Transcript Report Horiz Template

Merger Integration
Intellectual Capital Collection
Generic Proposal
March 2002
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Table of contents

Executive Summary

Our Understanding of Your Situation

A.T. Kearney’s Perspective on Merger Integration

Proposed Overall Approach

Realizing Integration Synergies

Integration Management

A.T. Kearney Qualifications
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Executive Summary
This section is tailored to the client situation and
summarizes the approach proposed in the
document
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Our Understanding your
Situation
This section is tailored to the client situation and
summarizes the key drivers of the merger. It
should highlight relevant quantitative and
qualitative analysis that demonstrate our insight
into the client’s particular challenges and drivers
of success for the integration
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A.T. Kearney’s Perspective on
Merger Integration
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The best value-builders combine organic growth with mergers and acquisitions
Value Growers Follow Conscious, Constant Process To Growth
Growth Matrix (CAGR 1988-2000)
Simple Growers
Value Growers
13.8%
18.0%
21.5%
Revenue
Value
-2.7%
Revenue
Growth
Revenue
Value
12.8%
3.6%
Revenue
4.1%
-3.6%
Revenue
Value
Under performers
Value
Profit Seekers
Value Growth
Source:
A.T. Kearney Monograph on Value-Building Growth 2001
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Mergers and acquisitions are key growth drivers
40% of Growth Is From Acquisitions
Sources of Growth
Value
Growers
Manage Both
Well
60%
100%
40%
External
Internal
Total Growth
What really matters in “acquisition for growth” strategies is execution
Source:
A.T. Kearney Monograph on Value-Building Growth 2001
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Few mergers actually create shareholder value
Acquirer's Value Growth Following a Merger
Average:
2.8%
49.5%

