M&A Integration, the Art and Science of Decision Making

High speed, high number and high quality decisions are key during M&A integration

Decisions have multiple drivers, enablers, and outcomes. M&A has higher velocity decisions than any other business situation.

M&A Integration is an extraordinarily complex activity attributed to multiple functions, personnel, products, geographies, customers, unique nuances, dependencies, risks, and the sheer volume of tasks to be executed. Brining all this together requires several decisions to be made in quick order. Decision making is part art and part science, seasoned M&A integration professionals understand the four Vs surrounding good decision making i.e., volume, velocity, value, and variety. How, when and where these integration related decisions are made can affect the end state of the integration and value creation from the transaction.

In a recent survey I conducted, approximately 100 M&A integration leaders were interviewed, here are insights from it:

61% believed slow speed or lack of decisions created sub-optimal value from the deal.

43% shared concerns about the quality of decision making.

34% believed slower speed of decision-making affected synergies.

22% understood the differences between executive decisions in steady state operations and differences in an M&A integration environment.

The below figure can help throw some perspective on the volume and velocity of decisions during various business situations and how an M&A integration stands out.

Understanding Variety of Decisions

Quality of decisions are causally related to its enablers, during a M&A integration we generally see many decisions with one or more enablers. Integration managers and leaders should quickly wrap their arms around each decision, its key enablers, the owners, and the impact of the decision itself. Making sure the right enablers are used will enhance the quality of decisions e.g., a decision requiring specific experts should not be made with data analysis or experience alone.

Figure 2: Decision Enablers

Each type of decision or its enabler has an inherent level of transparency attached to it — understanding the right enablers to each decision helps communicate the rationale ensuring higher levels of transparency. Quality of decisions can also be affected by style of decision making e.g., consensus vs unilateral etc., these are more cultural and should be undertaken based on what works in each organization. Understanding value of decisions is equally important e.g., At $100 million planned synergies, each week of delay due to lack of decisions postpones realization of ~$2 million in EBITDA.

Managing Decisions: Leading Practices

§ Make sure everyone on the team understands the financial, operational, commercial, and legal aspects attributed to each decision or lack of it.

§ Establish good governance to enable decision rights at the right levels in the organization early in the deal cycle e.g., at the due diligence stage itself.

§ IMOs should facilitate the right decisions, by the right people using the right enablers.

§ The more dissimilar the cultures the greater the need for definitive and timely integration decisions

§ Decisions, at the right places will enable combined problem solving, set directions and rule out further discussions — decide upfront, especially the tougher ones.

§ Establish the authority of each decision maker with clear lines of formality, interaction model and demarcation with other decision makers.

§ Make sure culture and ideology-based decisions are communicated widely with proper understanding of the impact on integration.

§ Enable and staff the integration with qualified personnel with the right and relevant skills — expertise-based decisions are required in specific areas such as legal, IT etc.

§ Understand impact of external forces on decisions e.g., HSR, pressure campaigns, regulations etc. and make sure impact is well understood.

§ The IMO should include list open decisions in all status reports and seek timely closure from the right people.