planning and management, production scheduling and shop floor control, and distribution requirements planning. As they move through the leverage stage of the ACL Life Cycle, some of these companies leverage the commonality of their processes and systems to produce innovative new products and services, identify additional market opportunities, and develop industry-changing relationships that reach through their supply chains.

Telecommunications companies in the leverage stage of maturity also have shared services in place for most of the critical business processes of their company, including the seamless provisioning (often called “flow-through provisioning” by industry insiders) of all telephonic services to customers stemming from a single telephone conversation responding to an individual inquiry about a service. This type of capability is only enabled when all of the information from what have historically been disparate data bases is available in an intelligent form through excellent systems integration, based on exceptional levels of commonality and strength in enterprise-wide business processes.

Healthcare companies in the leverage stage of maturity have typically discovered and implemented leverage-based improvements in their major cost structure elements as a result of enterprise-wide information visibility flowing from systems integration and centralized management of critical business processes. Health care companies generally also have uniquely challenging business conditions related to three other areas where leverage level operations can be a powerful tool.

The first of these areas is employee safety. Most health care organizations are spending a substantial amount of money in this regard, with training and documentation of company polices and safety-related practices requiring an increasing amount of company attention. The integration of systems and commonization of processes in a leverage stage health care company offers opportunities to more quickly incorporate internal best practices, externally imposed business requirements, and feedback about lessons learned across the entire health care organization regardless of geographic dispersion. Commonization and centralized management here can result in substantially lower cost, and more importantly, substantially higher and more uniform levels of employee safety.

The second area is bad debt. The integration of customer data, and effectively interfacing a common set of enterprise-wide processes and systems with outside service providers such health maintenance organizations and insurance carriers, substantially reduces the amount of bad debt in leverage level health care companies.

The third area, and perhaps the area of richest opportunity, is the area of patient medical information. This area is tricky because of legislation related to patient privacy and guidelines recently established for the maintenance and communication of patient medical information. However, one of the fundamental challenges faced by health care providers is the absence of available medical history, particularly when a patient is admitted to an emergency room or urgent care facility. Particularly when a patient is unable to respond to questions directly due to an incapacitation illness or injury, time can literally mean life or death. Making all necessary information available to the physicians and other health care professionals involved as quickly as possible is extremely important. When critical business processes and information systems for the management of this information are brought to an effective level of commonality, the rapid dissemination of the needed information can be greatly improved, while patients’ expectations around the privacy of their information are still met.

Financial services companies in the leverage stage of maturity, like health care companies in some ways, must balance the needs of differing local customer geographies against the advantages of centralized management in critical business processes and systems. There is real value in allowing some latitude to local branch officers and customer-facing staff such as loan officers to accommodate the unique circumstances involved in specific cases. However, these companies often find that a significant advantage of the leverage provided by enterprise-wide commonization of processes and systems is the ability to see the nuances of differing markets at a corporate level, and recognize broader trends among those different markets more quickly and clearly than they could before. This improved visibility, in turn, enables management to reconfigure their service offerings, redeploy resources such as sales dollars, and organize sales campaigns for those specific markets more quickly than they could previously.

The best of these companies, regardless of what industry they occupy, utilize their common platform of processes, systems, and information to understand the needs of their customers in unique ways, and fluidly translate those needs into the features of their products and services. A few, at the very top of the game, come to understand the customers’ needs even before the customer recognizes them, and when necessary they reconfigure their entire business to meet those needs, gaining unassailable competitive advantage. The enterprise-wide leverage they achieved as a result of carefully and skillfully handling the post-merger or post-acquisition integration of processes, systems, and data provided the platform from which innovation launched them to new levels of performance. Examples could as easily be provided for companies in pharmaceuticals, retail operations, or the food & beverage industry. The lessons learned and the techniques vary a little, but the principles are the same.

Did you know that the vast majority of mergers and acquisitions not only fail to hit their performance targets, but actually DESTROY shareholder value? Here’s how to identify and avoid the five most dangerous situations in mergers and acquisitions so your company can get the synergy it needs from these transactions:

Condition #1.
Can you make the tough calls? Recent interviews with merger and acquisition (M&A) industry executives reveal that the number one problem is: “Failure to make the tough calls.  You can’t appease everyone.  Businesses that end up with co-directors, co-CEOs, or co-leaders of any kind are businesses heading for trouble.”

It is best to make tough decisions up front, as the actual business combination is being formulated. Then implement them not long after the deal is closed. This is true not only of decisions pertaining to people, but also facilities, equipment, and critical information systems. An air of confidence -not arrogance or insensitivity, but resolute confidence and steadiness of direction – is an important element of M&A leadership. Making tough calls with confidence is one essential element.

Condition #2.
What type of culture does your company exhibit; Entrepreneurial or Administrative? M&A managers recently cited culture clashes as “Significant – to – Severe” more often than any other dangerous condition. I see cultural mismatch challenges arise again and again. In many cases, they are born out of geography. In other cases, they stem from the industry involved.
To understand and deal with cultural issues: 1) Identify the cultural characteristics of both businesses, 2) identify the disparities that exist between the two,  3) prioritize those that represent the greatest threat to progress in assimilation, and 4) take discrete steps to mitigate those risks. Ignoring this problem is deadly. Build discrete integration plans around melding company cultures to stay out of hot water.

