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1、How M&A cultural assessments are used to realize deal value goalsFindings from the WTW M&A Culture GAuthorsJim McKay,Managing Director,Global M&A Client Experience LeaderJohn Bremen,Managing Director and Chief Innovation&Acceleration OfficerCraig Keller,Global Head of Change Management&Organization

2、Transformation How M&A cultural assessments are used to realize deal value goals/3Introduction 04 Chapter 1 06 Value discussions and process 06Typical value-based goals 07Value discussion applied to the deal life cycle:08 When and how to start the process The people who generate and deliver value 09

3、Why is change so important in talent deals?11 Chapter 2 13 Workshop on value-based goals Chapter 3 18 Key Imperatives:Understanding the value challenges and the change and people related challengesSummary 21TABLE OF CONTENTS4/How M&A cultural assessments are used to realize deal value goalsThis pape

4、r is the fourth in a series about advanced M&A cultural practices.The intent of the series is to share the current state of leading practices in cultural work,specifically and only for the M&A situation.It is based on the findings from a unique and highly experienced group of M&A practitioners that

5、meet on a regular basis with WTW to share and discuss their views on this area.Each firms participants are drawn from its in-house M&A functions,representing corporate development,business development or corporate strategy(the term varies based on each firms internal definition of the role)and its h

6、uman resources M&A group.Throughout the series,the content reflects the discussions within the group and not the sole practices of any one firm.The distinguishing feature about the group that will also help readers understand the content better is that cultural investigations are an accepted part of

7、 their M&A process.The first paper in the“M&A cultural practices of advanced acquirers”series showed how M&A practitioners brought structure and discipline to cultural discussions through capturing in one place the parts of culture that have the greatest impact on a transaction(the culture framework

8、).The second paper covered how they created the business rationale for incorporating culture as part of their approach throughout the deal life cycle.The third paper built on the previous two and showed how M&A practitioners use the cultural investigations in reporting their findings to leadership.T

9、his fourth paper focuses on“value”and how to deliver extra value from the business combination,over and above what already existed in each business.Delivering value means achieving,or exceeding,the value-based goals that are built into the deal rationale and financials.Achieving these goals will sig

10、nificantly increase the odds of overall deal success.However,these are traditionally the most difficult of all deal goals to realize.IntroductionThe balance of this paper focuses on the areas that are most important to achieving this value.These are represented by the value goals,their drivers and,i

11、n particular,the contributions people can make and the changes they must adapt to as they alter the way they work and operate to meet new objectives.While problems in these areas take root early,there is a significant time lag before their impact becomes evident.They typically surface in the later p

12、hases,particularly the integration and transition to the“business as usual”phases,where the business results of the transaction show through.And they appear in various ways,often slowly:Customers disappear,revenues decline,and leaders and talent leave.Bottom line:The sought-after value of the deal d

13、isappears.Other deal goals and issues typically help preserve value in what was bought by transitioning the seller to the larger companys operating model,maintaining existing productivity and reducing business disruption risk during the transition.These areas typically are left in the hands of the i

14、ntegration team and functional leaders,and decisions in these areas are more tactical and center on providing the guidance,resources and funding to support these goals.Done well,these areas provide a solid foundation to support a sharper focus on value-based goals but done poorly the prospect of sig

15、nificant business disruption will restrict the ability to focus on“value.”As is customary throughout the series,we feature quotes and examples drawn from members of the M&A cultural group.Where necessary,the quotes and comments are edited for readability and to protect the confidentiality of the con

16、tributing company.Also noted throughout the series,each firm has its own company-specific framework and different ways of describing the work it does in“culture,”so the terms“cultural work,”“assessments,”“investigations”and“organizational assessments”(the term several use for their cultural work)are

17、 used interchangeably.Likewise,each firm has different ways of establishing the team to address culture.The important point being that each firm has an organized and disciplined approach to the work and a clear rationale for that work.About the types of transactions in the groups discussionThe discu

18、ssion is centered on bigger firms buying smaller firms with an emphasis on“talent”based deals,meaning deals where the people at a target are deemed the most important asset,among all the other assets at a target.For most buyers,the deal strategy centers on acquiring to expand their capabilities(also

19、 known as“scope deals”in M&A circles).We did not consider any transaction that transformed a company to such an extent that creating a new culture,or third culture was required.While these transactions do happen,they are a very small percentage of actual deals.Likewise,large industrial deals,and meg

20、a-mergers,while discussed within the group,are not the focus of this paper.The consensus is that the size,scale and global scope of these deals made it difficult to incorporate the approaches discussed here early,and that there were many other“assets”in the combining firms,well beyond just talent an

