A quick primer on the essentials of post M&A integration. M&A operations offer delicate integration challenges to optimize the return of the investment. This presentation is a refresher on the KSF to lead a post M&A integration.

1. Succeeding in Post M&A Integration
March 2018Munich Finance M&A Seminar

2. Biography
• Olivier Coispeau, CFA
• Founder of Maverlinn Strategic Finance
• Strategy (Roland Berger) and Finance
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• Strategy (Roland Berger) and Finance
(JP Morgan, Schroders, Clinvest)
• Innovative start-up incubation (Antfactory)
• Former economics professor at Paris-
Sorbonne university
• Education: Stanford University, Paris
Dauphine University and Sciences Po Paris

3. Close or miss M&A ? remember shareholders will ask about return
Comments :
• Executives assessing M&A opportunities may
experience difficulties to make deals penciled
out due to competition
• Check internal hurdle rates to make sure they still• Check internal hurdle rates to make sure they still
capture capital markets conditions
• Abundant dry powder, strong balance sheet and
M&A opportunities are not enough to justify
acquisitions and make them a success
• Alternative to M&A, return cash to shareholders
through dividends and share buybacks
• In order to close M&A ops, acquirers must prove
their capacity to quickly put boots on the ground to
deliver expected returns and create value
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Source : Bain & Cie

4. Create shareholder valueIntegrate new talents faster
What is the reason for Mergers & Acquisitions ?
- Invest corporate cash to obtain
financial return higher than the
weighted average cost of capital
- Talents are expensive and difficult to
hire fast enough to feed the corporate
growth
Half of the M&A deals fail to meet the acquirer’s strategic objective and do not
create value
weighted average cost of capital
- Manage length and depth of the
target integration
- Deliver value on the basis of the
higher brackets of the industry
growth
- Talents create value:
 historical net book value (NBV)
 anticipated value: the difference
between expected equity value (NPV
of future free cash flows) and NBV
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5. The secret for successful M&A is a good preparation
1. Upstream preparation
M&A strategic group
2. M&A execution
Trusted expert team
Expert M&A team
Clear growth
strategy roadmap
1 Strategic M&A is a three step integrated process
M&A strategic group Trusted expert team
3. Integration
Transition management
Expert M&A team
Trust & empowerment
for fast action
Early identification
of acquisition benefits
Smart transition
management to leverage
acquisition
2
3
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6. There is no magic formula for successful post M&A integration
- Acquirers in the most successful deals
have specific, structured and precise
value creation process going on
- Acquirers in the less successful deals
have vague justifications for making the
deals, and lousy metrics
Repeated M&A needs a proper post deal integration
organization to extract all accessible synergies
deals, and lousy metrics
- The very first step before making an
acquisition is to know the type of M&A
going on and set precise expectations
- The justification for making an
acquisition reflects unsufficient internal
work over 50% of the cases
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7. As a first step, management must assess the type of M&A deal
going on, this will set the right profile for the integration process
• Post M&A actions should be calibrated according to each deal; every post M&A
process is tailor made
• The following possible framework helps defining a precise profile for the
transaction before starting the integration process
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Source : Oliver Wyman
Synergies Cost <-------------o-------------> Growth
Speed Fast, under time pressure <-------------o-------------> Mid-range perspective
Extent All areas <-------------o-------------> No or partial integration
Integration spirit Takeover <-------------o-------------> Merger of equals
Integration start Immediately after signing <-------------o-------------> Deferred until closing
Team structure Clean team <-------------o-------------> Joint team
Fundamental decisions In advance, implicit <-------------o-------------> Explicit, intensive

8. Six basic M&A strategies define most ot the post M&A operations
1. Improve the
target company
performance
4. Access talents
faster than recruiting
them
Source : McKinsey
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2. Consolidate
industry excess
capacity
3. Accelerate
market access for
products
5. Exploit scalability
opportunity
6. Pick winners to
grow their business

9. There might be four other less frequent justifications for M&A
operations, and even sometimes less reasonable reasons
Source : McKinsey, IbisWorld
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9. Build-up for better
market practices
Case: SCI Corp.
10. Reduce market
fragmentation
Case: Air France
11. Activate internal
transformation
Case: Novartis
12. Bargain opportunity,
hidden gem
Case: Bolloré
10 11 1211109 12
1213

10. There are a few simple rules to create incremental value, and
three pitfalls that will destroy value in any M&A deal
A. Free the talents, resolve conflicts and
build quickly on human capital. Avoid a
walking dead HR mismanagement
B. Follow the money, work the numbers
in the details, reap low hanging synergies
first, stick to a precise roadmap
Source : Bain & Cie, Bo Le Associates
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2. Fail to define the cash
value drivers of the transaction
and the risks. Investors will sell
1. Loss of key people. Head
hunters know that M&A creates
frustrations and opportunities
3. Distraction from the core
business resulting in weak
corporate performance.