Condition #3.
Does your company’s management team have experience with mergers and acquisitions? Another devastating problem resulting in M&A failure is inexperience among the acquiring management team in performing acquisition tasks. These activities include target selection, due diligence, and post-transaction integration. Industry specific and even process or system specific knowledge is a substantial asset. But in the M&A world, the experience of the acquiring team with previous acquisitions and mergers is also critical.

It is often possible to supplement an inexperienced management team with outside professionals. However, finding someone that understands both the acquisition process and the fundamental business processes that are integral to the operations of the target company is often challenging. Don’t be afraid to get professional help when inexperience is a factor. There is too much at risk in M&A situations to use on-the-job training.

Condition #4.
I wish I had a dollar for every occurrence of this one I have witnessed over the last 30 years! Like many other areas of managers’ performance, hubris tends to blind the participants to the objective results of their actions. In a KPMG survey conducted of executives in 118 companies doing 700 cross border deals between 1997 and 1999, 82% of them reported that they considered the deals to be a success. However, 30% of them actually resulted in added value, and 31% lowered value with the balance remaining basically unchanged.

Long-time observers of this phenomenon often assert that managers seek to acquire other companies for their own personal motives and as a result they pay financial premiums for those companies that are not otherwise justifiable. Ego is the villain here. When this occurs, only intervention on the part of the board of directors has a strong chance of averting the problem. Your company’s board needs to be on constant alert for this situation, and step in immediately when they see it developing.

Condition #5.
Does your company’s acquisition strategy align business processes and systems to leverage all business assets? One of the most important elements of integration, and the one that is usually the weakest, is the commonization of business processes and systems across the newly formed enterprise. Integration most often fails because of lack of focus on the commonization of business processes and systems.

Successful M&A leaders understand the three reasons for this malady:
1) Many executives do not understand the importance of achieving commonality in the processes and systems of the combined enterprise.
2) Other company leaders do not know how to go about achieving commonality in their processes and systems.
3) Still other executives are simply unable to follow through on the difficult decisions related to post-acquisition and post-merger consolidation. To avert this problem, choose your M&A leaders carefully. Make sure the entire team (including the leaders of the acquired business unit) understands: You will be moving toward common processes and systems. Identify and deal with rebellion early in order to avoid a long and painful insurgency.

Your M&A activity can be a real earnings generator rather than a dilution nightmare, but only if leaders are honest with themselves and each other. They must work hard and work as a team to avoid the five most dangerous conditions of M&A.

Disappointed with your company’s earnings performance since your last acquisition? Worried that the next acquisition or merger will have a similar affect? You’re not alone! Study after study has demonstrated that mergers and acquisitions are a risky business. In spite of the fact that a lot of M&A advisors rake in substantial fees each year, almost every major review of companies completing Merger and Acquisition transactions shows that most of these transactions fail to deliver on promised financial performance. Like every other investment, the biggest risks yield the biggest results – whether they’re good or bad. One way to improve your odds is to study the methods of the most successful Merger and Acquisition companies.

As an industry executive, Ive encountered Merger and Acquisition challenges many times over the course of my career. I have also recently interviewed numerous C level executives from some of the worlds largest and most successful companies across several industries about this topic. I also conducted an internet-based survey of senior managers with extensive Merger and Acquisition experience. Seven winning characteristics emerged among the few truly successful Merger and Acquisition companies:

Characteristic #1:  Successful companies follow a proven path of general acquisition and mergers. First, they do meaningful strategic planning. This practice enables acquisition targets to be identified which are excellent strategic fits for the corporation, rather than mere opportunities for getting bigger. Second, they perform thorough due diligence work. Their due diligence differs from poor performers because they plumb the depths of business processes and information systems capabilities and capacities in the acquisition target to ensure appropriate valuation and strategic fit. Third, they negotiate terms and conditions for the transaction that avoid overpayment. They accomplish this by making certain that management does not become enamored with the target company. Fourth, they plan for post-merger or post-acquisition integration. That plan includes a comprehensive communications plan, alignment of objectives and performance measures, and integration of processes and systems. Fifth and finally, after the deal is closed, the most successful companies relentlessly execute the planned business assimilation and integration activity. M&A requires detailed planning, rigorous management, and aggressive execution to succeed.

Characteristic #2: Successful companies use initiatives or projects to perform integration, and fundamental project management techniques to manage each of the initiatives. Every company, including yours, has a unique combination of strengths and weaknesses, and market-facing strategies. The combination of these factors dictates what specific initiatives your company must use to assimilate the new business unit. In some cases, the most urgent needs will revolve around rationalization of staffing, facilities, and capital equipment. In other cases, achieving commonality in information systems to enable cross-selling and rebranding will be most important. Whatever the combination turns out to be, your company must lead these initiatives effectively through a formal program management structure. Formally structured and carefully managed initiatives are a strong characteristic of the most successful Merger and Acquisition companies. Formal program management requires such elements as a detailed project plan, discrete milestones, defined performance measures, designated responsibilities, risk management and change management processes, and so on. Initiative based integration rooted in sound market-facing strategy will improve the odds of successful Merger and Acquisition performance.