21、d employees.Finally,the issue of growth of shareholder value,or avoiding the erosion of shareholder value,as a specific goal,as seen through buyer stock price changes,is not typically a goal of talent-based deals and was not a factor in our analysis.In contrast,larger deals lend themselves better to

22、 share price comparisons with peer companies,since this data is publicly available and can then be analyzed by consulting firms and academics alike.However,the general principles reviewed here can be adjusted and applied in varying“doses”to most deals.How M&A cultural assessments are used to realize

23、 deal value goals/56/How M&A cultural assessments are used to realize deal value goalsWhen acquirers first investigate value,they look carefully into what the market pays the seller for.This is not found in the sellers organizational statements,such as its mission,vision and values nor in such gener

24、ic statements as“our value is in our people,our value is in our focus on the customer,our value is in our innovation capabilities or our value is in our intellectual property.”All might be true,but in these investigations,the purpose is to understand what this actually means and more precisely what

25、and who drives value,in specifics not generalizations.And then put a price on it.This value is generally found in the operations and varies greatly by the type of firm and industry and what the firm regards as its so-called“secret sauce,”(in other words the“ingredients”that generate this value).Anot

26、her twist is that these secrets are tightly guarded(and therefore not easily uncovered in any depth until post close).Furthermore,there typically is not one source of value,but several,often interdependent and each with varying degrees of impact on the business.With this context and for the purposes

27、 of this paper,the group identified three broad value categories for the discussions:Clients and customers:This category not only includes clients and customers,but also distribution networks and other business relationships in the industry that are meant to serve customers and clients.Key people:Th

28、ese are the employees who drive value.Typically,this talent is categorized into groups,such as senior leaders,key talent,key managers,critical-skill employees and“hot market”employees.Their contribution to value varies depending on each firm and the intended integration goals of the combination.Gene

29、rally,rank-and-file employees,while important,do not fall into this category.Services and products:What do they produce that the market buys and at what cost?It also covers whether they can charge a premium over competitors.Additionally,the definition of products also includes related technology,int

30、ellectual property and software products and services.Chapter 1 Value discussions and processWhat also must be included in the value discussion is how the target gets its“product”to the market in other words the targets go-to-market strategy(GTM).Other areas of value,such as the targets business pro

31、cesses or management practices are likely to change after the deal and therefore are not included in such a value discussion though some in the group did argue that GTM is a business process and that business practices should be included as a separate value category.But for the purposes of this pape

32、r well focus on the three categories above.When presenting to our steering committee for permission to proceed,the first questions theyll ask are all centered on value.Basic questions we face are Where is the value in the sellers business?And how are we going to increase this value when we combine w

33、ith them?Its not something we can fudge.We must have a clear position on this very early,otherwise we wont get the green light to go forward.The capital in our firm is not free and an investment in buying the target,comes at the expense of financing some other company initiative.Corporate developmen

34、t leader How M&A cultural assessments are used to realize deal value goals/7Chapter 1 Typical value-based goalsTo help with the context for this part,when buyers are“pricing”targets,they will price targets without and then with the value-based synergies.The first represents the base valuation of the

35、 business and the second demonstrates the potential extra value from the combination.As value is identified,specific goals and strategies are drafted to preserve and then grow more value from the combination.These are further broken into financial and market-based goals each with measurable targets.

36、The most frequent value-based goals used in transactions are:Customer revenue synergies:Generating more revenue from existing or new customers,through expansion of existing services or products.In its simplest form this is selling the buyers existing services into the sellers existing client base an

37、d vice versa.Service and product revenue synergies:Developing new services or products as a result of the combination to sell to existing or new customers.These are areas that do not exist at the buyer or seller before the deal.Developing new services or products often comes from not only improving

38、what exists through identifying the“best of best”from each firm,but also from developing new services or products.Traditionally these can take a considerable time to develop and so are the most difficult to even predict,far less achieve.Profitability synergies:Generating more profits from each firms

39、 client base,often by implementing more efficient processes.Also,more profits can come from determining that the seller is undercharging its clients for the value delivered,an all too common tactic when larger firms compare their pricing approaches with those of smaller firms.Market share goals:Expa

40、nding into new markets or increasing ones share of existing markets.The combination usually brings increased scale and scope,often enabling a business to compete in markets it was not previously able to by virtue of its increased position and visibility in the market.Value-based revenue synergies ar

41、e a whole different ball game for us in corporate development.We know M&A.We know how to acquire,how to integrate and how to manage the cost synergy side of the equation,such as consolidation of offices or suppliers.We can manage these centrally with limited need for key talent to get involved.Likew