50.5%
Top-Performing
Mergers
16%
8%
3%
10%
12% 27% 21%
3%
Value growth
-100%
-60%
-30% -15%
0%
15%
30%
Underperformance compared
to industry average
60%
150%
Overperformance compared
to industry average
Top performing mergers create significant shareholder value
Source:
A.T. Kearney Analysis 2001, SDC database, Global Worldscope
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Business Integration issues require “usual” management decisions while four main
factors add another level of considerable complexity…
Time pressure
• All stakeholders expect rapid execution
(shareholders, employees, management,
regulation committees, government,…)
• Decisions need to be made without delay
"Usual" Management decisions
Strategy & IPO
Simultaneity
•
•
• Co-existence of strategic,
tactic and operational
decisions
• Strong inter-dependence
of the decisions
• Short term and strategic
decisions may seem
incompatible
•
•
•
Define the scope of
combined entity
Confirm each country’s
scope of activity for mobiles
Design strategy leveraging
on broader global presence
Define financial and
operational targets as well as
timing of expected benefits
Prepare the IPO
Organisation
•
•
•
•
•
Rationalise shared supports (
Align and select Information
Systems for the integration
Align processes and share
best practices
•
•
•
Communication
Support functions
•
•
Choose the best organisational
model at the European
management level
Identify the central/local functions
evolution schedule
Define organisational charts and
management nomination
Define key decision processes
(committees, procedures, …)
Infrastructure
•
•
•
•
Define external communication
strategy
Define internal communication
strategy
Select communication rules and
procedures
Choose media (intranet,
documents, speeches…)
Reduce total cost of external
purchases through best price
evaluation volume concentration,
competitive bidding
Share best practices
…
Integration mgnt
•
•
•
•
•
Integrate overall planning and
milestones
Detail planning by topic and
country…
Manage transition phase
Track and execute financial
synergies
Manage risks
Human component
• High number of people
potentially involved
(operational, functional and
executive people)
• Risk of cultural mismatch
• Scarce resources to bridge
between merged companies
Scope
• High number of decisions to be made in all operational
and functional areas
• Dozens of projects/initiatives and risks to be managed
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… explaining why only few mergers and acquisitions succeed fully
Only 42% of Companies Outperform
Their Peers in Shareholder Value(1)
Only 29% of Companies Realize an
Increase in Aggregate Profitability
100% = 230 companies
Number of companies
42%
Industry average
58%
23%
17%
-25%
Under performance
18%
-15%
Higher
29%
Top Performing
Mergers
Lower
No
change
21%
11%
+15%
10%
+25%
Performance
relative to
industry
average
57%
14%
Outperformance
Note: (1) Shareholder returns from buyer divided by shareholder returns (industry average) after the merger
Sources : A.T. Kearney analysis, Global PMI Survey, 1998 ; Datastream
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Top performers across most industries can create significant shareholder value
Industry Specific Ranges of Value Creation(1)
64.5%
62.5%
49.9%
44.2%
43.3%
34.2%
32.3%
Creation of
Shareholder
Returns
26.6%
40.4%
36.1%
26.6%
26.0%
25.1%
31.9%
27.5%
22.4%
18.0%
17.2% 17.4%
16.0%
17.4%
14.8%
4.0%
-10.8%
Erosion of
Shareholder
Returns
-11.0%
-9.7%
-17.6%
-18.0%
-20.6%
-28.8%
-35.0%
-25.9%
-31.5%
-6.5%
-17.4%
-20.3%
-22.7%
-24.9%
-19.4%
-24.1%
-26.5%
-27.2%
-26.7%
-35.3%
-38.9%
-24.1%
-39.6%
Aerospace
Textiles
Construction
Miscellaneous
Electrical
Machinery & Equipment
Tobacco
Oil, Gas, Coal & Related Services
(1) Total shareholder returns percentage over/under performance relative to industry index in the
timeframe between 3 months before and 24 months after merger announcement; total
shareholder returns defined as the tangible returns investors receive through dividends and
stock price appreciations
Sources: Datastream; A.T. Kearney Analysis 2001
Food
Metal Products Manufacture
Beverages
Financial
Electronics
Printing and Publishing
Automotive
Utilities
Diversified
Transportation
Paper
Metal Producers
Chemicals
Drugs, Cosmetics & Health Care
Note:
Recreation
Retailers
-46.8%
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Once the deal is closed, the principal problems relate almost entirely to failures in
merger management, rather than to the underlying strategic rationale
Problems Identified in
Merger Integration
Percent of Respondents
Under-communication
58%
Financial/synergy Expectations Unrealistic/Unclear
47%
New Org. Structure With Too Many Compromises
47%
“Master Plan” Missing
37%
Missing Momentum
37%
Missing Top Management Commitment
32%
Unclear Strategic Concept
26%
Missing Pace of Project
26%
IT Issues Addressed Too Late
Source: A.T. Kearney’s Global Merger Integration Survey 1998
21%
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To manage inherent risks, “critical success factors” can be distilled from successful
large-scale mergers to guide value creation
Critical Success Factors from Large-Scale Mergers
Sense of Urgency
• Create a sense of urgency and reduce uncertainty through clear event milestones, and move quickly
Top-Level Leadership
Selected Quickly
• Select top-level leadership quickly and fairly; avoid “two-in-the-box” leadership for integration planning and execution
unless absolutely necessary
Clear Synergy Goals
• Set out synergy goals and objectives, to prioritize activities and provide a baseline for performance tracking
Manage Market Expectations
• Manage market expectations carefully. Set conservative dollar targets with a time frame that accommodates unforeseen
circumstances
Explicit Focus on Customers
• Keep strong, explicit focus on key customer retention and service with teeth (i.e., measurement and tracking)
Open, Timely and Consistent
Communications
• Maintain open and timely communications with employees to ensure understanding and retention
Decentralized Merger
Integration
• Conduct decentralized merger Integration guided forcibly via
— Clear guiding principles
— Overall framework and tools for integration
— Reporting standards
Strong Central Integration
Office
• Establish a strong central Integration office and decentralized Integration teams with corporate-wide perspectives on
— Results
— Project status
— Risk
— Lead role on internal/external communications
Well-Defined Processes
• Instill robust, well-defined processes to ensure objective and timely risk and interdependency tracking
Source:
A.T. Kearney Merger Integration
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In our experience, the most critical element in achieving targeted benefits is speed
Value Capture of Top Performers Over Time
Timing of Synergy Realization Is Also Critical
15%
6
85%
4
2
0
Cumulative Value
Capture
After Two Years
Value
Capture/Loss
($ MM)
-2
-4
-6
-8
-10
1
Time
Closing
the Deal
Year 1
2
3
4
5
6
7
8
9
10
Year in Which Synergies Are Realized
Year 2
Source: A.T. Kearney's global PMI survey '98
Source: Marl L Sirower : The Synergy Trap. Calculated based on a $10MM
acquisition premium, representing 50% of market value
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Proposed Overall Approach
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A.T. Kearney has a flexible merger integration framework with a comprehensive
toolkit to support planning and implementation throughout the merger process to
ensure value capture
A.T. Kearney’s Merger Integration Framework
Phase 0
Phase I
Develop Strategy
• Merger/Acquisition options
• Create/articulate/validate
— Markets/customers
— Competition
— Resources
— Sources of value
• Understand type of merger
Day
One
Establish Structure and
Plan
Merger • Establish the integration program
Manage- • Build integration capability
ment
Merger • Develop IT integration strategy
Enablers • Design/harmonize HR policies
MOU
Shareholder Approval
Phase III
Integrated
Planning and
Initial
Rollout
• Create master plan and
prioritize
• Assess sources of value
Sources
• Develop organization strategy & design
of Value
Multiple Tools
Exist for All
Cells
Phase II
Full-Scale
Rollout
• Monitor progress and
risk
• Execute the plan
• Validate sources of value
• Realign the organization
• Implement quick hits
• Develop SOV IT
enablers
• Implement HR plan
• Implement IT integration
plan
Change of Control
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This allows merging entities to rapidly capture available sources of value by
focusing on operational synergies, as well as seamlessly merging the organizations
MI Sources of Value
Achieve Growth Synergy
and Cost Synergy Targets
as Quickly as Possible
Merge the
Organizations as
Seamlessly as Possible
• Achieve $ XX million (annual rate) of
synergy savings within 12–18 months
— Sales
— Operations
— Procurement
— Corporate overlap and duplication
— Cost of distribution
— Technology/R&D
— Others to be identified
• Eliminate/minimize sources of risk
• Develop and communicate a shared
strategic agenda
• Define
— Organization structures/leadership
— Key business processes
— Technology platform/architecture
— Change integration requirements
• Drive top line growth
— New value propositions/products
— Cross selling/sales pull through
— Ensure customer focus/retention
•Drive the short-term value
•Exceed the market’s
expectations
•Integrate day-to-day
operations
•Ensure sustainable change
•Position for growth
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The program structure supports focused value capture teams working across all
SBU/Geographic teams
Illustrative
Steering Committee
Market Facing Teams
Value Capture Teams
Integration Office
Enabler Teams
• Set overall direction
• Make critical decisions
• Develop guiding principles
• Provide integration management
leadership and support
Focused on value capture across the businesses
