Integration Management Approaches and Practices for Timely Integration John G. Mathers 2010

1. Integration Management Approaches and Practices for Timely Integration John G. Mathers 2010

2. Content • Acquisitions and integration • Approach to integration • One story … in brief • Integration issues and concerns • Potential learnings: • Basic learnings • Other learnings to consider • Application of learnings • Key actions • RUP • Worksessions • Project management

3. Acquisitions and integration • Study/1 of 8,824 U.S. mergers re shareholder value: • ~80% fail to enhance shareholder value • ~20% succeed due to: 1) cultural appreciation; 2) internal communications; and 3) practical plans / execution • Study/2 of failed mergers: >50% did not achieve expected results because: • Failure to choose right company • Lack of alignment on – and communication of – a common vision for the “two” entities • Inability to handle cultural issues • Did not develop & implement appropriate approach to integration Sources: /1 MergerStat 2001 /2 Booz Allen & Hamilton 1999

4. Key integration aspects defined • Cultural appreciation: • Assessment of two cultures and strategic approach to integration including common vision, objectives, timeline, and metrics • Ongoing monitoring of implementation • Internal communications: • Sharing integration processes, action plans and success • Building alignment on issues, objectives and plans • Linking/working across organizations (entities and internal) • Practical plans and execution: • Detailed and actionable tactical plans including legal, finance, compliance, accounting, policy, human resources, account/asset conversion, account management, custody/funds, marketing, service, customer reporting, trading, risk, and technology • Project structure, reporting and management against metrics

5. One approach to integration Integration phases Potential integration activity • Separate and unequal (pre-closing) • Due diligence • Pre-deal communications and introductions • Consummation (post-closing) • Cultural assessment • Integration assumptions and issues • Integration plans and communication • Working together • Networking across/within entities • Integration execution • Consolidation • Policies and procedures • Realizing strategic and cost benefits

6. Conceptual approach to integration Potential activity by integration phase Phase 1 Separate & Unequal Phase 2 Consummation Phase 3 Working Together Hi Integration Decision-making Team Development Staff Communications Program Project Reporting Phase 4: Consolidation Focus of Action Tactical Execution Senior Mgmt Communications Objectives Alignment Integration Strategy Project Structure/ Management Tactical Planning Integration Assessment Issues/ Assumptions Lo Time Cultural Communications Plans / execution

7. One story … in brief • Acquisition of FSI company in 2000 • Due diligence included detailed business and technical assessments • Strategic decision to leave acquisition intact to pursue their strategy • During downturn acquisition provided support to parent as alternative to losing some clients • Three integration efforts were initiated: • One parent, one acquired company and one joint • Various reasons – including economic realities – led to efforts being put off • September 2003 management integration decision based on need for operational efficiencies

8. Potential integration issues Cultural appreciation: • No cultural assessment considered or completed • Cultural strategy does not align with the cultural focus of acquiror or acquiror’s division selected for acquiree • Acquiree’s management is too quickly moved aside • New management placed in acquiree are not a cultural fit • Acquiror moves faster than aquiree’s culture can respond in an effort to take advantage of acquiree’s competitive, organizational and technical competencies • Synergies are overestimated and the effort to achieve them are underestimated “We came [to parent HQ] for an integration meeting [where] they tried to understand what we were doing, but not a lot of them had done the research they should have to prepare.” “The best thing [parent] did is to find someone that fit our culture. Without [him] integration would have been a problem. He was the Chinese wall with [parent] so we didn’t get run over.”

9. Potential integration issues (cont.) Communications: • Acquiror mid-level management do not understand strategic or tactical value of the acquiree’s business • Acquiror due diligence personnel do not create relationships with acquiree counterparts in preparation for future partnering • Acquiree personnel are not sufficiently educated regarding acquiror’s organization, culture and vision (way they do business) “During the last four years I think that everyone has talked about integration but it has only been talked about. We have gone through the integration [effort] four times.” “There were a lot of people who came down to visit during the due diligence. They would get really excited about [what we were doing] and say how much it was like [they were] 20 years ago.”

10. Potential integration issues (cont.) Communications (cont.): • Acquiree personnel are not educated regarding the impact of merger/integration on their employees • Communication and ongoing management support by acquiror diminishes over integration period • Senior level acquiror management does not visit regularly to show interest and support “At first it was the technology they wanted and the feeling was ‘do they want us?’” “Many people [at acquisition] didn’t know what was happening [with the integration] and they needed to know.”

11. Potential integration issues (cont.) Practical plans / execution: • Acquiror policies and procedures, especially human resources, are too quickly overlaid on acquiree • Access to acquiror’s infrastructure for communications and partnering is not available quickly • No clear understanding of integration cost early in the effort • No clear view of resource requirements and constraints within each organization • Project planning and reporting unstructured “Everything doesn’t have to mirror what [parent] has done.” “[Parent] could have been quicker at including [acquisition] in the [corporate] network. This made us feel like a second-rate service.”

12. Potential integration issues (cont.) Practical plans / execution (cont.): • Management of both organizations are not aligned on business objectives (and model) that drove the merger • Management of both entities are unable to make timely decisions • Neither organization understands integration dependencies across / within and cannot clearly articulating them to management • Regular coordination and alignment is not part of the project management process “Good intentions are just not enough. I don’t care how we get there only that if we are going to do this, we need commitment and sponsorship from those that can pull this off.” “Getting everyone on the same page is critical. This is elementary.” “As to business decisions, I want the decisions that are made to be clearly in support of both [parent and acquisition].”