42、ise,we can help get all the leadership decisions and retention agreements out of the way early.All this work sets up the talent teams to work on value.But we dont do or own this revenue part.We are not experts in this area and thats all left to the business.Corporate development executive8/How M&A c

43、ultural assessments are used to realize deal value goalsAsking the questions is easy,getting the answers,and consensus on the answers,is not.Business unit leaderChapter 1 Value discussion applied to the deal life cycle:When and how to start the processThe value process starts at origination,when the

44、 feasibility of the deal is first discussed.At this stage the intent is to ensure that value is discussed in depth and that leaders come to a common understanding of the targets value and the increased potential value in the combination.The journey continues into formal due diligence,where more insi

45、ght is gathered from soliciting the sellers views and from analyzing more data.Clearer views are developed on the value issues and potential integration challenges in achieving that value.At this stage,preliminary goals to both preserve value and generate additional value are drafted.The process con

46、tinues into integration planning,where discussions center on how to achieve these goals in much more granular detail.At close,validating planned goals is vital.Because antitrust regulations prohibit sharing of confidential client data before close,pre-close estimates are prepared with the“best avail

47、able data,”but without the input of many with the knowledge of the clients and market and without a full understanding of the target customer data.However,the results of all this planning do not show through until post close in the business unit results.What process do these firms follow to address

48、value directly?As in most complex situations,it all starts with great questions.The most common question is“Why are we interested in this firm?”The rest builds from the answers to this question.Some standard questions are:Where is the true value of this business?What is their secret sauce or crown j

49、ewels?What do we think makes them valuable?What would they say?What do they say we should not change in their business at all?And where do they think we should further invest in them,either in capital or resources?What do they do better than we do?Or what do they do that we dont?What makes them attr

50、active to us?How can we add value to the target?And how can they add value to us?Exactly how will the combination create additional value?What market do they compete in?Who are their top clients?If we compete against them,what do our business leaders say about them?Who are their key leaders,and wher

51、e have they worked before?How well known are they in the industry?Do they have any industry gurus and who are they?Have any of them worked with us before?Or have we tried to recruit from them before?What did we learn about them from such experiences?Why cant we grow without the need for this acquisi

52、tion?Will they significantly accelerate our growth strategy compared to what we are trying to do?If so,how and by how many years?If this is a pure talent play,why cant we just hire their key talent instead of buying the whole company?The answers to these questions however incomplete,which they will

53、be are compared to how the buyer answers these questions for its own business to gain a clearer understanding of the current situation and the benefits in the combination.How M&A cultural assessments are used to realize deal value goals/9In talent deals,people are the number one asset in any firm an

54、d often the sole reason to buy a target.But in transactions,not all people are equal,and the goal is to find those who are most important to the value equation.But handling people is a complex and delicate task.Its a truism that people can drive current and future performance,but its equally true th

55、at they can also be barriers to improved performance,for example by not cooperating with the plans,or even if they do,by not executing the plans successfully.And in transactions the risk of the talent leaving is higher than at any other time,with firms especially vulnerable in the critical period im

56、mediately pre and post close.In this time period,executive recruiters and competitors alike will court key talent.For buyers,another big challenge is the access,or lack thereof,to the relevant key talent population at the early stages to evaluate this“asset.”These are all huge risks at the critical

57、time when buyers need the talent focused on the transition and integration.Chapter 1 The people who generate and deliver valueThese risks are very real,and weve faced this situation many times.Weve found that our competitors know the key talent in the target far better than we do,which is not surpri

58、sing since they can talk to whoever they want in the target and we cant till close.We are vulnerable in that the assets we think were getting,the talent,may well walk out the door before we can even get to them.In practical terms the first step is to get the sellers leadership views as a starting po

59、int and enlist these leaders to convey the relevant messages and our retention intent to this talent.Chief human resource officer10/How M&A cultural assessments are used to realize deal value goalsWhen you combine people intensive businesses,you are not just combining clients and financial statement

60、s.You are potentially changing peoples lives,lifestyles,careers and personal ambitions.When we started,we hoped people would behave logically,but we now know that thats mixed with a heavy dose of emotion.No matter how senior they are,people are people.I often say we need to enlist professional thera

61、pists to help with the people side.Vice president,human resourcesWe get the strategy,plan and tactics,but these must be executed by people.And these key people are tremendously busy as it is.Its not just a case of prioritizing,but re-prioritizing what they do.We need to be clear on that,with specifi