Others
Business
Development Team
Corporate
Center
Team
Global
Operations
Team
Global
Sourcing
Team
Technology
/ R&D
Team
Human
Resources
Team
Information
Technology
Team
SBU A or
N. America
SBU B or
Latin America
SBU C or
Europe
BU driven integration
to set priorities
SBU D or
Asia Pacific
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By launching the integration effort prior to change of control, significant progress is
made in identifying sources of value, while also developing the high-level
organization models to capture that value
Phase I (“Clean Team”)
Integrated Planning
and
Initial Rollout
Establish Structure
and Plan
Full-Scale Rollout
Integration Management
Data
Repository
Comm.
Planning
Oversight/
Visibility Rm
Master
Calendar
Baseline
Dev./Tracking
Day/Week/Month 1 Plans
Implementation
Sources of Value Identification
Analysis
Hypotheses 1
•
•
•
Hypothesis N
Opportunities
Operations/
Asset
Consolidation
Diagnostic Pack
Hypotheses 1
•
•
•
Hypothesis N
…
Initial Prioritization
Data Collection/Analyses
•
•
•
•
PP 1
PP 2
PP 3
PP 4
Init Q1 Q2 Q3 Q4
L
M
H
H
M L
Data Collection/Analyses
Business Unit
(e.g., Services)
Diagnostic Pack
•
•
•
•
CS 1
CS 2
CS 3
CS 4
PP1
PP2
PP3
PP4
Init Q1 Q2 Q3 Q4
L
M
H
H
…
Initial Sequencing
M L
…
CS1
CS2
CS3
CS4
…
High-Level Organization
IT Requirements/Alignment
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During the critical period prior to change of control, the engagement team
assumes the role of a “clean team” to enable critical pre-merger integration
“Clean Team” Process
Data
Collection
Organization
assessment
Hypotheses
development
Preliminary
planning
Company A
Company B
Limited
Joint Client
Team Meetings
A.T. Kearney
“Clean Team”
Role of Clean Team
• Quantify savings generated from identified
opportunities from teams of merged companies
• Act as a third party conduit for proprietary
information of both companies (protection should
merger be aborted)
• Validate and challenge initial assumptions of
opportunities made by merging companies
• Highlight best practices in existing companies and
external knowledge and recommend ongoing merged
operating practices
• Determine risk factors in merger for ongoing risk
management during implementation
Pre-Change of Control
Merger Synergy
Hypotheses
Open
Joint Client
Team Meetings
Post-Change of Control
• Accelerate decision making by providing access to
comprehensive databases and detailed analysis
• Share and validate findings with joint client teams
• Finalize initiatives based on validated hypotheses
• Develop implementation plans
• Assist in launching initiatives and provide continued
implementation, risk and financial tracking support
Validated Initiatives
The up-front work efforts of the “clean team” enables accelerated
launch of implementation activities and value capture
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After change of control, the teams quickly finalize — not identify — synergy
opportunities and gain consensus
Phase II
Integrated Planning
and
Initial Rollout
Establish Structure
and Plan
Full-Scale Rollout
Master Plan Detail
Day/Week/Month 1 Execution
Initial Prioritization and Sequence
Overall Prioritization/
Executive Committee Buy-In Master Plan Sequencing
Full Team Meetings
Timing of Results
Investment Requirements
MD 1 Workplan
Step 1
2
3
4
Init Q1 Q2 Q3 Q4
• Disclose and Validate
PP1
L
L
Init
• Modify and Refine
M
Q1 Q2 Q3 Q4
ST3 Workplan
MD 1
M
H
ST 3
H
M L
Init Q1 Q2 Q3 Q4
PP1
L
SC 6
H
• Finalize Savings Opportunities
and Prioritization
PP 4
H
M
L
M
SC6 Workplan
H
H
M L
• Identify Interdependencies
IT Requirements/Enablers
Master Plan Detail
Communication
Begin Implementation
Results Tracking/Risk Assessment
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The transition to full-scale rollout and implementation of initiatives is supported by
a clear tracking process
Phase III
Integrated Planning
and
Initial Rollout
Establish Structure
and Plan
Full-Scale Rollout
Implementation
MD 1 Workplan
Program Risk Management
Task 1
Task 1
Task 1
Task 1
Q1
Q2
Q3
Q4
Top 10 Program Risks as of 06/24
Illustrative
• Organization announcement timing still unclear
• IT requirements not fully understood
Size = $ Saved
• No plans to address cultural misalignment
Red planned to be
• Success of communication not currently
measured
Risk
Activity
Initiative
Yellow
Green
6
12
18
Time to Complete
Implementation
Current Quarter
Jan. Feb. Mar.
Cum. Qrtly. Breakdown
4Q97 1Q98 2Q98
Initiative Status Management
Cost Saves and Growth Achievement
Communication
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Throughout the effort, managing risk is a formalized methodology; adherence
facilitates a fair and robust decision making process
Illustrative
Project Risk Prioritization
Risk Identification
Risk Categorization
Ref
Project Prioritization — Business Criticality And Size
Business Criticality — how much
does it matter if the project does
not meet its objective?
•A = Incremental benefit
but current processes will
suffice
•B = Supports strategy
but manageable impact
if project fails/delayed
•C = Important to the
strategy with significant
impact if project
fails/delayed
Risk Reduction
Business
Criticality
Project
5
Risks
Project
2
B
A
•D = Critical impact/must
keep up with
competitors/cannot
continue business
B
C
Complexity
Green
Unstable/sensitive assumptions create risks
Project
3
A
Low
Significant risks need to be managed
Project Project
6
1
C
Red
Amber
Risk Plans
High
D Project
4
Project
Plans
Assumptions
D High
Many issues are closed by making assumptions
Proj ect Area
1
Dat a conversi on process
2
Dat a vol umes/ si zi ng
3
Operat i ons changes
4
Syst ems changes
5
Test pl ans/ t est execut i on
6
Cont i ngency pl ans
7
St affi ng and resources
8
Cont rol s and st andards
9
Met ri cs and benchmarki ng
Issues
10
Trai ni ng/ educat i on
Issues are open questions
11
Cross proj ect communi cat i ons
12
Cust omer i mpact
13
Probl em report i ng/ escal at i on
Issues, Assumptions And Risks Are Inherent In The Project Plans
Pre-mi l e Mi l est one
st one
Post mi l e
st one
Merger Risk Profile
Green
Criticality
Amber
Red
Now
Time
Future
Benefits of Proactive Risk Management
Challenges
Decision Making
• Cross organizational input and dedicated facilitation ensures objective input
• Milestone risks associated with decision timing are derived from process-wide initiatives
Planning/
Execution
• Risk process highlights resource vulnerabilities. Sense of urgency associated with the process
forces discussions and actions
• Proactive management and facilitation objectively evaluates all communication risks. Forum
offers participants a chance to agree or disagree
Reporting
• Concise updates focused on cross-organizational risks direct attention where it is needed
• Clear assignment of risk ownership and action responsibilities eliminate confusion
Source: A.T. Kearney Merger Integration
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Realizing Integration Synergies
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To assess and achieve their synergies, all teams can leverage a number of A.T.
Kearney’s proven methodologies and tools as appropriate
Illustrative
Supporting Methodologies and Tools
Streamlining
Product Portfolios
and Networks
Objectives:
Focus Areas:
Methodology
and Tools
Leveraging Assets
Streamlining the
Organization
Reducing
Purchased Costs
Increasing Sales
Force
Effectiveness
• Rationalize product
offering and
customer base
• Evaluate and
implement optimal
network strategy
• Maximize asset
utilization
• Bottling plant
consolidation
• Warehouse
consolidation
• Realize network
synergies
• Determine
management and
governance structure
• Integrate offices
• Align HR policies and
procedures
• Leverage corporate
spend
• Leverage purchasing
volumes
• Increase revenue
productivity of sales
force
• Increase knowledge
and value-added
selling capabilities
• Explore channel
leverage (i.e., Dealer
/Reseller network)
• Product Offering
• Customer
requirements
• Network cost and
capacity
• Fixed assets
• Capital expenditures
• Inventory
• Procurement
• Finance / Accounting
• Legal / Regulatory
• IT
• HR
• Direct materials
• Purchased services
• Indirect materials
• Capital expenditures
• Sales force
effectiveness
• Cross-selling
• Product Portfolio
and Network
Rationalization
Methodology
• Operating Networks
Integration
• Supply Chain
Transformation
• Operating Asset
Effectiveness
• Corporate Center
Rationalization
• Strategic Sourcing
• E-Sourcing (eBreviate)
• Market exchange
strategy (LSN)
• Sales Force
Effectiveness
Methodology
• Customer Retention
Methodology
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Rapid benefit delivery is feasible through integrating the operating network
Key Assessments for Integrating Operating Networks
Several Iterations
Market Requirements
SKU Tree
Manufacturing Capabilities
SKU tree
Number
of
Variants
SKU 1
Proliferation
Level
A
B
C
D
E
E
F
G
H
I
SKU 2
SKU 3
•
•
•
1•
1 •
1•
Compact
Classic
Compact
Classic
•
•
•
•
•
GBH
EBH
Mechanical
EBH
Mechanical
GBH
•
•
•
•
•
•
•
Blue
Blue
White
White
White
White
White
•
•
•
•
•
•
•
Menthol/Euca
•
•
•
•
•
•
•
Classic
Compact
Classic
Classic
Compact
Compact
Classic
•
•
•
•
•
•
•
Resealable
Resealable
Resealable
Resealable
Resealable
Resealable
Resealable
•
•
•
•
•
•
•
•6 •12•18•24 •6 •12•18•24 •6 •12•18•24 •6 •12•18•24 •6 •12•18•24 •6 •12•18•24 •6 •12•18•24
•1 •1 •1 •1 1• 1• •1 •1 •1 •1 •1 •1 1• •1 •1 •1 1• 1• 1• 1• 1• 1• •1 •1 1• 1• 1• •1
97%
O v eral l Effici e n cy
(= Up ti me Effic i en cy x % MPP)
1
2
GBH
3
Current Sites: 2
Future Sites: 1
U p tim e Effici e nc y
3
Classic
Network Configuration
6 9%
59%
Current Sites: 8
Future Sites: 5
5 4%
50%
2
36%
1
31%
2
Current Sites: 2
Future Sites: 1
45%
Current Sites: 4
Future Sites: 3
6 2%
24%
19%
1
3 7%
35 %
32 %
28 %
Current Sites: 1
Future Sites: 1
Current Sites: 3
Future Sites: 2
2 8%
2 1%
4
28
S it e 1
S it e 2
S it e 3
Sit e 4
S ite 5
S it e 6
S it e 7
1 6%