Characteristic #3: Successful companies pay meaningful attention to the match of cultures, organizations, and HR matters such as management retention. If your company has been through an acquisition or merger, you already know that the different cultures of the companies involved always make the situation challenging. In hostile takeovers, it can prove devastating. Employees often find that the behaviors previously rewarded by their company can sometimes result in demotion or dismissal. Performance criteria change, as do the people measuring the performance. When this happens, management in the acquired company, as well as many of the employees,  becomes threatened, defensive, and resentful. The loss of key leadership in critical transitional periods can ruin the deal, and even when the entire deal remains intact, the resulting organizational instability often drains so much energy and time from remaining managers that it costs the new enterprise more time to achieve expected financial performance goals.  Some Merger and Acquisition advisors report that as many as 72 percent of key managers head for the door within three years of an acquisition or merger. Almost all successful Merger and Acquisition companies incorporate a formal culture management structure into their integration planning. Some even put specific performance measures in place to monitor the success of melding the cultures following their formal public merger or acquisition announcement. The HR details, from communication to compensation, are make-or-break elements of Merger and Acquisition success.

Characteristic #4: Successful companies ensure that the acquisition is an integral part of overall business strategy. Have some of your company’s acquisitions turned out to be a poor fit with the rest of the business? Responses to my recent survey of senior managers with extensive M&A involvement indicated that the targeting of acquisitions which are a good strategic fit was the third most critical issue to M&A success. Strategic fit implies a close alignment of markets served, technologies owned, Research and Development direction, financial position (revenues, market share) between the companies involved. It also means that there is a real and quantifiable set of synergy related opportunities between the two companies. The best Merger and  acquisition performers maintain a strong strategic plan with market-facing strategies, internal operating strategies, specific performance targets, and performance metrics linked from top to bottom throughout the enterprise. They incorporate the alignment of those elements of the acquisition target into integration planning for their transactions, and pull the trigger on them soon after the deal is consummated. Effective planning is a fundamental element of successful business. In Merger and  acquisition situations, it must also be the basis for every major decision.

Characteristic #5: Successful companies have full-time time resources assigned, and strong lines of executive accountability for the success of the acquisition. Does your company assign full-time teams to acquisition pursuits, or rely on part-time efforts from people who also have a day job? The pressures of day-to-day job responsibilities for key staff members make it incredibly difficult for them to focus on a part-time assignment related to Merger and  Acquisition activity. The early assignment of skilled full-time resources to these tasks as early as possible in the due diligence phase of the acquisition or merger process is often critical to success. General Electric, arguably one of the best acquirers in the business (certainly one of the most prolific) recognized that management experience made a huge difference in the success of their endeavors, and as a result, decided some years ago to designate integration management as a full-time role in their company. Studies of GE and others show that companies who assign full-time teams have better Merger and Acquisition track records.

Characteristic #6: Successful companies have discrete targets for integration activities, and relatively short-term financial objectives that are quantitative. In your company’s last acquisition, were specific performance targets published and widely known? While goals such as “become accreted within a year” are quantitative enough, they must be broken down into a set of initiatives and accompanying performance measures in order to be useful. The best companies understand not only what the top-level goals are in quantitative terms, but also what specific actions will be taken, by whom, and by when, to achieve that desired result.   Hence the detailed project plans around a defined set of initiatives described in Characteristic # 2, above. Initiatives can relate to revenue growth, market share growth, or operating cost reduction. They can involve a wide variety of actions such as establishing strategic partnerships for marketing or distribution, efforts around cross-selling or re branding, facilities rationalization, new Research and Development initiatives, organizational restructuring, and information systems upgrades. Those companies who are most successful march through discrete initiatives toward quantitative goals. Achieving those discrete goals enables the newly merged company to hit specific financial objectives at designated times. The most successful Merger and Acquisition companies are those who most discretely define what success means.

Characteristic #7: Successful companies move assertively to get the newly acquired business entity onto common business processes and information systems early on. One of the C-level executives I interviewed (this one was a Financial Services executive) in preparation for my book said: “We have three top priorities in these transactions: gain market share, grow assets, and reduce operating costs in proportion to the assets we manage. Getting the acquired entities onto common processes and systems is strategically critical for us in achieving that third goal. But beyond just our financial performance, it impacts the morale of our employees, our ability to present a consistent face to our customers, and our efficiency in employee training. When a company like ours is systematic in their approach, they can bring new acquisitions onto common processes and systems in six to nine months.” Most of the leading companies in this area, including companies like GE and Cisco, exhibit this characteristic. Unity and consistency produce and exhibit strength to customers and shareholders. The strength of unity and consistency is never more important than the period immediately following a merger or acquisition.