62、c actions,and what that means to their career path,and compensation package.Business unit leaderTo mitigate these risks buyers must identify the right people who drive value while putting plans in place to retain and motivate them.Investigations into people need to result in identifying key individu

63、als and answer the following questions,which build on and are used in conjunction with the earlier value questions:For each category of value,who are the key“value”people and what specifically do they do in contributing value?Where do they fit in preserving and growing value?Who is responsible for i

64、dentifying the key people to grow value,at the target and in the combination?What key talent exists beyond the leadership weve met?Are there any key influencers?How do they rank and categorize their key employees?What is the talent paid?How is it paid?Who determines what talent is paid,and the amoun

65、ts?What amount of discretion is applied?What are our contingency plans if the talent leaves or if we misjudge the value categories?How M&A cultural assessments are used to realize deal value goals/11For these experienced acquirers,change and a change analysis is vital and is embedded in their proces

66、ses as part of their broader cultural investigations.But why this intense focus on change,more so than any other type of deal?Deals represent change lots of change,especially to people.People and change are interrelated and interdependent.Identifying the changes needed and planning for change is com

67、plex and subject to heavy constraints.There are a massive number of variables to consider in talent deals that impact the buyers ability to execute its strategy,much more so than in other deals.The plans for change are limited not just by the lack of access to the talent,but often due to the fact th

68、at the time to conduct due diligence is very short,and the planning period between announcement to close can often be less than 30 days.These difficulties are compounded by the changes in skills and personnel involved as the deal progresses.The deal journey requires leadership skills that change by

69、phase.Typically,deciding the right company to buy,requires mostly strategic skills.Deciding the right price centers on financial skills.Chapter 1 Why is change so important in talent deals?However,aligning the value drivers stemming from leadership,key talent,rank-and-file employees,clients and prod

70、ucts shifts the focus to management and operational skills.Because the leaders and teams working through the phases are not the same,things become complicated.Different leaders and teams will take the lead at these different phases,so explaining“change”to each very much depends on the phase they are

71、 in,and whether they have ongoing involvement or not.If this is not difficult enough to manage,the shift in decision-making authority further compounds the problem.Prior to close,corporate development has significant decision-making authority.In the early stage of the combination,post close,the inte

72、gration team has the most authority,which declines significantly as time passes and the business itself takes on the decision making in its own right.As explained,change in a transaction is an enormously complex undertaking.Given all these complications caused by the“people factor,”these experienced

73、 firms conduct a change assessment essentially an evaluation of the need for change and how ready each firm and their leaders are to manage the change successfully,incorporating all the variables above.12/How M&A cultural assessments are used to realize deal value goalsWe first conduct a self-assess

74、ment of our readiness at the buying business unit.Typically,this begins with a factual review of any lessons learned from the businesses change history,if that material exists.Well then move to review our leaders success in previous change initiatives and our views on their ability to make decisions

75、 and act on the changes needed.Well use both to assess whether the right skills,competencies,experience and resources exist internally for the challenge ahead or if more help is needed.The same assessment is made of the sellers readiness,but we cant really validate that with them until after close.T

76、he key is to make sure both sides understand the intent and value of the exercise.Corporate development leaderMaking the right decisions and deciding on the right changes to make is by far the most difficult to get right,for multiple reasons.Many of the challenges faced,as noted,are predictable,but

77、managing through them,during the heat of a transaction,needs specialist skills.Its the common bridging problem between strategy and execution,between those involved in the acquisition and those involved in the integration.Change specialists can help build this bridge.Without such skills,were dead.Co

78、rporate development,integration leader How M&A cultural assessments are used to realize deal value goals/13Chapter 2 Workshop on value-based goalsWe used a workshop format to dig deeper into the issues,using a case study to start the conversation.In the example,“value”has been determined and the tra

79、nsaction is in the pre-close phase.The discussion centered on the issues highlighted in the case study and their experiences in similar situations.Case study set up:Buyers organizational assessment of valueBusiness context:This acquisition will accelerate our growth strategy in a market that is alre

80、ady growing quickly but features multiple competitors.We compete in this space but have a small talent pool of experts compared to the targets talent pool.We dont compete nearly as well as the target in the top-tier market,which also has made external recruiting of top talent very difficult.Value id

81、entified in target:As a standalone firm,the targets value resides in its client base,industry-leading talent,services it provides that were still developing and its products,particularly the software it often sells clients at the conclusion of a project assignment.Value in combination:The impact of

82、the proposed acquisition is substantial.It adds new capabilities in areas we dont have.Overnight it deepens our talent pool in areas where we overlap.It propels us immediately into the top-tier market and will better position us to recruit top talent.We can also grow the value the target has as a st