14 %
S it e 8
S it e 9
10%
Sit e 1 0
Current Sites: 1
Future Sites: 1
A.T. Kearney 6/Document#/I.D.
1
A .T. K earn ey 6/ 98 .2 90 2
Current Sites: 2
Future Sites: 1
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36
Local Market
Requirements
• What are the market
requirements
• What is the
current/future
competitive
positioning
• What distribution
channels are growing
fastest
Portfolio
• Which SKUs are offered
• Which specific product
characteristics
• Which emerging
technologies/competitive
offerings
• How is product bundled
and promoted
Manufacturing
Capabilities
Network
Configuration
• What can be produced
• Which are the costs
of transportation,
• Where
handling and
• How does throughput vary
inventory
by location and plant
• Which is the most
capability
cost efficient
• What are the capacity
network
constraints
configuration
• Are there cost
synergies with other
Dannon products
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Which entity in the supply chain should develop a capability is determined by the
business’ scale and strategic objectives
High
Activity Strategic Importance
• How core is the activity? How
“entangled” is it with the rest
of the organization?
• How critical is it to maintain
control and involvement in the
activity?
• Is the activity an area of
competitive advantage today?
In the future?
Strategic Alliance
• Develop strong
relationships with key
supply chain partners that
have the required
capabilities
• Maintain very high levels
of cross-functional
involvement
In-House
• Invest in resources and
people to develop worldclass capabilities
Outsource
• Outsource activity to
capable provider
• Organize related activity to
minimize transaction costs
with outsourced provider
Rationalize
• Depending on true
switching costs and
investment requirements
either continue to develop
capability in-house or
outsource
Low
Low
High
Potential For Internal Capability Development
• In the short- to medium-term can the required capability be
developed in-house to be highly efficient and effective in an
activity?
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Differences in each company have to be understood, and decisions made on both
the operating model of the joint venture going forward – a formal process can
help in facilitating this thinking
Corporate Center Rationalization Methodology
Step 1
Step 2
Identify the Operating Model
and Detailed Operating
Structure and Characteristics
of Each Firm
Step 3
Make the High Level Choices
As to How the Company
Operates Going Forward
DWNA
Determine New Operating
Model, and Appropriate
Benchmarks
DWNA/JV Partner
Business Group
Model
BG1
•?
BG2
•?
BG3
Step 4
Holding Strategic
Company Architect OperatorFunctional
Strategy
•?
Financial Control
Business Group
Support Function Alignment
BG1
?
BG2
?
BG3
?
Other
Stand Alone
Resource Management
JV Partner
Accountability
Business Group
Model
•?
BG2
•?
BG3
•?
C = Corporate
B = Business Unit
O = Outsourced
Holding Strategic
Company Architect Operator Functional
Model
Capital Allocation
BG1
Define and Align Support
Functions
Finance
• Accounts Payable
• P/L accounting
• Consolidation/ corporate
reporting
• Tax
• Treasury
• Planning/budgeting
Human Resources
• Benefits/administration
• Benefits planning
• Compensation planning
B
B
C
C
C/B
C
C
C
C
C
C
C
B
B
B
C/B
C
B
C
C
C
C
C
C/B
B/O
B/O
B
C/O
C/O
C/B
C/O
C/O
C
C/O
C/O
C
Corporate Staff Size
Autonomy
Marketing
Create Joint Venture Organization
Staff Placement
• Effective, fast rationalization and savings
• Best practices “Corporate Center”
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Strategic sourcing is a powerful methodology for leveraging the combined
spending base and procurement capabilities of the merged organization
Seven Step Strategic Sourcing Methodology
1. Define
Sourcing
Categories
2. Develop
Sourcing
Strategy
3. Generate
Supplier
Profile
• Assess supply
• Review
Key • Profile spend
category business supplier lists
Elements • Identify
specifications
impacts
and supplier
• Unbundle as
• Confirm sourcing capabilities
appropriate
strategies
• Prescreen list
• Review supply
• Validate total
to develop
category profile
supply chain
short list of
• Assess
perspective
suppliers
procurement
processes
• Review trends
• Evaluate total cost
and savings targets
• Existing
A.T. Kearney • Proven database • Detailed
understanding
supplier lists
Intellectual and management
of supply market available
Capital tools
— Market
globally
Employed • Existing supply
category profiles
competition
— Industry
economics
4. Select
Implementation
Path
5. Select
Competitive
Supplier(s)
6.
Operationally
Integrate
Supplier(s)
7.
Continuously
Benchmark
and Monitor
Supplier
Improvement
• Select supplier
development or
negotiation path
including use of
market
exchanges
• Define initial
negotiation
strategy
• Tailor and issue
• Complete
•
RFPs
implementation
• Analyze responses
templates
• Develop targeted
• Gain buy-in to
•
negotiation strategy
supplier changes
• Negotiate a deal
• Coordinate new •
supply chains
• Implement systems
to monitor results
• Experience in
the beverage
industry,
including
bottled water
• Negotiation
training
• Electronic
• Implementation • Performance
procurement tools
templates
measurement
•Internet RFPs
tools
•On-line auction
• Technologytools
enabled data
• Benchmarks
capture process
Embed supplier
monitoring
processes
Implement market
monitoring tools
Periodically
re-evaluate
supplier
competitiveness
and performance
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Strategic Sourcing has a goal of delivering bottom line savings through core
elements: strategic purchasing; demand management and change management
Strategic Sourcing Approach Overview
Strategic
Purchasing
Tangible
Results
• Reevaluate external purchases and
restructure supplier relationships
to get best value for the company
(price, quality and service)
Demand
Management
Change Management
• Reduce costs by decreasing or
eliminating the demand for
goods and services
• Embed achieved savings by
transforming organization,
structure, processes, policies,
and systems
Demand Reduction Hierarchy
Aggressive
Buyer
Leverage
Eliminate
Demand
Product
Specification
Improvement
Application
Methodology
Organization and Skills
Greatest
Process
Systems
Strategic Procurement Vision
Reduce Quantity
Procurement Policies
Reached Info.
Transparency
Strategic
Sourcing
Reduce Quality
Joint
Process
Improvement
Organizational
Structure and
Infrastructure
Reduce Frequency
Substitute
Global
Sourcing
Relationship
Restructuring
Redesigned
Processes
Implementation of
Process Linkages
Technology Tools
(Information Systems)
Impose Onerous Approvals
Performance Metrics
Heighten Cost Awareness
Transition Management, Communications, Training
Conservative
Lowest
Opportunity
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Strategic Sourcing is effective in integration environments since it can be started
immediately, deliver major savings and contribute to building the new company
Integration-Related Strategic Sourcing
Integration Savings
• Leveraging scale
— Capitalize on combined buying power
— Use leverage to restructure supplier offerings
— Mitigate supply risks by managing vendor
concentration
• Generating efficiencies
— Spread technology investment over increased
purchasing base
— Evaluate/select the best existing purchasing
systems for use in the new organization
• Rapid transfer of best practice
— RFI/RFP harmonization
— Convergence of procurement practices and
guidelines
Build the New Company
• Teamwork across the new enterprise:
— All categories
— All business units
— All geographies (domestic and/or global)
• Bottom-up initiative driven by the “new” team
— Service levels/needs
— Demand dynamics
— Organizational similarities and differences
• Relatively undisruptive (products and services not
people)
• Helps new management to understand their operation
in detail
• Opportunity to redesign processes to reflect the new
organization, and embed world class procurement as
a core competency in the new company
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The sales productivity effort should include Customer Retention Methodology to
understand the key risks for customer defection and action plans to address them
Customer Retention Methodology
Step 1
Overall Process
Workstreams
Objectives
Step 2
Immediate Front-Line
Actions
• Sales force focus
• Detect and react to
defection behavior
• Incentives for retention
performance
• Empowerment of staffpricing, fee waivers, etc.
Customer Analysis and
Retention Plan
• Analyze customer
satisfaction level by
product
• Quantify retention
performance and value
contribution of key
technology segments
• Understand customer
defection
• Pursue additional research
on high value segments
Defection/Loyalty Segmentation
Retention Sales Programs
• Initiate early
communications
• Build account plans
• Build triggered and
tactical response capability
• Build defection models
Step 3
Product Management
Issues
• Develop metrics to
measure customer
retention
— Overall company
— Specific product
branding
• Ensure customers are
positively impacted by
changes in the company
Medium-Term Actions
High Value Customers
Create Targeted Retention Programs
•
•
•
•
•
•
Contribution
Value Channel Management
• Channel migration pricing
• Price rise
• Passive customer service
Retention
Retention bonus/incentives
Differentiated service levels
Enhanced product applications
Customized communication
Customized product benefits
Early warning
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Our approach to sales productivity includes benchmarks, analysis of overlap and
identification of near term growth opportunities
Salesforce Productivity
Benchmarks
Efficiency
Illustrative
Effectiveness
Number of Reps
Serving Accounts
Total Sales
Managed by
Sales Rep
#
$
#
Sales Dollar Per
Sales Rep
$
$
Average Training
Per Sales Rep
Marketing
New
Products
$
Network
Services
Account Win/Loss
Performance
Price
A
B


