Tools and frequency of measuring integration success
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We frequently discuss the success, or failure, rate of transactions, but I’m interested to hear from others what if any tools you have used to measure success as well as how often this actually takes place.
Hi Jeremiah – one way we are talking about measuring the success of an integration that includes a transition service agreement (TSA) is to measure a key performance indicator (KPI) of the ability to exit the TSA by the agreed upon date and the financial impacts associated with doing so. This dollarizes a value related to the integration. Additionally, we are planning to use a synergy tracker to identify potential technology, vendor, or headcount synergies and the dollar value associated as they are realized throughout integration.
We have used in the past a financial and non financial kpi. For example a 5 year financial plan and social and environmental metrics. The KPI were given to the new management and reviewed on quarterly basis depending on the nature
I echo Emily on the financials. From a Private Equity standpoint, the way to measure success is simply the difference between the price they sell the company at exit and the cash they used to purchase the business at the beginning.
For a strategic buyer without a plan to exit, I think relevant metrics should be measured every quarter for 3-5 years and tied to managers’ variables. I believe there should be no more than 5 really critical KPIs.Financial modelling – comparison of financial models from DD with financial result a few years later.
We have a quarterly reporting tool that measures a few KPI’s related to all acquisitions in the past 4 years. Specifically, my organization tracks net revenue for the past 4 years at year end and last twelve months for the prior 3 years, customer count/retention, and average revenue per customer. The values are reviewed by the executive team for areas of concern.
Judith, your reporting metrics sound elegant and simple. In your firm, are your products largely free of direct costs (e.g. software), or are you perhaps selling labor services? I would typically have assumed costs, profit, or monetization rate would show up as key metrics as well.
We are currently trying to establish another way of measuring the integration success. In the past and that is what I am mainly reading here, the integration success was largely linked to the financial performance (eg. actual vs. budget, actual vs. prior year, etc.).
With all the macroeconomic factors being unpredictable at the moment, I want to focus on non-financial KPIs. Here we are measuring the FTE figures, employee retention, employee sentiment and the net promotor scores from customers or suppliers (whatever is relevant for the business). But also the time to implement all compliance and regulatory requirements.
In my experience, measuring the success of a transaction really depends on one thing, and that is what the original goal of the deal was. Whether the objective was to increase revenue, reduce operational costs, expand market share, or gain a strategic advantage, success can only be measured against that specific target.
Too often, people evaluate deals based on general financial outcomes without aligning that evaluation to the original intent. For example, a transaction might not immediately boost revenue, but if the purpose was long term positioning or tax efficiency, that deal could still be successful within the broader strategy.
Whatever the reason for the acquisition, that goal should be clearly communicated to everyone involved in the transaction process well before due diligence even begins. If the team does not understand what success looks like, then decisions made during integration can easily misalign with the company’s long term objectives.
As for tools, I have seen success tracked using a mix of synergy tracking dashboards (Power BI), operational key performance indicators, and integration scorecards. But those tools only work if they are tied to a clearly defined goal from the start. Without that clarity, the metrics lose meaning.We leverage financial modeling and the KPIs set by the executives.
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