83、andalone firm with our resources,the access we can give the target to our client base and the services and research we have in our firm.One immediate opportunity to generate more profits with the targets clients is by using our higher billing rates.We can also provide additional capital to fund the

84、targets existing initiatives.Integration strategy:We need a flexible,two-tier approach,based on preserving and growing value,while limiting disruption to the business.This means full integration of management and financial reporting and all back-office activities and very limited integration for bus

85、iness-facing activities.The preliminary value-based goals are summarized below,based on the organizational assessment of the two firms.14/How M&A cultural assessments are used to realize deal value goals Value-based goalsIssues/risks identifiedDecisions madeChanges/actions neededRevenue synergy:Leve

86、rage joint teams to get new clients/customers and/or expand services with existing customers.Revenue synergy:Introduce the targets talent to our clients.Revenue synergy:Sell the targets software to our client base.Profitability synergy:Increase profitability of existing clients at target.Talent:Sell

87、ers sales force to focus on both client bases,a new capability for us.Client base is different.They operate in the high-end market(large global firms)whereas we operate in the middle market,with limited success in the higher market.From a discussion on client profitability,ours seems much higher tha

88、n the targets.If we implement our billing rates,we can charge the targets clients more.But we cant see actual client data until post close to confirm this issue and likewise we dont know who at the target actually owns selling,pricing and contracting at the client level.Decision making styles differ

89、ent:The target describes itself as nimble in decision making.We have said the same in terms of making decisions,but realistically the time we take to approve decisions is much longer.Sales force:The target has a dedicated,standalone sales force,which we dont have.Sales responsibility is just one par

90、t of a senior persons role in our firm.Risks:Our contracting process may slow down the targets decision making,leading to slower response time and/or,customer defections.While we may preserve the existing business there is no additional growth from the combination.Preserve and protect existing busin

91、ess during transition,adopt the M&A principle of“do no harm.”All non-business facing integration to be led by us and our resources.Finalize and communicate leadership appointments and retention bonuses for leadership and key talent.Implement our higher billing rates to the targets clients as new pro

92、jects surface and existing contracts are renewed.This action has also been identified as a tactic for quick wins.Go-to-market(GTM)plans need to be reviewed,revised and/or created.Work with the targets key salespeople to sell and cross-sell the services and products.Set specific measurable targets.Am

93、ount and timing“to be determined.”Changes/actions are complex.Leaders must eliminate potential roadblocks that might negatively impact focus on the value goals and drivers and the people charged with delivering them.From the business overall,there will be changes to management roles,reporting relati

94、onships,performance metrics and career paths as they are integrated into our way.How M&A cultural assessments are used to realize deal value goals/15 Value-based goalsIssues/risks identifiedDecisions madeChanges/actions neededPeople and changeWe are still not clear who the targets key revenue genera

95、tors are,at the individual client level.Risks:Key people dont perform to expectations or leave.Deeper dive needed on GTM.Separate workstream to cover our existing strategy,the targets strategy and whats best for the combination.Business unit leaders own the results.But we need to confirm who is resp

96、onsible for generating the work that leads to these results.Plans for realizing goals,may involve changes to pay,bonuses and commissions.But any changes need to consider the impact on the employees responsible for delivering on the value-based goals and the potential impact on customer relationships

97、.These comments reflect the groups experiences:Revenue:General Everyone agrees that synergies are notoriously difficult to achieve.Weve seen times where we grew so accustomed to changing assumptions in the spreadsheet that the numbers generated from these assumptions and attached to the synergies th

98、emselves seem to take on a utopian view.But our experiences have shown that more than half of our estimates can disappear overnight,when weve gone through the exercise to validate the plans in detail needed with those responsible for delivering.So,an immediate step is to do a thorough review of the

99、goals and the assumptions on which they are based.Weve had several instances where our customer synergy targets seemed reasonable.The problem was not with us but our customers.They just did not cooperate.Bringing them new services or expecting them to replace competitor products with ours did not re

100、sonate with them to the degree we expected.They just did not buy in the volume we wanted.Or maybe our talent did not push the new services with the fervor that wed hoped.Or both.In one case,we put too much focus on new cross-selling opportunities and that took too much of the talents time on plannin

101、g leading them to overlook their existing client responsibilities.As a result,the performance numbers for that client base started to decline.It was not as though we lost clients;they just did not seem to come back for new projects in the same volume as before the deal.After all its the total of bas

