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Make it or break it: Value-based execution - EY - Global

Make it or break it: driving value through integration

Value-based execution

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Reviewing and challenging performance will provide clarity of results to date and identify areas to enhance value.

Summary: The deal closure is just the beginning of achieving synergies, and deal success is based on a number of elements. This requires establishing integration milestones as well as continuous monitoring and flexibility to make corrections mid-course.

Implement feedback loops

The deal process should always feature feedback loops to respond to evolving conditions.For example, if work toward the achievement of certain synergies is falling short, a feedback loop can provide a mechanism to warn management to respond.

At one company, the focus had been on achieving full integration with the existing enterprise resource planning system. But once the actual integration was underway, it became clear that a far more critical task for IT was to update and integrate customer files.

Adequate feedback mechanisms enabled the company to re-prioritize activities in accordance with actual conditions, and a key factor to ensuring success is to maintain strong communication with stakeholders and implementation teams.

Cross-functional performance measures can help communication, as well as assist in prioritizing ongoing efforts and creating a sense of shared ownership in driving the integration effort.

Transaction value assessment (TVA)

At six months, one year or 18 months after a deal is closed - or the specific timing aligned with the most critical aspects of deal value milestones - a company should assess deal performance to enable a mid-course correction.

Leading companies report that this approach can add substantial value, not only to the deal in question, but also to future transactions through lessons learned.

All too often soon after close, management attention begins to shift elsewhere. Before any acquisition moves too far off track, leading companies elect to undertake a review of the integration process.

When done well, this is a rigorous, objective assessment of how the company is performing against the deal model approved by the board or executive management.

Take the time to revisit the deal

Once an acquisition is up and running, there is a tendency to assume the deal is performing as planned. However, if a company is to become a skilled acquirer, it must take the time to revisit each deal openly and objectively.

The learning enables the company to improve its acquisition skills to build an important source of competitive advantage.

Similar to the due diligence and integration planning processes, such a review should focus on the key drivers of deal value and synergy. A key advantage of these reviews while a deal is still ongoing is that it can identify variances and process deficiencies, helping get the transaction back on track.

View Case study: the fast-moving technology sector provides measurement challenge

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