11. Post M&A objectives focus on return, talents and clients
Deal Logic
Management
Style
Production
Status
Key integration factors
Style / Culture / Status
Time
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Style
Equity Return
Talent Pool
Market
Leadership
Integration ScopeCorporate
Culture
Core objectives
Return / Talents /
Leadership
Management style: winner takes all <–> management bio-diversity
Corporate culture: corporate credo <–> pragmatism according to goals
Production status: our way <– > their way (e.g. IT, machinery …)
Expectations
Source : BCG

12. The 90 day rule of M&A integration is a critical Key Success Factor
Comments :
• The first 90 days are key for the success of
the target integration
• The M&A integration team
empowerment and the target key
Timeline is critical,
proscratination is lethal
empowerment and the target key
people mobilization are both critical
• Prepare corporate integration toolbox to
save time and energy
• The strategic roadmap must be clearly
set and quickly communicated
• Expectations must be set, strategy
must be clear, responsibilities set
• Staff must be regularly updated on the
integration progress and mistakes
quickly corrected
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13. The top line « health check » is a management priority, cost
optimisation is only second to it
Comments :
• A simple way to look at the priorities is
to go through the details of the free
cash flow generation
• FCF is still the best indicator of value
creation for the firmcreation for the firm
• The first line of FCF is REVENUES,
representing 100% of the decreasing
order structure of the P&L
• The optimization of the cost structure is
derived from the 100% base line
materialized by revenues
• The optimization impact is measured on
the improvement of the EBIT margin
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Source : Accenture, EBIT impact on process optimization

14. Over 50% of M&A synergies are related to IT integration, systems
migration can cause delays in value extraction
Comments :
• Flexible and scalable IT architecture provide
a strong advantage in post M&A integration
• The best acquirers have already organized
themselves : SOA, one ERP, avoid systems
+ =
48% of deals
Systems Integration
themselves : SOA, one ERP, avoid systems
useless redundancies
• Due diligence will help streamline and
anticipate the systems integration. A messy
IT organization may lead to different choices
• People are always reluctant to migrate and
this can cause significant delays in
extracting synergies
• Budget third party assistance to accelerate
the integration and balance it with the DIY
option
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+ =
&
+ =
24% of deals
28% of deals
Source : Technische Universität München
or

15. The soft factors will decide on the success or failure of the post
M&A integration, being smart, nice and pro. is mandatory
Comments :
• Every process is unique and every
company wants to feel it is special
• M&A generates a huge amount of• M&A generates a huge amount of
stress, the higher the price paid, the higher
the stress
• Post M&A is one of the most difficult
management challenge with a high risk of
error
• During this time, staff feel a high degree of
insecurity and anxiety, awaiting bad news
and painful decisions to be announced
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Source : Oliver Wyman

16. Share and discuss a simple but precise integration scorecard on
the on-going process with team, project by project
ISSUE RESOLUTION
What does not work and
must be fixed quickly,
ranked and prioritized.
PROGRESS
Typically, this is the compass
for the integration process, it
measures the distance to the
end of the process.
90% 75%
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DISCOVERIES
What needs to be
adjusted or discussed in
the process. Things that
could be useful later
end of the process.
ACHIEVEMENTS
What has been done
already and working well.
80% 60%
The integration scorecard must be shared, updated and discussed at least
every week

17. Strategy and Organization provide the framework of a successful
post M&A integration
Comments :
• Strategy:
 the expectations for the newly acquired
company are set and communicated
One needs quickly the big picture
• Organization:
 the target management is clear, tough
decisions are quickly made if necessary,
people understand well what is expected
 the acquiror’s integration team is moving
smoothly alongside the target management
team to facilitate the execution of the plan
The corporate threads from both the target and the acquiror
are interlaced at right angles to form a new fabric
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18. DON’T DOMUST DO
Keep a smart and clear mind on the post M&A priorities: leverage
talents first
- Don’t be vague, waste time, and
show that you are hesitant: staff is
waiting for a clear roadmap
- Interview key target people and ask
them what can be improved, organize
peer to peer discussions, foster a
Keep people morale high, celebrate achievements, a too stressful environment
will only generate negative externalities radiating all over the firm
waiting for a clear roadmap
- Don’t lose people confidence, you
must be reliable and fair
- Don’t allow stressful working
conditions to develop together with a
heavy management hand
peer to peer discussions, foster a
« sport » positive competition spirit
- Set compact ranked integration
metrics, set and act on priorities first
and take the tough decisions early
- Make people happy, integration must
not be just another stressful process
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19. Leading a world of change, together