Quality
A
B
A
B
Service
Laptop A
Capability


B
Co. A Co. B
Co. A Co. B
Co. A Co. B
Co. A Co. B
Overlap
Near Term Growth Opportunities
Territory
Co. B
Co. A
Sales
Overlap
Co. A
Position
Coverage Overlap
Major
Sales
Opportunity Strategically
to Introduce
Manage
Co. B
RelationProducts
ships
Minor
Integration Leverage
Opportunities
Region
Opportunity
to Introduce
Co. A
Products
Minor
Major
Co. B Position
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Information Technology should be viewed as an enabling mechanism for achieving
merger goals
Technology Focus in a Merger Product/Market Focus Context
Illustrative
Anticipated Benefits
Cost Reduction
Cost/Revenue blend
Revenue Enhancement
Product Focus
Product Expansion
Complementary or
New
• In high-overlap mergers, the emphasis is on
cost reduction. Market analysts expect to see
tangible actions being taken early in the
merger program
• For synergistic mergers, timescales to achieve
benefits may be longer, and I.T. integration
can operate within a longer planning horizon
to support revenue enhancement
• The common factor with all of these merger
forms is the need for a smooth integration
process that eliminates the risk of customer or
employee defection
Synergistic Merger
• Channel rationalization
• Systems enhancements to
support new products
• Major systems revisions to
support cross-selling and
geographic/channel expansion
• Review of global data centers
and core systems
Product
Lines
High Overlap
Overlapping
Geographic Expansion
• Eliminating duplication between
systems
• Rationalizing service agreements
• Reducing license fees
• Reducing support costs
• Pursue data center
rationalization
• Standardization on common
systems
• Standardization on common
products
In-Market
Merger
Out-Market
Merger
Market Focus
Market Overlap
Source: A.T. Kearney Merger Integration
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IT must quickly deliver tangible business driven results in a timely fashion and not
necessarily the “best” possible solution to achieve value creation commitment
Illustrative
Representative IT Support Requirements
Percent of Initiatives Defined Over Time
Business Initiatives Defined
• Business synergies
— E-business opportunities
— New product/ new market opportunities
— Cross selling
— Leverage existing products to new
geographies
— Act on future acquisition opportunities
80%
Supporting IT
Initiatives Defined
10%
• Cost imperatives
— Rapid integration to capture synergies as
committed to the street
— Product rationalization
— Product and plant integration
Deployment/
Integration of IT
Initiatives
Time
• Business continuity
— Statutory and performance reporting
— Integrated strategic measurement
— Merger integration progress
IT’s challenge is to stay in tune with business initiatives to understand the scope of effort,
develop the IT response, and to integrate with the corporate IT direction
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Integration Management
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The Steering Committee and Integration Office manage the overall program and
coordinate decentralized project teams through the Integration Office
Steering Committee
•
•
•
•
•
•
•
Develop/communicate objectives and targets
Develop merger guiding principles
Sign off on major issues/decisions
Set overall direction for integration
Provide resources and eliminate roadblocks
Implement top-down communication
Focus on continuing operations
Integration Office
• Coordinate integration process, scope activities
• Implement merger planning, integration and reporting — create and manage the
“master plan”
• Conduct frequent work task reviews with teams
• Facilitate overall change management
• Maintain a scorecard to track deliverables and benefits
• Prioritize enterprisewide issues and make recommendations
• Manage communications
• Install and manage effective merger risk management
Market Facing Teams
Value Capture Teams
Enabler Teams
Integration
Teams
Integration
Teams
Integration
Teams
Integration
Teams
Integration
Teams
Integration
Teams
Integration
Teams
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Each component of the project had specific roles and responsibilities
Integration Roles
Steering Committee
• Set the strategic direction and principles
for integration
• Sign-off on major issues/decisions
• Top-down communication throughout the
integration process
• Focus on continuity of growth, customers’
issues
Deliverables
• Strategic direction, operating philosophy,
and governance structure
• Guiding principles
• Communication of key messages
• Scope and actions
• Overall objectives and goals
Integration Office
• Coordination, planning, integration,
reporting and communication
• Monitors implementation of organizational
models
• Prioritize issues / initiatives
• Facilitate overall change management
• Risk identification and management
Decentralized Integration Teams
•
•
•
•
Propose transition strategy for the area
Prepare the transition work plan
Detailed organizational assessment
Identify merger benefits and implement
tracking mechanism
• Implementation of transition plans
• Overall project key success factors
• Master project plan and risk assessment
• Transition reporting including benefits
tracking and risk management
• Communication implementation
•
•
•
•
•
Transition plans
Organizational assessment and design
Progress reports with targets achieved
Risk assessment
Performance measurements defined
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Each of these three teams have clearly defined roles and responsibilities
Key Pre-Merger Integration Set-up Responsibilities
Steering Committee
Integration Office
Value Capture Teams
• Communicate objectives and goals of
merger
• Define roles of members
• Identify team members
• Identify team members
• Create team charters
• Establish and communicate the
“Merger Guiding Principles”
• Establish cost savings & revenue
synergies targets as a precursor to the
“Merger Integration Scorecard”
• Prepare for Kickoff Meetings to
introduce team members and provide
initial orientation
• Initiate the appropriate MIS/IT
infrastructure
• Agree on optimal processes to
coordinate each team
• Support development of high-level
business line/functional plans
• Begin data collection and hypothesis
testing
• Identify, at a high level, major risk
areas
• Develop Day 1 Plans
• Identify and appoint Integration Leader
• Identify and appoint team leaders
• Communicate formation of Integration
Office and Value Capture Teams
• Communicate executive commitment
to the integration program
• Communicate team leader and team
member commitment
• Ensure regular and consistent topdown communication across all
regions and groups
• Co-ordinate the senior management
review cycle of these plans
• Assemble the first “Master Plan”
• Develop tracking baseline
• Issue initial communications to
stakeholders, as required
• Establish risk management process
• Develop organizational, customer
and/or cost profiles falling within team
scope
• Conduct interviews to gather
additional qualitative insight regarding
operating processes and styles
• Develop joint vision for combined
organization
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The Steering Committee must apply significant early effort to communicate the
new company’s strategy, operating philosophy and governance
Issues to Address
Strategy
• Market environment
— Likely environment
— Other competitive developments
• Ensuring 1 + 1 = 3
— Realistic capacity for development
— Areas for investment/growth
— Strategic initiatives to freeze,
continue or accelerate
— Key third party relationship issues
— New opportunities arising
• Linkage to performance targets
— Growth
— Cost reduction
— Capital efficiency
Operating Philosophy
• Core management style
— Holding company
— “Strategic architect”
— Business controller
— Operator
• Alignment to core style
— Leadership alignment
— Line responsibilities
— Corporate responsibilities
— Support functions
• Performance management
— Expectations setting
— Role of the “plan”/“budget”
— Performance reporting and
management
• Management reward systems
Organization and Change
• Organization structure
— Reporting relationships
— Inside DWNA versus in parent
— Decision making/maps
— Key accountabilities
• Key corporate policies
• Relationship structure
— Conflict resolution mechanisms
• Change management
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In addition, the Steering Committee should establish a clear set of guiding
principles
Merger Guiding Principles
1. “This is not the customer’s merger” — Major focus on
avoiding customer inconvenience and loss of customers.
“Customer service can only change for the better.” Cost
savings are important, but second to customer focus
2. Focus analyst expectations on the longer term — Savings
goals defined as $1 billion expense “run rate” reduction by end
of three years, eliminating short-term, quarter-by-quarter focus
3. Appearance of tight control through Command Center —
Command Center used as a single point of contact for all
external communications. External presentations conducted in
“war room” to exhibit corporate controls in place
4. Relentless tracking of risk and interdependencies — All
merger projects required to use risk and interdependency
tracking approach. These were integrated by the Command
Center to provide corporate perspective on risk. Focus of
internal meetings on risks and customer issues, not on successes
5. Systems focus on smooth Integration — “Suites” of systems
should be selected rather than pursuit of optimal elements from
each organization. Extensive use of “bridges and
workarounds” to maintain critical controls while expediting the
process
6. End-to-end systems and process testing — No system or
process should be considered ready for processing until it has
been tested in a “dress rehearsal” mode (usually two dress
rehearsals)
Case Examples
1. Fast and fair — accept that we will make mistakes, but
give us credit for being smart enough to be able to
recognize them, and not so proud that we can not change
2. Leadership must be evident/inspiring — not holed up in
the corner offices/board rooms, but out in evidence with
key customers and our employees
3. Harmonization — this has to be a key goal with respect
to strategy, key policies, business processes, etc.
4. Minimize ambiguity — be clear in plans, timing,
decisions(don’t fuzzify - “don’t know” is ok
5. Short term bias towards the customer — don’t lose
sight of the business whatever we do
6. Overcommunicate — you can never do enough here
7. Integration study team should be advisory and separate
from management — let management decide and let
advisors advise, don’t mix too closely
8. Seek acquaintanceship-building opportunities —
informal, formal
9. Emphasis on flexibility/change/fluidity — accept
change as a way of life, strategic agility is key, it is
management’s first responsibility to take risk (change,
growth, wealth creation can only happen by taking risk)
7. “1 + 1 = 3” volumes — Strong encouragement of business
units to focus on post merger business volumes
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The role of the Integration Office evolves over the course of the integration
Establish
Structure and Plan
• Creation of Integration Office with
leadership assigned
• Define roles of members
• Establish and communicate the
“Merger Guiding Principles”
• Establish cost savings targets as a
precursor to the “Merger Integration
Scorecard”
• Initiate the appropriate MIS/IT
infrastructure
• Support development of high-level
business line/functional plans
• Identify, at a high level, major risk
areas
• Co-ordinate the senior management
review cycle of these plans
• Assemble the first “Master Plan”
• Update Merger Steering Committee
• Issue initial communications to
stakeholders, as required
• Establish risk management process
Day
One
Integrated Planning and
Initial Rollout and
Implementation Support
• Develop further project
infrastructure
• Refine and monitor the “Master
Plan”
• Finalize key objectives, and
establish the “Merger Integration
Scorecard”
• Work with line management to
finalize detailed Integration Teams
required and their scope, objectives
and timelines
• Focus on ensuring detailed,
comprehensive project management
• Establish initial prioritization
framework
• Refine reporting tools
• Preliminary assessment of key risks
and interdependencies
• Update Integration Steering
Committee on plans
• Manage stakeholder
communications
Full-Scale
Rollout and
Implementation
Support
Transition of
Integration Office
Responsibilities
• Update Integration Steering
Committee on plans and progress
toward targets
— Maintain the “Merger Integration
Scorecard”
• Support development and execution
of detailed implementation plans by
decentralized Integration Teams
• Ensure consistency of execution
• Run the continuous risk management
process
— Stabilize or desensitize risks as
appropriate
• Champion “quick win” projects to
reinforce confidence of key
stakeholders
• Ensure that key milestones are met,
proposing resource reallocations as
necessary
• Manage stakeholder communications
• Develop contingency plans as
necessary
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A Command Center to monitor and control the process of the merger can be
established
Command Center Layout
Example
Functional Areas
“Dress Rehearsals”
End-To-End Testing
System
A
System
B
Identified
problems;
implemented fixes
System
E
Time
System
C
System
D
Actual
Dress
Dress
Rehearsal Rehearsal Conversion
1
2
Testing
Source: A.T. Kearney Merger Integration
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The Command Center monitors and tracks critical information from each area of
the integration and provides an overall view of progress to ensure success
Example
“Command Center” Information Reporting
Network Evaluation
ROE
Market Value Invested
(Pre-merger) Capital
SVC
Economic Returns
Business Line
Integration Plan
Revised Retail Organization
Integration Framework
Expected Cost Reduction
“Dress Rehearsals”
End-to-End Testing
Potential Losses
Aggregate Portfolio Sensitivity
Market Positioning
Market Share
Shareholder Value Created
Client base
Key Performance Indicators
Basis Points Change
Planned Budgets
System
A
Time
Dress
Dress
Actual
Rehearsal RehearsalConversion
1
2
Jan
Feb
Mar
Apr
May
Source: A.T. Kearney Merger Integration
Phase I
Phase II
System
B
System
C
System
E
System
D
Testing
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There are five main advantages of implementing the Benefits Tracking and
Reporting (BTR) system
BTR Implementation

