by Lauren Dever
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Before we dive into best practices and insights on global separations and integration programs, we must first set the scene. While no separation is the same, there are key threads that run through each one. In this piece, we will assume you are trying to separate a fully integrated business unit with eight functions (HR, Legal, Finance, Facilities, R&D, Sales, Production, and IT) and provide you with M&A separation timelines, best practices, lessons learned, and project management platform recommendations.
What is the Typical Timeline for a M&A Separation?
- Letter of intent (1-3 months)
- Signing of SPA (3-6 months)
- Closing/Day 1 (1-12 months)
- End of Transitional period (12-24 months)
It is key to note that before the letter of intent, you must determine exactly what it is you are going to sell (by this we mean what FTEs) because signing can only take place when the buyer specifically knows what he/she will be buying.
In addition, you need to be ready at closing to execute separations (systems, contracts, etc.). Moreover, you must remember you are not completely separated after closing - workstreams such as IT can take a year or longer to fully separate; this means, you are separated with a TSA (Transition Service Agreement).
What is the Governance Structure of a M&A Separation?
Obviously, at the beginning of a separation only a small number of people within the company, plus external advisors, will know what is taking place; this can be an almost secretive time. However, as the process continues, many people will become involved - often over a hundred people, especially for larger multinational corporate conglomerates. In this case, governance can be broken down into three main categories:
- Steering Committee comprised of Board members
- Separation Management Office comprised of Board members and external advisor
- Workstreams with business unit FTE (full-time equivalent) and advisors; workstreams will be across all the countries the company spans, and, again, there are 8 workstreams: Sales, R&D, HR, IT, Supply Chain/Production, Legal, Facilities, and Finance
5 Key Success Factors in a M&A Separation:
To achieve a successful global separation, everyone needs to know and understand the following five success factors before the separation begins:
- Begin with the end in mind - Consider: what will the company look like at close? What TSAs do you want to provide and for how long? What will the company look like at the end of the TSA?
- Keep it simple - Focus on separation - optimization can be done later. This also means taking a militaristic approach: act, execute, and move forward. In order to do this effectively, it is imperative to divide the project into manageable, well-defined pieces.
- Establish a clear governance and strong SMO - The SMO is the center of it all; it must have its eyes on the horizon and ultimate goal in order to identify red flags and cliffs SUSPECT “cliffs.”
- Focus on the interdependencies - Separations fail because people do not look at the interdependencies in enough detail.
- Unified usage of tools and templates - Everyone working on the separation must be using the same tools and templates, and they must know how to leverage all of the key features. This key to success is easier to master if the tools and templates are intuitive and there has been some training on them.
How Midaxo is Used to Run Successful Global Separations:
With the governance structure and keys for success in mind, the highly important, and traditionally complicated, question of how to make sure information across all workstreams is communicated accurately and regularly must be addressed. How does the information get from workstreams to SMO to the Steering Committee? This is where a comprehensive M&A project management tool must be leveraged. More specifically, here is how KPMG utilizes Midaxo in global separations:
The separation plan is put into Midaxo, and the plan is then separated into workstreams.
Milestones are added into workstreams, and then within each milestone, specific activities are identified.
Midaxo is used to provide one source of truth and simplify communication. This means, in order for information to get regularly reported to the SMO (especially when multiple countries are involved), there needs to be a single source of truth that is constantly up-dated in real-time. The ability to update each task’s status and add high-level notes, as well as key dependencies, means communication during a complicated time becomes straightforward and simple.
The dashboard functionalities are fully taken advantage of; all data computes to a dashboard for the Steering Committee, SMO, and workstream leaders. This provides a clear overview of the process with visuals. With this live reporting, for instance, you can see at a high level what is completed, delayed, and not yet started, plus where the risks are. Furthermore, the dashboard is also used to compare workstreams.
The platform is employed to provide accountability, a key benefit when undertaking a large M&A project.
M&A Separation Lessoned Learned:
- Carefully think through your program set up before the start of the separation and make decisions fast.
- Populate Midaxo from the top down; break milestones into detailed activities.
- Workstreams will differ and will need different approaches and levels of support based on the number of people in the workstream and how much M&A experience they have; one size does not fit all.
- Make use of the interdependency functionality and follow it on a daily basis.
- Use Midaxo reporting dashboards in every meeting and ensure management reports on it as well - you must understand this is the one source of truth.
- Treat project tooling as a systems implementation.
- Enforce unified and proper usage of Midaxo; this means specify the level of detail needed as information is put into Midaxo. Remember “garbage in, is garbage out.”
- Make use of the risk / issue function.
- Store key deliverables in Midaxo after finishing a key activity.
- Organize specific project support for usage in Midaxo.
Managing separations and integrations are multilayered, complex tasks, but the above insights from our Partners at KPMG can help you and your teams approach them in methodical, proven ways. In and of itself, an M&A platform is never a cure all for deal challenges, but it can certainly organize and streamline your M&A process, offering significant benefit to achieving deal success.