Sharing ideas with the world

Tuesday, May 12, 2009

PMI - Key Areas of Integration

5:30 PM Posted by Deepak Nayal , No comments

Post Merger Integration (PMI) is a huge field in itself with loads written and talked about. I have been exploring this area for some time now and looking in retrospect my experience with organizations undergoing M&A. Based on my mini research, in order to articulate my thoughts I came up with a model of my own (such an MBA cliché). I believe that there are three key top level areas of integration in PMI stage for any M&A deal –

Here Systems & Processes and Culture take care of the hard and soft aspects of the integration respectively. The last, Management, is a hygiene factor – an infrastructural aspect if you may. So if the management integration is not done well, the effects will show up in the integration of other two areas too. I believe that in any PMI initiative management integration should be given the top priority. This is not saying that one should focus all energy in doing this while forgetting the other two aspects.

Here when I say management I do not just mean the senior executive management. This includes the middle and front line managers as well, and why not; After all, it is these people who are actually looking into the operational part of the post merger organization and it is these people who interact with the employees. So if this layer of the organization in frustrated or unclear about the tasks then the effect is going to permeate throughout the organization. I think if companies put more effort in the management integration, identify leadership and assign clear roles and responsibilities upfront then the whole process of post merger integration can be made smoother. 

Friday, May 08, 2009

Post Merger Integration – an opportunity or a pitfall

3:32 PM Posted by Deepak Nayal , No comments
All M&A deals consist primarily of three main phases – Due diligence and Planning, Valuation and Negotiations, and Post Merger Integration. It is the second phase of Valuation and Negotiations that usually generates the huge public interest and media attention. All the hype usually gives people an impression that this phase is the most important in any M&A deal and should be given the most attention.

In my view, it is the post merger integration (or PMI) phase which makes or breaks any deal. No matter how much effort one puts in the first and second phases if this last phase is not done properly then all the previous effort goes waste. Unfortunately, a lot of companies do not realize the importance of this phase; I see two main problems regarding PMI in usual M&A deals.

First, PMI is – intentionally or unintentionally – given low priority in the entire deal process. One of the common mistakes one can witness is that companies wait for the negotiations to close before going ahead with the PMI. The usual argument given is – why invest into something when we may not even get it? What these companies fail to understand is that by starting to look into different aspects of post merger integration the company can foresee the possible opportunities or problems arising from the merger. This can even help these companies in valuing and negotiating with the other party.

Second, unfortunately, when it comes to PMI companies mostly focus on the hard aspects – the easily quantifiable ones – and they miss on the softer human aspects of the integration. One of the things I have realized is that almost any problem in business, be it finance or marketing or supply chain, has its roots in the human aspects. After this revelation, it is hard for me to understand how companies can ignore such an important aspect while integrating with other businesses.

I believe it is very important that companies realize these two points as early as possible in any M&A deal. Execution of any integration initiative is no doubt complex but keeping these two points in mind will help companies in utilizing the opportunity provided by the integration instead of falling into the common integration pitfall.

Sunday, January 18, 2009

Investing in Skill

6:11 PM Posted by Deepak Nayal No comments
It is very important for a company to have skilful employees in order to grow. A high performance organization invests in skills in two different stages, first at the time hiring and second during employment.
  
At the time of hiring such organizations make sure that they either hire people who bring the right set of skills to the organization or hire people which have ability to learn and employ those skills effectively. 

During employment, such organizations make sure that they regularly train their employees to keep upgrading their knowledge and skills. High performing companies understand that this is not just a requirement for their line employees but also for supporting functions. They also understand the need of cross-skill training. These trainings can be for either hard or soft skills. 
In addition to the above mentioned characteristics of a high performance organization there is one characteristic that sets it way apart from the other organizations. A high performance organization on a whole is distinctively known for a particular skill; for example, Apple is known for its amazing marketing style, Southwest is known for is unconventional customer service, Google is known for its innovation. Such organizations build this prime skill over a period of time and use it as a lever to maintain their lead in their respective markets.

Such organizations are also good at “weeding” out old skills and “bringing” in new ones as required. Note that this does not mean that they stop having the previous skills but that they increase their focus on the new ones which are more apt for the then market conditions. An excellent example of this is Apple. In the beginning, the company had its focus on high end computer technology but later on it started to “shift” its focus on branding and marketing which has now resulted in cult like following of the company’s products.

The key impact of developing such a skill is that the entire company starts thinking with that skill in mind. The employees understand what is important to the organization and their activities get tuned in that direction.

To become a high performance organization and improve on your skills, you need to ask yourselves the following questions - 
  • Where are we placed in the market?
  • What skill(s) do we currently have?
  • Where do we want to place ourselves in the market?
  • What skill(s) is required for us to reach there?
  • If there is a gap between these skills, how do we fill it?
  • How do we measure and monitor our skill(s)?
Answers to these questions will help the organization develop its skills and train its employees on the required areas.