Facilitates the identification and realization of cost synergies and related costs, whether they be in a merger
environment, a restructuring program, a strategic sourcing program or any general cost reduction program

Provides key constituents with access to periodic, data-driven status of program initiatives

Creates a forward-looking risk and milestone tracking system to alert key stakeholders about potential synergy
shortfalls or issues

Provides evidence that cost synergies have been achieved

Provides information for a common program communication vehicle for executive management
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The BTR is a web-enabled system that allows users to input and update key
project data easily, quickly and frequently. The output of the system is used to
create consolidated project and program-level reports
Web-enabled User Interface
(Via a Terminal Server Application)
Management Reports
(Generated through Excel and PowerPoint)
Benefits Achievement,
Progress against Plan &
Revised Forecasts
Summary of Manpower
Reductions & Savings
BTR
Database
300
Q3'99
Q4'99
Q1'00
Q2'00
Project Risk Assessment
Q3'00
Q4'00
Total
200
II
II
100
I
0
Oct
Nov Dec Jan Feb Mar Apr May Jun
Jul
II
III
SC3
No
Aug Sep Oct
Dec Jan
SF11
Feb Mar
SC5
ST9 SC7
ST10
RT6
EM4 ST7
I
I
PP2
SC11
PP7
RT5
RT3
SF8
CS4 PP5 EM6
MD15
SC1
ST8
MD19 MD26
MD31 MD11
MD34
EM7
RT4b
RT4a
CS2
EM1
SC4
ST2
ST1
EM2
MD32 MD21
MD37
EM3
MD29
MD33
EM5 MD6
MD1
MD27
CS1
CS5
MD2
MD18
The BTR front-end and back-end are completely customizable and
scaleable to meet the needs of any engagement size and scope
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The eight components of the BTR consist of one-time and ongoing regular update
reporting requirements
1) Project Profile
 Defines projects and owners
One-time
Reporting
2) Project Milestones
 Identifies key milestones with accountable owners and completion dates
3) Project Interdependencies
 Describes interdependencies with other teams, actions required and impact if actions are not taken
4) Headcount Reductions Template
 Tracks actions resulting in net headcount reductions
 Tracks headcount-related savings and costs
5) Non-Headcount Savings and Cost Template
Tracks non-headcount savings and associated implementation costs

