Just a little over a week has passed since his inauguration; but President Rodrigo Duterte is already making waves. Many people, not just Filipinos but the international community as well, are watching how the first 100 days of the new president will be like.
As shareholder expectations become higher, businesses are now looking to do more mergers and acquisitions or strategic collaborations to attain greater growth. Out of the 96 Philippine CEOs we have surveyed last year, 81 percent said that they are likely to enter into strategic alliance or partnership. While volume of deals have increased, only 38 percent of the executives surveyed globally felt that their deals were financial successes; even fewer believed that they have achieved operational success. Often, anticipated deal synergies are not realized and shareholder value is not increased.
Success remains elusive as deals become more complex. Well-thought out deals usually fail during integration. The first 100 days following the announcement of these deals are critical as it sets the tone that can reverberate for a long time.
PwC has identified seven ways to create a successful framework for integration and deliver sustainable value.
Accelerate the transition
Integration planning should not be done only after the deal is closed and announced.
Doing this early in the deal process improves deal results. About 92 percent of the highest performing deals studied by PwC had their integration teams starting work either before or during due diligence. All of them included synergy assessment during the due diligence phase.
It is therefore important that delivery teams are given the freedom to make speedy decisions within the proper boundaries. Building and keeping the momentum is critical.
Define the integration strategy early
Given the uncertainties that usually accompany a new acquisition, management can be overwhelmed by massive data and analysis. While putting the right governance structure is important, management should be careful not to be caught in a bureaucracy that hinders initiative and causes delays. Do not use the uncertainties and lack of data as an excuse to avoid developing an integration strategy early. That is why it is important to have experienced integration teams, as professional judgment is required to sift through the uncertainties and make sensible and realistic assumptions.
Based on a PwC study, the speed at which integration activities are pursued has a direct link to successfully achieving the deal objectives. Within three months, aim to align leadership, communicate with various stakeholders and integrate operating policies. Rapidly converting your acquisition strategy to integration strategy may spell the difference between failure and success.
Focus on priority initiatives
The tasks required to properly manage the acquisition post-deal can be very daunting especially if these involve transformational or huge transactions. Limited resources dictate that integration efforts should be prioritized. Focus on the quick wins. Identify which tasks will lead to biggest positive impact on shareholders’ value. Channel resources to these work streams.
Allocate resources based on potential financial impact, probability of success and timeline limitations. Avoid trying to do too much as this may lead to fewer accomplished tasks.
Prepare for Day One
Making plans for Day One should happen during due diligence. Making a good first impression is important and in mergers and acquisitions transactions, that first impression happens on Day One. It is the time when people from both organizations come together. What happens on Day One can create a lasting impression so it is important to get the message right.
Communicate with all stakeholders
People are always wary of change. Communicate early with various stakeholders—investors, employees, customers, suppliers, bankers and the general public—and reassure them of the deal objectives. Provide information directed to their specific concerns but maintain consistency with the overall theme and tone.
Recognize that communication should be two-way. So, listen to feedback and address communication gaps sooner rather than later. Be candid, communicate what you know and admit what you do not know yet. Set expected timing and milestones. It is important that you maintain consistent messaging at all levels of the organization to maintain credibility.
Establish leadership at all levels
Successful integration is usually led from the top. Assign key management posts early to minimize uncertainty and establish clear lines of responsibility and accountability.
Create a steering committee consisting of senior members of the management to oversee the execution of the integration plan.
Consider engaging an external consultant to project manage the integration process so as not to distract key management from day to day operations.
Manage the integration as a business process
Either domestic or cross-border deal, small or large acquisition, venturing into a new market or simply expanding in the existing one, each and every deal is different. While integration plans should be customized depending on the specific circumstances, there are key milestones that businesses can target to increase the likelihood of a successful integration process. Follow a sequence of coordinated steps to concentrate resources around key priority areas.
While the first 100 days is not the end but just a prelude of things to come, it does set the stage for future gains. Doing a deal is hard enough and capturing value can be harder. Management should continue to look for synergies and remain vigilant that early wins are not eroded.
The new president appears to be off to a good start. He has selected experienced people as cabinet members, clearly communicated his game plan and specifically addressed the concerns of various sectors during his inaugural speech. He remains consistent with his message from the campaign period to post-election on prioritizing peace and order. Certainly, he did not hesitate to take quick action in his fight against drugs and corruption. As of writing, he is reported to be on track to deliver on his campaign promise of enacting the Freedom of Information bill.
I, along with many others, am watching in anticipation, the other things that will be accomplished by the Duterte administration in the first 100 days. Change is here and hopefully, change for the better is here to stay.
* * *
Mary Jade T. Roxas-Divinagracia, CFA is the Deals and Corporate Finance Managing Partner of Isla Lipana & Co./PwC Philippines. Email your comments and questions to email@example.com. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.