Using 6-Sigma Techniques to Reduce Post-Merger Integration Failures
Post-merger integration is one of the most challenging environments for a business due to the complexity and breadth of impact on the business. Further, often being an infrequent event most management and their staff don’t have experience executing the required changes. Because of this more than 50% of deals fail - and don’t deliver the expected benefits.
The 6-sigma management system integrates business best practices to foster focused and data based execution of improvements. Typically used to improve businesses by reducing costs, improving customer satisfaction or reducing risks it can be readily applied to the post merger integration activities to dramatically reduce execution failure rates.
Core to the 6-sigma system is focus on the customer, process and reduction in variation.
Translating this to a post merger integration environment:
Customers – are your internal stakeholders, including your staff, contractors as well as your external stakeholders such as your customers, suppliers and regulatory bodies
Process – with the acquisition of a new business nearly every business process will be duplicated and needs to be aligned, harmonised or the opportunity taken to re-create and improve
Variation - in the PMI environment is fundamentally about managing risk. In a period of turbulent change you need to urgently ensure the appropriate controls and monitoring of key financial, operational and customer processes to ensure they are running to plan so there are no unintended or adverse impacts.
These principles are applied in a program of work with the DMAIC (Define, Measure, Analyse, Improve, Control) phases. Below are listed the key phases of a typical DMAIC project and suggested activities that a post merger integration program should consider.
Define - requires the crafting of a problem statement that encompasses the business goal of the transaction such as increased sales, acquire IP, cost synergies, etc and timeframes to be achieved. In management parlance this is a combination of a vision statement and a SMART objective that everyone will rally around.
Measure – baseline the key metric. To monitor progress a metric is determined that best represents the goal. We recommend a financial measure that is simple, easy and fast to measure. This allows frequent and timely sharing and discussion within the business, of progress and if necessary adjustment. If management are uncomfortable presenting a dollar figure, percentage reductions or ratios can be more palatable.
Analyse – involves understanding what the integration priorities will be. Taking into account the objective and the measure an re-assessment of due diligence work is taken to firstly list the changes that could be made and secondly to rank these by their impact on the key metric. Higher priority is given to changes that either improve the metric or reduce the risk of a negative impact on the metric.
Improve - with so much to be done and limited resources available the business functions face critical choices. With an understanding of where to act a detailed plan of action is developed that will prioritise the activities that will bring the most benefit in the shortest time to the business.
Control – apart from the usual reporting you would expect of a program of work this includes the key metric and how it is trending, so that timely corrective actions are taken as needed.
Taking a 6-sigma approach to post merger integration adapts a proven business improvement methodology to a significant business challenge. Utilising the DMAIC structure drives a systematic approach that will significantly reduce the risk of failure.
About M&A Integration Partners
We specialise in leading the execution of our client's POST MERGER INTEGRATIONS to deliver targeted value with minimal disruption. We support mid-market organisations who do not right fit leaders, capabilities, and tools to ensure a successful post merger business integration. Our experienced Business Integration Leaders work our client’s business to:
Lead and stabilise the entity to be integrated
Assemble and lead the Business Integration Team
Design and build the Business Integration Roadmap
Lead the Business Integration Program and mitigate execution risks
Identify new synergies to enhance the original business case
Measure outcomes and update executive sponsors
Our Business Integration Leaders are experienced VP/EGM level leaders with a deep understanding of business fundamentals, M&A, and Post Merger Integration.
Please contact M&A Integration Partners to discuss how we can support your Post Merger Integration activity.