Monday, February 25, 2008

Finding the integration watermark

Sri Rajan and Till Vestring of Bain & Co. on post acquisition integration

A Bain & Company study of 250 global executives with M&A responsibility showed two-thirds routinely overestimated synergies available from transactions. But, at the same time, most understood what drives smooth integration: 80% said integration efforts must be “highly focused on where the value is in the merger. Rajan and Vestring further quote examples of Tata Com-TGN, BP-Amoco amongst others say –

A deal either enhances core business or opens up a new and separate platform for investment; Successful integration can make or break a deal’s trajectory.

Three types of investment thesis – active investing, growing scale and growing scope – require different degrees of integration. When companies have a clear understanding of their investment theses, they can quickly decide where and how much to integrate.

In fast moving, intensively competitive markets companies that don’t get their integration right can pay a heavy price.
It’s an excellent piece, agreed. But I find one missing perspective – of the Customer. For me, (s)he is the center point. Everything revolves around them. When you debate how much to integrate, wear the hat of a customer and ask yourself – how much will the customer benefit if we integrate and if so to what level? Answer that conscientiously and there is your watermark.

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