Regular
Update
Reporting
6) Capital Expenditures Template
 Tracks capital expenditures related to the project
7) Asset Sales Template
 Tracks proceeds from asset sales related to the project
 Tracks related asset write-downs
8) Risk and Key Milestone Tracker Template
 Tracks progress against key milestones
 Highlights areas of potential risk
 Identifies actions required to resolve issues and remove barriers
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Updates to the system are used to track progress against targets. The system can
track multiple parameters, including - savings, costs, headcount and project status
Web-enabled User Interface
Management Reports
(Via a Terminal Server Application)
(Generated through Excel and PowerPoint)
Headcount Reductions and Related Savings/ Costs
Summaries by
Project Team
Non-Headcount Savings and Related Implementation Costs
169
28
28
Monthly Achievement
& Forecast
Capital Expenditures
26
138
21
21
14
0
4
4
Jan
Feb
Mar
8
8
7
31
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Total
30
25
Other Restructuring Charges (i.e. Asset Sales & Write-Offs)
20
Monthly Progress
Against Plan and
Forecast
15
10
5
0
Jan
Risk and Key Milestone Tracker
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
-5
II
I
II
II
III
SC3
Project Risk Assessment
SF11
SC5
ST9 SC7
ST10
RT6
EM4 ST7
I
I
PP2
SC11
PP7
RT5
RT3
SF8
EM1
SC4
MD34
EM7
MD15
SC1
RT4b
RT4a
ST8
ST2
ST1
CS2
MD31 MD11
EM2
MD32 MD21
MD33
MD37
EM3
EM5 MD6
MD1
MD27
CS5 MD18
MD29
MD2
A.T. Kearney 4/1375C/Merger Integration 48
CS4 PP5 EM6
MD19 MD26
CS1
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_Macros
The Steering Committee and client team leaders are provided with summaries of
progress against plan on a regular basis
Illustrative
Financial Reports
Run Rate Saves — Project SC01
Run Rate Saves — Supply Chain Integration Team
Run Rate Saves — Integration Program
(US$ MM)
300
200
Monthly Actuals
Original Plan
Revised Forecast
100
0
Jul
Aug Sep
Oct
Nov Dec
Jan
Feb
Mar
Apr
May
Jun Jul
Aug Sep
Oct
Nov Dec
A.T. Kearney 4/1375C/Merger Integration 49
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_Macros
A risk-tracking system is implemented to track initiative progress and to help
anticipate delays, identify barriers to success and highlight areas of concern to
leadership
Illustrative Example
Initiative Risk Assessment
Size of Savings
<$1MM
Red
Risk Rating
$1MM–$5MM
$5MM–$10MM
AA1
SC6
Yellow
I
PP4
>$10MM
SC3
SF11
SC5
TBD
ST9 SC7
ST10
RT6
EM4 ST7
Green
I
PP7
PP2
RT5
RT3
SC11
SF8
CS4 PP5 EM6
01/02
12/99
EM1
SC4
MD34
EM7
MD15
SC1
RT4b
RT4a
ST8
MD19 MD26
ST2
ST1
CS1
CS2
MD31 MD11
EM2
MD32 MD21
MD37
EM3
On Hold
MD33
EM5 MD6
MD1
MD27
CS5 MD18
MD29
06/00
Expected Completion Date
12/00
MD2
06/02
A.T. Kearney 4/1375C/Merger Integration 50
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_Macros
In risk management, objective criteria need to be developed to decide which
initiatives are inherently more risky than others
Initiative Prioritization — Business Criticality and Size
High
Business Criticality — how much does
it matter if the project does not meet its
objective?
D
• A = Incremental benefit but current
processes will suffice
• B = Supports strategy but
manageable impact if project
fails/delayed
Illustrative
Project
4
Project
5
Project
6
C
Project
1
Business
Criticality
• C = Important to the strategy with
significant impact if project
fails/delayed
• D = Critical impact/must keep up
with competitors/cannot
continue business
In This Example, Project 5 and
Project 1 Are Both Critical and
Complex, Requiring a Formal
Project Risk Management Approach
Project
2
B
Project
3
A
Low
A
B
C
Complexity
D High
• Business Complexity — how many
areas of the business will be involved in
the project?
• Technical Complexity — how
technically difficult is the project?
• Project Size — how many dedicated
FTEs will be working on the project?
A.T. Kearney 4/1375C/Merger Integration 51
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_Macros
Once risks have been identified, they are then prioritized as “Red”, “Amber” or
“Green” (RAG) to reflect their potential impact