102、e and synergies thats important at the end of the day,and if the base declines that means we need more synergies than ever.Thats not a successful formula.So,the action is to review which individuals are on which workstream and ensure they are not spread too thin.We once had all these synergy targets

103、 set but set aside zero time or money in the integration budget to teach the talent what we wanted them to sell or deliver.Our strategy was:These are very intelligent people,theyll get it.They did not.So,an action here is to check the talents views on these synergies and discuss with them what help

104、they need.16/How M&A cultural assessments are used to realize deal value goalsHow people,priorities and change relate to the value goals This part is the hardest,and one we have less control over.One example that springs to mind is when we all felt our strategy and plans were comprehensive.Everythin

105、g looked good on the spreadsheet and our leaders were satisfied and they signed off on the goals.But we missed the people part.The key people we were relying on did not change their day-to-day priorities fast enough,or significantly enough to achieve the goals,so without such change,the deal was nev

106、er going to work.We also never fully appreciated how hard the key talent was already working so adding extra goals and objectives mid-year did not resonate with them.They were busy enough trying to deliver what they were incentivized to do at the start of the year.So,we learned that the missing step

107、 was not going through the new priorities in detail with the talent,and if were asking them to do something different,be prepared to discuss what they should stop doing.The“do no harm”principle sounds good and is common in M&A transactions,but it can have an unintended consequence on those working t

108、oward the value goals.In more than one situation,the changes we imposed on the targets employees did not come across as“do no harm”and instead placed extra workloads on people,specifically through our functional integration requirements.This came from all sorts of initiatives,such as financial repor

109、ting,operational reporting,systems integration and benefits integration.All necessary,but it also distracted the key talent.We complete a“change and readiness for change”review,and make sure the seller knows and understands the purpose,process and benefits to the integration in doing this pre-close.

110、So,in one example,our change review identified several issues,the biggest one being our concern about the targets leadership ability to scale personally and therefore lead the change for the organization from a small product firm to a solution based,matrix organization that has global needs for the

111、services in the target.We had to get them adjusted to the new levels of bureaucracy,financial controls and decision-making speed and authority on a global scale rather than the targets single office work environment.We determined this was our top“people and change priority,”since without resolving t

112、hese issues,value generation would nearly be impossible.Profitability:Comment We tread very warily with the profitability goal because weve been burned in the past.Once,we naively thought a targets clients would pay more for what we perceived as more value from our larger firm.But the targets client

113、s did not care,and many defected to competitors when we tried to implement new pricing no matter how we dressed it up.Now,one exercise we undertake is to understand why a targets key customers buy.If“price”is a big determinant,then thats a huge red flag for this synergy.How reward systems relate to

114、the talent working on value goals Reward systems are always a big problem.And its an area that is very hard for corporate development to manage or understand,even with the help of our HR function.Were not privy to all the details of how our business pays our key talent,so understanding the issues in

115、 combining reward systems is not our strength.In one deal we saw huge percentage differences in the two businesses,in the aggregate,in the mix of base salary versus bonus and commission.For the pure sales roles,they paid their sales folks nearly twice what we did,for apparently similar roles,leading

116、 to problems after close.We could not get the teams to work together because there was no agreement within teams on who was paid or given credit,or proportional credit for both selling and delivery.That became an organizational blockage we did not recognize early enough.In hindsight,that should not

117、be a surprise since they would not even know of the differences in details because compensation is highly confidential information.But its much trickier if we set an objective of preserving value when they say their current compensation arrangements are what drives value.In such cases,it is importan

118、t to get a specialist advisors help.Besides being an expert,the advisor can also manage the confidential,personal data,that we dont want to become common knowledge.How M&A cultural assessments are used to realize deal value goals/17How GTM relates to value goals Weve had all sorts of problems determ

119、ining the future GTM strategy.In one case,we both seemingly had similar GTM strategies.However,the real problems surfaced in the execution,where we had huge differences,such as who owns certain responsibilities,who gets paid for it,what a team-based system looks like,and whether it really is a conse

120、nsus team approach or more a“star system”approach,with clear leaders,who normally get the lions share of the financial credit as well.As a result,we do not separate the GTM strategy from the reward system discussion because they are two sides of the same coin.How retention of talent relates to value

121、 goals In one disastrous deal,we put the leaders on retention but not the customer-facing talent,because the leaders implied that they had much more influence on the customers than they actually did.It turned out the leaders were more like traditional managers without much value to add to the custom

122、er base.Over time,the key talent left,eventually becoming a flood.We could not fix the mistake because we were too late in surfacing the problem.Now,we manage retention on an ongoing basis.Its not a“one and done”exercise.How decision making relates to the value workstreams Decision making is always

