Managing the Merger &Retaining People-Based Economic Value

Patrick DonohueNational Lead PartnerHuman Capital M&A ServicesDeloitte & Touche

Priorities and Strategies in Managing a Merger

Speed and Simplicity

Minimize Disruption

Strategic Fit

Optimal Cost

Priorities and Strategies in Managing a Merger

2. Speed and Simplicity

1. Minimize Disruption

4. Strategic Fit

3. Optimal Cost

1. Optimal Cost

2. Strategic Fit

3. Speed and Simplicity

4. Minimize Disruption

Day One On Going Operations

Infrastructure Strategy Alternatives Absorb

Bringing the target into the new parent– Advantages: The “Obvious Choice”, simple and direct, demands little executive time– Disadvantages: “Conquering Army” approach, reduced value on key assets and people in the acquired company, great strain on parent company

resources

Design A New Infrastructure– Advantages: Optimal strategic fit and cost structure.– Disadvantages: May be more disruptive during transition and add time and complexity to the launch of the new organization.

“Clone & Go” Duplicating the infrastructure of the target

– Advantages: It works, its quick, and can minimize disruption. Can be an effective temporary strategy. – Disadvantages: The adopted model likely to be a poor fit for a smaller, younger organization.

Especially During a MergerPay Alone Will Not Keep People

Fair Market Compensation

Trust

The Job

Career & Growth Opportunity

Wealth Accumulation

Total

Rewards

Strategy

Retention of People-Based Economic Value Starts with the Business Case of the Merger

Capitalize on Economies of Scale – Reduce overhead– Eliminate redundancies– Access markets

Leverage Core Business– Forward integration– Backward integration– Acquire substitute product– Grab market share

Transfer Skills/Technologies– Acquire distribution channel– Make a bet on new technology– Invest in new product line

Start With the Business Case (continued)

Capitalize on Economies of Scale

Leverage Core Business

Transfer Skills/Technologies

Degree ofIntellectual Extent of

Capital Transfer Retention Effort

Moderate Focused

High Broad

Very High Extensive

Where is the Intellectual Capital?

Leadership Expertise Culture

Human Capital

Structural Capital

Customer Capital

Process Efficiency Database/Knowledge Base Network/Alliances

Key Accounts Brand Equity

Group Head Key Technical Contributor Human Resource Director

Process Owner/Case Manager

CIO/IT Professional VP, Business

Development

Account Manager Marketing Manager Sales Rep

Assets Sample Retention Targets