The better the question
How can we execute M&A transactions in a remote world?
The coronavirus pandemic has made M&A integration more challenging.
The coronavirus pandemic has made M&A integration more challenging, as the face-to-face meetings that help two organizations come together largely have had to happen remotely.
But, just as due diligence has become more virtual over the years with cloud-based data rooms, a virtual M&A integration is also possible. If executed well, it can become a competitive advantage for your transactions.
more synergies identified by the team than were identified in the deal model.
The better the answer
A fully remote integration is possible
Barriers can be overcome with creativity to yield favorable results.
Ernst & Young LLP (EY) recently helped execute a fully remote integration for a US$1b+ global transaction, spearheading the integration from deal announcement, to close and post-close.
Despite virtual delivery, the coronavirus pandemic and volatile market conditions, the integration team closed the transaction ahead of schedule and identified 40% more synergies than were identified in the deal model.
The better the world works
What we learned while executing a remote integration.
1. Leveraging due diligence and setting up a virtual clean room
The integration team leveraged the two virtual due diligence data rooms that were already established to populate remaining sensitive data. This was important for the EY clean-room team to jump-start the analysis. EY created a 100% virtual clean room by utilizing the cloud-based tools from due diligence and conducting the relevant analysis prior to the deal close. We were also able to perform analysis to exceed planned synergies and timing.
2. Coordinating executive and team engagement
Executive engagement in integration planning is even more important in a remote environment. Early on in this transaction referenced above, the executive in charge established the foundation for the value drivers and guiding principles and drove expectations and accountability throughout the process. The executive participated in all one-on-one, integration management office (IMO) and Board meetings, which allowed for consistent touch points and overall program alignment.
Frequent touchpoints are essential during integration, especially when integration is being done in a virtual setting.
These frequent touch points with members of the C-suite and integration leads generated engagement and, we believe, were essential to the integration’s success. At workshops, the executive clearly articulated critical path, project scope and clear expectations, even in a completely virtual setting. Selecting an executive to lead the integration can be paramount in engaging and guiding all workstreams in the right direction.
3. Establishing teaming and trust
Building trust can be the foundation of a successful integration, particularly when working virtually. Selecting integration leaders who are well-respected in the organization and deal advisors who are trusted throughout the process can be key. Without the subtle nuances of nonverbal communication in a conference room or hallway chats, companies often need to establish an environment with rapid and trusted, top-down or bottom-up, safe communication to get the job done.
Assimilation often happens through conversations and taking time, even just for a moment, to encourage casual, informal dialogue and connect on a personal level. It is important to embrace healthy conflict to allow gaps and tensions to be resolved immediately. In a remote environment, it can be easier to have miscommunication because body language, attitudes and demeanor are difficult to decipher and interpret through the screen or over the phone. Further, it is difficult to compare notes and mismatched information in a remote setting, so it is important to address discrepancies and disagreements in a timely fashion.
- Encourage team members to turn on their cameras during video conferences in order to create an in-person atmosphere
- Exchange phone numbers, when applicable, to text and less formally check in with one another on a day-to-day basis outside of calendar invites
- Host one-on-ones with each team member to learn more about his/her career interests and development goals, as well as a bit more about hobbies and life outside of work
- Make an effort, when possible, to engage in casual conversation at the beginning of team calls, such as asking the group about their weekend or following up on a team member’s earlier comment about upcoming plans
- Create an environment where all team members contribute regularly on team calls, whether it is a quick status update or a question to pose to the group; participation will increase engagement
- Check in with colleagues after project or client calls; if there is any question that information was interpreted differently or that directions may have been ambiguous, follow up immediately to clarify
- When issues arise, address them immediately to maintain productivity and engagement moving forward
4. Driving internal communications and change management
In the remote environment, overcommunication and getting in front of how companies will drive culture, change management and executive engagement throughout the integration process and for Day One is important. To bring two companies together throughout the integration process, as well as for Day One, we recommend regular CEO communications to both companies, which could include videos and virtual townhalls with each leader at close. In the absence of communication, assumptions and rumors may occur.
For example, we hosted an all-day, open, “virtual conference room” for the integration team to allow team members to have ad hoc conversations throughout the day. The IMO had morning and afternoon check-in calls daily. These calls provide a forum for team members to provide updates, ask questions to the broader group, solicit feedback and report on the status of agreed-upon items.
An open-all-day virtual conference room, in addition to daily check-in calls, allows team members to connect throughout the day.