123、a prime focus for us when we discuss value.For example,founders are sometimes a common problem,especially when we want the founder to stay for a period.We repeatedly find they are the ultimate decision makers or reverser of decisions.In our organization that does not work.There are multiple layers t

124、o go through,based on the financial consequence and thats not something founders are comfortable with.Talk about taking away authority and power.But often the founders value to the deal is immense.In some deals,they are the value,thanks to their deep industry expertise,client connections and industr

125、y recognition.In our early leadership integration sessions,we do exercises where we describe ourselves and ask the target to respond,based on what they think or know of us.Its always enlightening and is meant to be lighthearted.And while this starts when leadership first meets,often designed as“ice

126、breakers,”the exercises can reveal some“hard truths.”For example,one exercise highlighted our differences in preparation and decision making.Our style is to prepare by reading the instructions beforehand and come to the exercise ready to make decisions.In contrast,they did no pre-reading and viewed

127、the meeting as the method to brainstorm approaches and make recommendations without necessarily expecting a decision at the end of the exercise.We saw ourselves as decisive and them as indecisive.Whereas they saw us close minded and not very collaborative.One said that they thought we wanted to make

128、 a decision at the meeting to demonstrate our decisiveness rather than take the time to make the right decision,which was their focus.But if these issues are left at the“ice breaking”level,then we create a two-fold problem.One is that the same issues come up when the two“talent teams”come together t

129、o review customers and relationships,except the“light heartedness”does not last long and the contrasting decision making styles erupt into conflict.And the second is frustration with our own leadership,who have not taken what theyve found and helped the other teams avoid the same problems.Its here w

130、e see the clear need for change specialists to not only advise in this area but provide the bridge that is so often lacking between leadership and the field,between“deciding what to do and actually doing it.”18/How M&A cultural assessments are used to realize deal value goalsChapter 3 Key imperative

131、s:Understanding the value challenges and the change and people related challengesIf it isnt measurable,it isnt a value driver.And if these goals do not have clear responsibilities and accountabilities placed on individuals and teams,theyre not real goals.Business unit leaderKey imperativesThe group

132、highlighted the following key imperatives in three broad categories:Value-related challenges Change-related issues People-related issuesIn particular,understanding the value challenges will set the tone and direction for which components in the two other imperatives are most relevant for each deal.U

133、nderstanding the value challenges Value must be prioritized.Identify value and its sources as early as possible.But recognize that there are two significant barriers in the way of determining an accurate assessment of value,which in turn impacts the development and timing of the supporting change st

134、rategy.Identifying and agreeing value is not easy.The first barrier is that value is not something companies review every day or often.Describing value generally at the headquarters level is easier than uncovering it at the operational level,but its at the operational level where the deep investigat

135、ions must take place since thats where the value combination occurs.Most firms will have multiple sources of value,often interdependent.Both firms need to be clear on what their sources of value are,in detail,including interdependencies.The information needed to construct accurate value estimates is

136、 not usually available.The second barrier is access to relevant information.This can cover not just the access buyers want to both the talent and the“secret sauce”but also the“hard”data such as actual per client profitability or the incentive details that reward the key talent.Time also works agains

137、t the analysis as with big firms buying smaller firms,the due diligence period and integration planning period is typically relatively short.The result is that buyers must make plans with incomplete,inaccurate and often conflicting data,which makes the change planning complex and liable to multiple

138、changes itself.Making the right decisions and implementing the changes needed to support them is complex.The group characterized value identification,change planning and its execution as“a race against time and a battle against preconceived misperceptions in value and in the change exercises importa

139、nce,difficulty and timing.”How M&A cultural assessments are used to realize deal value goals/19Understanding the change related issues The absolute key to preserving and growing value is to create a customized integration plan,based on the value goals and drivers of those goals.Once value is identif

140、ied and agreed,draw up the preliminary goals to deliver on that value.Integration objectives are then customized around these value objectives,allowing for differences in approach between preserving value in the short term and growing value in the longer term.Prioritize the different areas of value

141、and set goals for each.Integration generates many initiatives,with varying levels of value.Prioritize by the highest value initiatives,which are generally those with the largest business impact.Back these up with measurable goals that can be easily understood.Validate the preliminary goals and drive

142、rs.Conduct a full review at close with the operational people charged with delivering them.Based on this review,make the necessary adjustments.Set up value workstreams to execute the strategy.These typically focus on revenues,profits and market share.Value from cost synergies,while important,can be

