Questions to consider
- At what point do you begin planning for day one readiness?
- Do you consider the level of planning undertaken appropriate?
- Is focus placed in the right areas to maximize greatest value as soon as possible?
- Do you require clear accountability for the achievement of synergies?
A few missteps in day one preparation can quickly destroy deal value.
Summary: Too many deals are unnecessarily delayed or experience expensive workarounds because the buyer is not ready to pursue opportunities on day one. Work on the development of an integration roadmap must begin long before a deal is completed.
Maintaining business continuity and realizing immediate value
There is no clear line between where pre-deal planning ends and day one execution begins. Companies need to decide how much actual work must be completed before closing a deal and how much will commence on day one.
Synergies should start to be realized on day one. Newly combined companies need to be in a position to ensure such work is well underway, even if synergy achievement may take weeks, months or even years.
The business itself must be ready on day one to deliver products and services to customers, thus providing immediate customer value and cash flows.
A few missteps in day one preparation can quickly destroy deal value. There should be a clear delineation between the focus on longer-term synergy objectives and immediate priorities.
Communication is a must
The deal team and corporate executives are often aware of the strategic intent of the transaction and the key value drivers. However, these are not communicated effectively or at the appropriate time within an organization and externally to customers.
Customer and employee retention is as important as potential headcount reductions or synergies and, as such, an active approach to communication is critical. People want to know what lies ahead, especially in times of change.
Communicating clear messages ensures value delivery. It also prevents dis-synergies arising from individuals feeling they are not informed and involved.
A planned approach to communication, both internally and externally, forces management to proactively address issues rather than reacting to negative consequences.
Day one readiness
Day one readiness focuses on the details necessary to bring business functions and processes into alignment.
In many cases, the acquired asset is being stripped of its central support in terms of finance, treasury, marketing, procurement, HR, tax and compliance. Any slip-up can prove costly.
Companies are often caught by surprise when they realize how long certain day one preparations may take. For example, before a company can open new bank accounts, it will need the name of its new operating entity and a legal entity will need to be established.
This can prove challenging to determine prior to deal closing, but it is nonetheless critical.
Long lead times
In many cases, lead times are long. This is especially true of regulatory approvals, including licenses, permits and tax clearances, which can take weeks or even months, particularly overseas. Similar lead times are likely for the updates of the essential IT routines such as ordering, processing, configuring, shipping and billing.
Work in these areas should begin long before the deal is closed. How long in advance, however, will be a function of the time available, the value perceived, the investment required and the probability of the transaction closing.
Order-to-cash and related processes must be ready to go on day one. As for synergies, the integration plan developed pre-close should by now be in implementation, with focus placed on those areas identified and prioritized during the planning process.
At this point, deal success will depend largely on the quality of the integration plan and the people assigned to its execution.
Buy-in should have been achieved prior to deal closure, with the involvement of the business units and central support functions, and a clear handover to the operating team that is tasked with executing the plan.
Wherever that point may be, the way forward means a focus on accountability and includes communication of formal responsibilities and monitoring of timelines.
View Case study: using a risk-based approach to achieve synergies
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