December 28, 2021 at 12:19 am #52001Christopher TwibleParticipant
I’ve always found that when completing an acquisition that synergies after often lost with the change in management or leadership and they are difficult to track and hold accountability on to deliver. I’d be keen to understand from this forum how you like to track and deliver synergies from a financial DD report all the way through to delivery in the LTM or forward LTM of earnings.
ChrisDecember 30, 2021 at 4:56 am #52190Abdullah AzizParticipant
That is really a key point Chris.
Start capturing the synergies from the due diligence phase is an important step. However, this should evolve with clear ownership and accountability.
The integration committee shall be responsible for regular reporting to the management on the value created from the synergies.January 2, 2022 at 9:48 pm #52259Stephane HetroyParticipant
Hi Christopher, I do agree this is a difficult point and quite often the good or bad news post acquisitions are not easily identifiable when you just have an aggregated value because the synergy analysis prior to the acquisition was not clearly realized or too high level / optimistic and no preparation or transition was planned with the PMO to facilitate the method to track these synergies you just end up with a nightmare. The PMO and clear timeline with responsible and engaged workstreams ahead of the acquisition are quite key elements. Another aspect (past audit experiences and discussions with advisors) is that very often to push their political agenda or under great pressure a lot of middle or top management of the the acquirer (not only the target) will hide issues or brush them away. In fact in one case we even proposed on some key integration aspects that a “circularisation” like in audit was made to confirm if an action had been finalized as stated (i.e. When a department provides you with a set of account balance for example debt, the auditor can ask to all debtors to the company to confirm the amounts outstanding or to reply if the amount stated is incorrect or in dispute). This last part did not fly to well on one project… (not M&A actually, difficult BD project).January 4, 2022 at 5:02 am #52309Yiwei LeeParticipant
Hi Chris, agree that synergies (both revenue and cost) are difficult to track and realize, especially when in reality there could be many issues and differences
Perhaps, the key is assessing the extent of similarities / synergy possibilities even before the M&AJanuary 17, 2022 at 2:27 pm #52645Liwei WangParticipant
Sharing some my experience on the synergies tracking and managing: 1) Assign a dedicated project manager to manage the integration and track the synergies 2). Involve all the functions who will deliver the synergies 3). Use synergy tracking tool – list all the synergies in the business case, the target, up to date realised and forecast – give it green/amber/ red rating 4). Constantly and regularly tracking & monitoring is important 5). If possible, talk with the CEO, set synergy target as one of the parts of functional heads’ performance targets.January 29, 2022 at 6:29 am #55339Albert TANParticipant
One way is to setup a profit guarantee mechanism to ensure that the sellers of the business stick to their financial projections.In the event of a shortfall in expectations, then the buyers will be compensated proportionately. Else, the sellers will get their dues by achieving each milestone as they progress along. Assuming the financial projection last for 5yrs and all the milestones are achieved, then the sellers get compensated in full and the buyers will have achieved their aim.January 29, 2022 at 7:40 am #55343Albert TANParticipant
To add: organising feedback sessions amongst staff or target performance group sessions will help. Ultimately, the approach also has to be bottom up, not always top down. Especially, in a new acquired company, there are resistance forces tha we should be mindful of.
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