1. Risk Management Through
The M&A Process
•7/10/2013
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2. Agenda
 Introduction
 The M&A process
 Target Identification and Evaluation
 DD & Negotiation
 Post Integration
 The Risk Managers role
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3. Introduction
 Identification of major risks,
red flags and examples of
how they can be addressed
in due time and what can
happen if not managed
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4. Introduction
 A workshop around Do’s and Don’ts and red flags for
efficient risk management during the mergers,
acquisitions and joint ventures process
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5. Introduction
 How can the risk manager support the business and its
objective during the mergers, acquisitions and joint
venture process as in the post integration process
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6. The M&A Process
Target Identification and Evaluation
Due Diligence and Negotiation
Post Closing Integration
- Screening of candidates
- Pre-closing-integration-plan
- Organizational/legal integration
- Leadership structure
- Rough evaluation
PREPATORY
• Involves corporate strategic
objectives
• Combine analytical abilities
• Internal coordination
• Short communication channels
• Top management decisions
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- Detailed evaluation
- Internal decision
TRANSACTION
• High coordination requirements
(int./ext.). Flexibility
• High volume of communication
• Combination of professional
know how
• Interface to target company
- Human Resources integration
- Cultural change
INTEGRATION
• Integration of units/people from target
company
• Knowledge management
• Efficiency, time frame
• Handling over to new entity
management team
• Controlling of activities
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7. Target
Identification
and Evaluation
DD and
Negotiation
Post
Integration
 Strategic fit
 Culture crash
 Market risk analysis – culture, history, HR, Country blue print
 Are there environmental risks hidden in the selected target?
 Corruption
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8. 7/10/2013
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9. Corruption issues
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10. Corruption issues
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11. Target
Identification
and Evaluation
DD and
Negotiation
Post
Integration
 Do the negotiators understand the benchmarks and
company risk appetite?
 Are the deal-makers more concerned with closing the
deal than whether the target is a good fit with acceptable
risk?
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12. Target
Identification
and Evaluation
DD and
Negotiation
Post
Integration
 DD and Negotiation Phase
 Operational risks







Property
Process risks
Contracts
Pension liabilities
Employee matters
Supply chain risks
IP rights – trust – transfer
 Within existing country – check cost/implication of alignment
 Use insurance as tool
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13. Insurance
 Insure risk you do not
want to take
Traditional P&C
• Property
• Product Liability
• Public Liability
 Make sure your
insurance policies are
prepared for aquisition
growth
• Employers Liability
• Motor
Financial Lines
• Directors and Officers Liability
• Employment Practices Liability
• Pension Trustee Liability
• Commercial Crime
 Red flag – do you know
understand the exposure
and do the targets team?
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• Professional Indemnity / Errors & Omission
Transactional Lines
• Warranty and Indemnity
• Tax Liability
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14. Target
Identification
and Evaluation
DD and
Negotiation

Alignment of expectations

Post
Integration
Setup integration workstreams
 Operational
 Finance
 Insurance
 IT
 HR
 Procurement
 100 days review and follow-up
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15. Target
Identification
and Evaluation
DD and
Negotiation
Post
Integration
 Don’t let the DD teams go and let others manage the
integration without supervision.
 Difficuelt to manage the integration through a phone
 Dont let HR and culture wait until second wave
integration after first integration wave (100 days)
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16. 100 Day Review
 Do’s
 On track and if not
 Root cause analysis
 Gap closing plan
 Update risk assessment per integration work stream
 Learning's into M&A polices and manual
 Learning's to be used in second wave integration process
 Don’t
 Pretend it didn't happen and let the acquired entity ”alone”
 Forget to have lessons learned to support continues
improvement
 Forget second wave integration
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17. Risk Managers Role
 Insurance only?
 Enterprise approach to M&A
 Help other stakeholders to build the
M&A process make sure that risk is
in focus where relevant
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18. Questions
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