143、handled elsewhere.Develop a GTM strategy.While this is a subset of the value,it needs its own special attention.This must be well thought out and must factor into account that deals dont close in parallel with the financial year end.In practical terms this means that existing strategies and incentiv

144、e plans will require adjustments during the year to accommodate the re-prioritization of objectives.Put in place a separate mechanism for resolving value driver roadblocks quickly.Dont wait and treat this area like any other workstream since delays directly impact client revenue,which,once lost,may

145、never return.Keep sight of the base business.If too much focus is placed on synergies,then the base business may be compromised.Manage the fact that leaders change and deal skills required at each phase change.Understanding how a deal unfolds and how to manage through it is a skill that requires dee

146、p experience and expertise in complex change situations.Manage and balance the functions demands of the target.Manage the larger firms“functions”so that their need for standardization does not conflict with the need for customization as it relates to value work.Big firms can potentially suffocate ke

147、y talents ability to focus on value with an overwhelming volume of functional requests.Communicate client/customer wins and successes early.Quick wins generate excitement,builds momentum and reinforces that the“value part”of the deal is real and visibly recognized.Hope is not a good strategy here.We

148、ve found,to our cost,that hoping people will change their priorities to meet the deal goals is not a recipe for success.Business leader20/How M&A cultural assessments are used to realize deal value goalsUnderstanding the people and the changes they must make Identify key people that drive value.Find

149、 the key talent who will preserve value in the transition and grow value over time.These are not necessarily the same people.Categorize people according to their value contribution.How important people are to each deal will vary,but the harsh reality is that not all people are equally important to t

150、he value equation.Develop and execute a retention strategy.Once identified and categorized,put the key talent on a retention plan,and make sure it goes beyond the leadership ranks,since there is a high risk of value destruction if the talent that drives value leave.Do not separate the people and cha

151、nge discussions.Address these together,since its people who execute change.Reprioritize and change the business and talent priorities to reflect the value objectives.Talent must change their priorities if they are to work toward the value goals.If they dont understand or buy into the new priorities

152、or have relevant input thats not been considered,this effort will fail.Nothing will demotivate talent more than trying to achieve what they see as badly created goals.Here we find all the concerns about pay,bonus,confusing objectives,and potential solutions come to the fore.Its a great forum to get

153、these issues out in the open and resolved before they fester and become blockages.Integration leader Align reward systems to support the goals.As goals are rolled out,systems typically dont keep pace with the change priorities,especially in larger firms with multiple business units that require cons

154、istency and infrequent changes to maintain company-wide efficiency in management and reporting.Often,manual tracking is required,especially in the period before the transfer to business-as-usual operations is complete.Real priorities,as opposed to those on a plan,become clear to the talent through o

155、bserving what and who gets rewarded.Ensure adequate time is spent on training.The better trained the key people are,the more likely they are to succeed.Developing new work habits takes time,and without the proper focus on training and development,well-meaning intentions can fall on deaf ears.Trainin

156、g also gives them the opportunity to share with others concerns and mutually resolve any issues that may get in the way of working toward the goals.Explicitly plan for change interventions and assess each organizations readiness for the change to come.Evaluate leaders change experience and whether t

157、hat experience was successful.While many may have led a change initiative,few are likely to have led multiple changes simultaneously as happens in a transaction.Dont lose sight of the rest of the employee population.While leaders must keep the key talent motivated,they must do the same for the rest

158、of the employee population too.The reality is that different categories of people will be at vastly different stages in understanding the deal and the“change”aspects in the broad sense and therefore motivational efforts must be tailored to the different segments of the population.Typically,leaders m

159、anage this through motivating the middle manager ranks,who are then charged with bringing the rest of the population along to keep them engaged and productive.Done successfully,this helps keep the base business performing to expectations.SummaryIn talent deals,success rests on the ability to identif

160、y,preserve and grow value.Its this intense focus on value that separates the successful from the rest.Cultural investigations in this area are focused on the value issues and the relevant changes needed to realize that value and the people who drive it now and in the future combination.The group is

161、in universal agreement that to execute the value proposition,each deal must have a customized integration plan tailored around the value goals and drivers of those goals.How M&A cultural assessments are used to realize deal value goals/ 2022 WTW.All rights reserved.WTW67450/08/About WTWAt WTW(NASDAQ

162、:WTW),we provide data-driven,insight-led solutions in the areas of people,risk and capital.Leveraging the global view and local expertise of our colleagues serving 140 countries and markets,we help you sharpen your strategy,enhance organizational resilience,motivate your workforce and maximize performance.Working shoulder to shoulder with you,we uncover opportunities for sustainable success and provide perspective that moves you.Learn more at .