5. Increasing external communications
Consistent and clear communication with customers, regulators and suppliers throughout the integration, and at close, can help generate a positive experience and engagement. External communications may include an executive touch point planned right after close, particularly for the most important customers and stakeholders. Offering a change management process with Q&A for customers in a recent deal was helpful right after close to address items that had changed.
6. Prioritizing Day One on-site must-haves
Tasks that require in-person work (such as IT) can be identified early. The IMO may need to assess the risks and trade-offs to prioritize what can be done on or before Day One vs. waiting until after close. Organizations with clear work-from-home policies during the COVID-19 crisis may need to evaluate the possibility of bringing specific teams back to the workplace to streamline activities that require in-person collaboration. While some organizations may delay such activities, the financial impact of delaying synergies and savings from consolidation may need to be considered, as well as the potential health impact on team members.
7. Adapting culture and employee experience
Driving toward a new, cohesive culture is challenging in a remote environment. To engage employees on Day One, even in a remote setting, companies can set out a view of how the culture should look on Day One vs. Day 100 vs. the future state. In this engagement, we recommended a pulse survey before and after close to identify priority areas related to culture and employee experience.
Within the integration team, we profiled the value of engaging and developing employees by scheduling regular one-on-one check-ins for team members regarding their personal well-being. We also understood personal constraints that could occur during this unprecedented time. For example, we understood that several of our practitioners were parents navigating the challenges of working from home. With the blurred lines of work and home life, for both the EY and client teams, team members developed an understanding that there would be occasional interruption or technology issues. In fact, we believe this cultivated a culture of empathy and mutual understanding that further solidified teaming and trust.
8. Establishing a clear governance structure and cadence
The need to make sure that an integration is moving in the right direction can be even more urgent in a virtual environment. Without consistent, in-person collaboration at the client site, things can go off track without noticing until it is too late.
As with most integrations, we helped the client to establish a clearly defined governance structure. We assisted management in their creating an executive steering committee to help drive accountability and direction throughout both organizations. From there, we helped the client to quickly establish an IMO, and integration leads from both companies drove accountability, tracked progress, and helped keep momentum and motivation within the broader integration team.
Weekly integration meetings with functional work stream leads, as well as a weekly executive team and steering committee meeting, helped establish strong working relationships; provided important program updates; and addressed the relevant risks, issues and decisions.
In addition, more frequent one-on-one meetings with each functional work stream helped the teams to touch base on the functional area’s specific workplans, as well as to outline expectations and track progress. Since there was no opportunity to meet in person and see each other in the office, these one-on-ones allowed teams to more closely monitor delayed activities and course correct, when necessary.
Further, in order to work remotely on a tightened time frame, detailed workplans were created. Day One priorities had to be monitored and kept top of mind through regular conversations and meetings. Without regular, informal conversations, frequent touch points through regular meeting cadence are necessary to clarify questions and to understand that all team members are aligned.
9. Reimagining workshops and collaboration tools
Historically, within the industry, most workshops, particularly the integration kickoff, interdependency workshops and Day One readiness checkpoints, were conducted in person. Yet, for this integration, EY reimagined the workshop for a virtual format with specific attention to detail before, during and after the workshop:
- Before: Poster boards were shipped to participants’ physical locations so that they could review the content and hang up the wall chart with the details that would be covered in the meeting – to have the same feel of in-person content.
- During: All functional work stream leads and steering committee executives attended, enabling end-to-end participation led by the IMO, with understanding and accountability during the discussion. The team used virtual storyboarding software to draw on the screen and show relationships between key milestones.
- After: EY shared a copy of a post-workshop virtual wall via PDF with full workshop notes and follow-up actions across work streams. EY then coordinated team discussion sessions to document and update workplans for identified interdependencies. These discussions clarified milestones and activities across work streams as well as cross-functional dependencies.
A virtual meeting room was used to facilitate the meetings and workshops.
10. Building in fun
Integrations are often challenging, with long hours and high stress levels. Finding ways to have fun, even while remote, is important. We recommend virtual happy hours and sending colleagues small tokens of appreciation throughout the process. This could include personal notes from the executive team, or food and beverage. These gestures can keep up morale in a tough environment and can help colleagues participate in and enjoy the process.
Following the Day One readiness workshop with our recent deal, the team hosted a virtual event to replicate a social setting that could have traditionally happened following an event on-site. The EY team hosted trivia with the client team, consisting of 30 people, including executives from both organizations.
Thinking creatively about how to bring engaging events to a virtual platform can go a long way for establishing rapport and building relationships.