Risk Categorization
• Red = Showstopper
— Legal block to the merger
— Unable to provide one Funds Transfer System
— Lose a major customer
— Unquantifiable cost impact
• Amber = Serious Problem
— Major cost impact (difficult workarounds)
— Customer irritation or embarrassment
• Green = Minor Problem
— Minor cost impact (workarounds identified and acceptable)
— Localized impact
Illustrative
A.T. Kearney 4/1375C/Merger Integration 52
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_Macros
A.T. Kearney Qualifications
A.T. Kearney 4/1375C/Merger Integration 53
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1083
_Macros
A.T. Kearney is a global management consulting firm with 5,000 employees
worldwide
Successful Track Record
 Diversified management consulting
Firm
 Founded in 1926
 Backed by the information
technology expertise of EDS
 Mostly Fortune 500 clientele
 Global
• 65 offices in 35 countries
 Senior, experienced staff
 More than 3000 assignments per
year
 $1.4 billion of fees in 2000
Toronto
Ottawa
Cleveland
Washington, D.C.
New York
Boston
Lisbon
Madrid
Barcelona
London
Paris
Brussels
Amsterdam
Düsseldorf
Oslo
Milan
Copenhagen
Stockholm Stuttgart
Munich
Berlin
Istanbul
Prague
New Delhi
Helsinki
Singapore
Beijing
Hong-Kong
Tokyo
Moscow
Chicago
Seoul
San Francisco
Houston
Los Angeles
Denver
San Diego
Phoenix
Mexico
Dallas
Atlanta
Manila
Caracas
Kuala Lumpur
Miami
Sao Paulo
Buenos Aires
Johannesburg
Melbourne
Sydney
Wellington
A.T. Kearney 4/1375C/Merger Integration 54
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_Macros
A.T. Kearney is best known for delivering outstanding tangible results quickly
Sample of
Recent Clients
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Ameritech
Anglian
BT
Carrefour
Euro Disney
General Motors
Johnson & Johnson
Kellogg
Metro
Monoprix
Nabisco
Nomura
PepsiCo
Promedes
Prudential
Quelle
Sears
Shell
Sprint
Unilever
Representative Annual
Results Achieved
Federal
Express
>$500 Million
"A.T. Kearney has helped enormously to address our key issues… We
have planned and implemented cost reduction Programmes that will return
over half a billion dollars"
Fred Smith, CEO, Federal Express
Sears
>$750
Million
"…in sharpest contrast… A.T. Kearney consultants helped engineer one of
the most stunning corporate turnarounds in recent memory"
Arthur Martinez, CEO, Sears (excerpt, review of Dangerous Company
in Fortune, August 18, 1997)
Rolls-Royce
$750 million
"We wanted consultants who wouldn't just give us advice and walk away"
John Rose, CEO, Rolls-Royce
Marks &
Spencer
$250 million
"The Kearney work has made us radically re-think our approach to the
business. We wouldn't have done that otherwise"
M&S Supplier
General
Motors
>$3.5 Billion
"A.T. Kearney is really the father of our global purchasing system." "They
are our achievement consultants"
Jack Smith, CEO, GM
A.T. Kearney 4/1375C/Merger Integration 55
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_Macros
Our commitment to our clients is guided by three key principles
Relationship Based Accounts
Mutual Involvement
• 90% of revenues from repeat
clients
Unique Quality Program
Engagement Quality
Quality Review
Engagement
Review
1.
Please rate the caliber of our team members
Poor
• 15 current clients with 10 plus
years
2.
3.
125
100
100
75
1 9 9 6 : Glo b al
tran sfer p ricin g
d o cu men tatio n is
3 0 0 th p ro ject
1 9 9 5 : Ch in a
mark et en try
strateg y
1 9 9 0 : Glo b al
b u sin ess strateg y
fo r n ew au to is
9 0 th p ro ject
To ta l Nu m ber
Of Pro jects
50
25
0
5.
1 9 9 3 : Man u factu rin g b en ch mark in g
stu d y is 1 0 0 th p ro ject
1 9 7 4 : P u rch asin g
d ep artmen t au d it
is 5 0 th p ro ject
1 9 5 9 : S alary ad min istratio n
p ro g ram rev iew is 2 5 th
1 9 7 9 : To o l ro o m stan d ard s
p ro ject
stu d y is 2 5 th p ro ject
1 9 9 5 : Bran d in g strateg y is
1 9 9 0 : Cu sto mer
1 5 th p ro ject
satisfactio n p ro ject
is b eg in n in g o f
1 9 4 4 : Jo b ev alu atio n is
1 9 9 4 : S trateg ic So u rcin g is
1 9 6 3 : Main ten an ce su rv ey relatio n sh ip
b eg in n in g o f relatio n sh ip
b eg in n in g o f relatio n sh ip
is b eg in n in g o f relatio n sh ip
1940
1950
1960
1970
1980
1990 1995
Yea r
5
Excellent
1
2
3
4
5
Completely
1
2
3
4
5
Completely
1
2
3
4
5
Completely
Do you believe the identified results or benefits can be
achieved?
Not At All
• Senior-level relationships and
accountability internationally
• Joint steering committees and
action teams
• Involvement of key stakeholders
• Personable, collegial client
interaction
4
To what extent were expectations clearly set at the
beginning of the assignment?
Not At All
300
3
Did we interact and work with your people effectively?
Not At All
4.
2
Did we maintain effective communication with you and
your people during the assignment?
Not At All
• Most relationships extend
internationally through our onefirm policy
1
1
2
3
4
5
Completely
• Two quality evaluations following
a project
• 85% of work exceeds expectations
• The only program of its kind to our
knowledge
These principles ensure that A.T. Kearney consistently provides not only
high-value insights but also practical, tangible results for our clients
A.T. Kearney 4/1375C/Merger Integration 56
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_Macros
In overall satisfaction, A.T. Kearney is the global leader
Client Satisfaction
94%
A.T. Kearney
82%
KPMG Peat Marwick
80%
Price Waterhouse
McKinsey & Company
79%
Andersen Consulting
79%
77%
Booz-Allen & Hamilton
Boston Consulting
IBM
CSC Index
Source: Louis Harris Survey, 1998
75%
74%
71%
A.T. Kearney 4/1375C/Merger Integration 57
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_Macros
Our organization of global service and industry practices supports effective
building and dissemination of specific know-how
Industry Practices
Aerospace
and
Defense
Automotive Communications Consumer Goods Financial
and
and Retail
Institutions
Media
High Tech Pharmaceutical
And
and
Electronics
Healthcare
Process Transportation Utilities
Strategy and
Organization/
Merger Integration
Service
Practices
Operations
Technology
A.T. Kearney 4/1375C/Merger Integration 58
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_Macros
We have used our specific capabilities and know-how to build a wide range of global
merger integration experience with more than 250 assignments
Selection of A.T Kearney merger integration clients
Industry
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Aluminium Comp. of America
The Battenfeld Group
CIAM SpA
EKO Stahl GmbH
GEA AG
James River - Fort Howard
Kvaerner Warnow Werft GmbH
Krupp MAK/SKL
Lone Star Technologies, Inc.
MAN Gutehoffnungshütte AG
Mann + Hummel
Pfleiderer
Robert Bosch GmbH
R.R. Donnelley & Sons Company
Siemens
Siemens / Tyco
ThyssenKrupp
VA Technologie AG
Woodward Governor
Oil & gas, chemicals, pharmaceuticals
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Food industry
•
•
•
•
•
•
•
•
•
•
•
•
Booth Fisheries Corp.
Delikat Fabrikker A/S
EAC Plumrose Division
H. J. Heinz Co.
John Labatt Ltd.
K.-H. Asmussen GmbH & Co
Lipton/Van Den Berg Foods
MD Foods International
Molson Breweries
Noelke
Select Beverages Inc.
Unilever Canada Ltd. / Unilever Foods
Advanced Medical, Inc./IVAC Systems, Inc.
Agr Evo
Air Liquide/BOC
Amoco
Arco
Baxter International, Inc.
BP
Bayer/Hoechst AG
Byk Gulden Lomberg Group
Dystar
Ecolab Inc./Henkel KGaA
GE Plastics
Hoechst/Schering AG
Hoechst/Rhône-Poulenc
Metallgesellschaft
Mobil
Monsanto
National Patent Medical/American White Cross
Rohm & Haas
Shell
Sterling Chemical
TotalFinaElf
Wella AG
Financial institutions
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Transportation
•
•
•
•
•
•
•
•
•
Air Lingus-FLS
BahnTrans GmbH
Canadian National/Illinois Central
Canadian Pacific Ltd.
Federal Express Corp.
Istituto Nazionale Traspo.
LOG SPED GmbH
Univar Corp.
Wegener N.V.
ABN AMRO N.V.
Bank für Gemeinwirtschaft AG
Bank of America/NationsBank
Bank of Indonesia
Bank of Melbourne
Bayerische Hypo Bank/
Bayerische Vereinsbank AG
Chase Manhattan Bank/Chemical Bank
CIBC/TD
DBS/POSBank
Erste Bank / Ceska sporitelna
HIH Winterthur Int'l. Holdings
K&H / ABN-Amro (Hungary)
SBC Warburg
Société Générale
Union Bank
United Jersey Bank
Westpac Banking Corporation
Other
•
•
•
•
•
•
•
•
•
•
•
•
AOK
Apex
Carrefour - Promodes
Destec Energy, Inc.
Enso-Gutzeit OY
HOCHTIEF / Turner
Illinois Power
Casino- Monoprix
Nagano Toyota Motor Sales Co., Ltd.
Pacific Corp.
Saint Laurent Paperboard
Staples, Inc.
A.T. Kearney 4/1375C/Merger Integration 59
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_Macros
Our merger integration competency is brought to life through a style suitable for
merger integration activity—swiftness and analytical rigor matched with
sensitivity and buy-in
A.T. Kearney Merger Integration Practice
Competencies
A.T. Kearney's Approach To Client Work
• Consulted to many of the
world’s top corporations
• An independent strategic view
Seasoned
Expertise
Knowledge
of Best
Practices
Tangible
Results
• Advisory role in many of the
major mergers in the past
decade
• Merger integration experience
across industries and
geographies
• Formalized feedback processes
within the firm to capture and
advance post merger
integration best practices
• Highly developed project/risk
management skills
• Proven ability to expedite
change in large organizations
Intellectual Capital
Development

Cross-functional and cross-company teambased approach

Well-structured and flexible work plan

Early and recurrent management buy-in
opportunities

Culturally versed and flexible

Tangible results mindset

Cooperative, participatory style

Leverage client knowledge base

Objective, fact-based analysis and practical,
feasible recommendations

Local resources/global support
A.T. Kearney 4/1375C/Merger Integration 60