13. Learnings from Numerous Projects General: • Find someone to manage the business that fit the culture • Have the new management of the acquired company act as a go-between with the parent to guarantee appropriate speed of cultural, organizational, procedural and technical integration • Keep the management of the acquired company involved during transition but not beyond • Everything – especially HR and other procedures – do not have to mirror the parent organization at the start, even if it looks like an improvement • Use a modified Braille process to educate the management of the acquired company about the parent. Educate them and let them experience it • Continue to provide open financial and other support systems to build appropriate infrastructure in the newly acquired company • Establish a regular (every six months or less) program of visits by senior level management to show interest and support

14. Learnings (cont.) General (cont.): • Prepare the acquiring organization to receive/ understand the value of the new business in detail; this makes contact across the organization easier and more collegial from the start • As part of the due diligence process, those managers reviewing the acquisition opportunity might to include introductory interviews with counterparts at the prospect company • Quickly place the new organization into a part of the business that fits their value and possibly their culture; this makes the new subsidiary feel included • Provide education to the entire staff of the new subsidiary regarding the impact of the acquisition both on the organization and on the individuals; this builds commitment at the individual level • Get the new subsidiary connected to the parent’s network as quickly as possible; this gives them an experience of inclusion and facilitate communications and working relationships

15. Learnings (cont.) Cultural appreciation: • At the point of acquisition, management of both organizations have the best view of the synergies; this is the time to develop overall integration vision, strategy and timeline, and to foster it through the layers of management • Timely decision-making processes across and within management of both entities must be developed and fostered for integration project success Communications: • Identify key integration stakeholders / interested parties in both organizations; gain agreement to participate in decision-making • Define key integration assumptions and issues across and within both organizations • Communicate and align integration vision, deliverables and dependencies across and within both organizations

16. Learnings (cont.) Practical plans and execution: • Develop high-level and then detailed project plan with critical path; stakeholders / interested parties must contribute and agree • Define overall project budget, resource allocation and run rate metric • Allow each sub-project or track to manage their actions as they see fit – as long as they can report on progress weekly • Develop and agree to project management exception-based system focused on near-term deliverables and key project metrics through project team to stakeholders and sponsors • Support regular re-alignment of plans and critical path based on shifting/new dependencies

17. Communications across/within both entities Application: key actions Cultural Communications Plans / execution Team Development Integration Assessment Issues/ Assumptions Objectives Execution Objectives Alignment Integration Strategy Project Reporting Action Stakeholder Alignment Integration Decision-making Strategy Tactical Plan Critical Path Communications Program Re-Alignment Planning Stakeholders Project Management

18. Integration with RUP RUP Documents Actions Worksessions Strategy Worksession Stakeholders Needs Objectives Worksession Vision Business Model Business Case Stakeholders Worksession Functional Requirements use case Non-Functional Requirements support Lifecycle Review Requirements Analysis Design Lifecycle Review Implementation

19. Critical worksessions • Strategy Worksession: • Objective: Review cultural assessment and develop overall integration strategy, sponsorship and communications process • Audience: acquiree senior-level management and acquiror senior-level management directly impacted by merger value proposition • Objectives Worksession: • Objective: Identify critical issues, agree on integration objectives, define key initiatives and build a strong working relationship • Audience: key group of managers responsible for critical integration actions across both entities • Stakeholders Worksession: • Objective: Define and align detailed project plan and critical path in order to assure that all resources are efficiently focused and aligned to guarantee completion on schedule and within budget • Audience: all stakeholders and interested parties across both entities

20. Project structure/reporting • Aligned project plans – completed at the track level and synchronized at the project level – are the basis for execution management and reporting • Track teams project management meetings: • Purpose: near-term focus on – and management of – weekly tasks to meet aligned track and project level deliverables • Members: all track, support, and implementation teams • Reporting: track leads: weekly to Project Office contacts against aligned plan on an exception-basis • Timing: weekly for 30 minutes • Project office team meetings: • Purpose: near-term focus on weekly key tasks to meet aligned project level deliverables; decision-making re weekly resources • Members: permanent project staff, appropriate technical representatives, and subsidiary communications coordinator • Reporting: project-level performance to project plan; track-level exception items • Timing: weekly for 30 minutes

21. MON TUE WED THU FRI SAT SUN MON Project structure/reporting (cont.) • Steering committee meetings: • Purpose: project-level focus on key deliverables; decision-making re monthly/quarterly resources • Members: sponsors and key stakeholders • Reporting: project-level performance to project plan; recommendations re key deliverable resourcing issues (impact on schedule or budget) • Timing: semi-weekly for 60 minutes • Stakeholders committee meetings • Purpose: project-level update on performance to plan; discussion of strategic project concerns • Members: all stakeholders • Reporting: project-level performance to project plan; strategic concern(s) for consideration (if any) • Timing: monthly for 60 minutes Steering Committee Project Team Stakeholders Committee Track Team

22. Implementation opportunities • Phase 1: separate and unequal • Complete cultural assessment • Use assessment to develop integration strategy • Phase 2: consummation • Complete key interviews to identify critical issues • Use interviews to help focus on issues, outcomes and timing • Phase 3: working together • Complete preliminary vision and business case to drive inclusion of all tasks • Use deliverables to educate all stakeholders on dependencies and develop critical path • Phase 4: consolidation • Regular work reviews and re-alignment drives timely results

23. Support materials Documents: • Integration assessment • Critical issues list and management • Integration check list • Vision & Business Case (RUP) Forums and Worksessions: • Objectives worksession • Project socialization – table of content • Project plan alignment worksession • Project weekly work reviews

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