Background

1. AMEU CONFERENCE16 to 18 October 2006PresentationonKey Transformation, Merger & Acquisition Success Drivers from a Management PerspectivePresented ByDr W J de Beer

2. Background • Over a period of 18 months research was done through a selected panel identified from international and local companies who went through transformation, or a merger or an acquisition • The research amongst others focused on: • Key success drivers from a management perspective • Key drivers behind failures • The role and selection of Leadership • The role of Executive Sponsors

3. Presentation Outline • Transformation, Mergers and Acquisitions • The Drivers behind Successful Transformation, Mergers and Acquisitions • Leadership • Early Stage Transformation, M&A Failure Indicators • Early Stage Transformation, M&ASuccess Indicators • Conclusion

4. Transformation, Mergers and Acquisitions • Transformation, Mergers and Acquisitions (M&A) initiatives are a world wide phenomenon • These initiatives are viewed by various people as bestpractice world trends and essential for a business to survive in an ever changing and very competitive environment • There are however also people who express the view that this is not necessarily the most preferable business practice Irrespective of the differing views; transformation, merger and acquisitions are taking place at an increasing rate, and cannot be ignored

5. The Drivers Behind Successful Transformation, M&A • Effective leadership • Transformation Leadership • Leadership Sustainability (Staff Resilience) • Executive Sponsor • Realistic vision • Setting realistic goals and managing the transformation tightly • Communication • Motivation • Persistence • Business Acumen

6. Leadership Dimensions Required for Success (…1) • Motivation and directing • Creating vision and purpose • Direct • Networking • Situational analysis • Exploring opportunities • Evaluating • Decision making • Taking decisions in time and doing so specifically during times of uncertainty • Follow through • Deliver on the mandate • Retain focus • Recognition, reward and correct behaviour

7. Leadership Dimensions Required for Success (…2) • Power • Use of authority effectively and with credibility • Competitiveness and will to succeed • Retain and build credibility • Communicating and coaching • Communicating clearly • Communicating consistently and precisely • Know how to communicate • Know when to communicate • Developing leaders and others

8. Leadership Attributes Essential For Staff Resilience Communication Business acumen / Culture Vision Staff Resilience Persistence Motivating

9. Executive Sponsor • Pave the way for the effective execution of the project • Generate support for the project amongst the ultimate decision makers • Provide strategic guidance and direction to the transformation leadership • Ensure transformation alignment with the shareholders vision • Advocacy of the project through active and visible support

10. Essential Dimensions in Selecting a Leader • Relationship strengths • Ability to foster sound relationships • Ability to comfortably interact at all levels • Effective communicator • Strong ability to motivate and lead • Business acumen • Sound overall business understanding • Sound appreciation for governance and compliance requirements • Sound ability to set business direction • Strategic thinker • Ability to create vision and purpose • Ability to proactively identify and explore opportunities • Industry knowledge and expertise • Knowledge of the industry • Appreciation for the industry challenges and opportunities

11. “..The best leaders seldom rely on position power to get things done today; - they instead use their own charisma, knowledge, and relationships to convince others to get things done”. Nelson (2005:123)

12. Early Stage Transformation, M&A Failure Indicators (…1) • Poor communication • Lack of communication • Lack of change management • Lack of feedback • Lack of vision • Lack of detail in the vision • Vague or changing end state goals • Lack of stakeholder buy-in • Lack of stakeholder commitment • Lack of political support • Lack of organised labour support • Lack of staff support • Cultural differences not respected • Disconnect between transformation success and employee interests

13. Early Stage Transformation, M&A Failure Indicators (…2) • Financial • Lack of financial analyses and controls • Lack of defined financial targets • Lack of reliable business & financial information • Ineffective due diligence • Other • Ineffective business governance structure • Lack of legislative support • Lack of legal compliance • Contractual obligations which could not be honoured • Incompatible/ lack of system integration • Ineffective programme management • Speed of transformation too slow • Lack of transformation flexibility

14. “No matter how well you execute, the risk of failure increases markedly when the ideas you develop don’t fit with your existing capabilities, or force you to acquire those capabilities at too high a cost”. Bossidy (2002:30)

15. Early Stage Transformation, M&ASuccess Indicators • Visible Executive Sponsorship • Strong Leadership • Effective Communication • Motivation • Managing of cultural/social differences • Encourage innovation • Vision • Buy- in • Alignment of activities to the vision • Effective due diligence • Effective programme management • Effective and proactive measurement

16. • Communication • Effective Programme Management High • Executive Sponsorship • Integration Strategy • Effective Leadership • Issue and Risk Management • Persistence • Strong Process Drive • Rapid Engaging • Recognition and Reward • Motivated people • Management of Cultural Diversity • Vision • Enabling Environment • Clear Goals • Resource Availability • Effective Due Diligence Relative Success Probability • Stakeholder Management • Defined KPI ’ s • Building Rapport within process • Legal Compliance • Awareness of Differences • Contractual Obligations • Flexibility Compliance • Relationship Building • Financial Controls Low High Low Success Drivers Success Probability Matrix

17. 3. Business Momentum 1. Transition Planning Degree of Integration Operating Commitments Speed Transition Team Customer Focus Executive Alignment 5. Value Capture Links to Due Diligence Disciplined Approach Strategy and Vision Guiding Principles Value Drivers Implementation Plans Validate Synergies 4. Day One Readiness 2. People and Culture Performance Metrics Synergy Tracking Knowledge Transfer Communications Risk Assessment Day One Requirements Performance Measures Retention Implementation Plans Organization Design Change Management Culture Balanced Approach for Overall Success

18. Conclusion • Transformation, M&A failures are many times theresult of bad planning, lack of control, bad management decisions and the lack of effective leadership and not due to a lack of business opportunities and technical reasons • Without an enabling environment and buy-in from all stakeholders, the transformation or M&A success rate, is highly at risk • Transformation, M&A principles and lessons learned are generally universally applicable • Through effective programme management early failure signals can be identified and mitigated against to ensure a greater chance of transformation success

19. “Without an appropriate vision, a transformation effort can easily dissolve into a confusing, incompatible, and time-consuming project that go in the wrong direction or nowhere at all” (Kotter, 1996:7).

20. THANK YOU

21. “A transaction can rest on a brilliant business structure and be captured in a finely articulated contract; but if careful thought is not given to the concerns and the motivation of the people involved, the undertaking is not likely to achieve its full potential-or it may flounder altogether”. Clements (2004:191)