When a cultural clash threatens success
Two software companies with more than $1 billion in combined annual revenues were preparing to merge, and management engaged AlixPartners to perform due diligence before the deal was announced. We projected that the business combination had the potential to deliver $110 million in savings. However, management was worried that certain stark cultural differences between the two companies threatened to undermine the combination. Looking to capture as much value as possible in the first year after the merger, management turned to us again for help. Our new mandates: to set up an integration office for review of both of the merging companies, to prepare and execute post merger integration plans, and to ensure that all of the expected benefits got captured.
Careful analysis sets up a successful integration
Once we set up the integration office, we put every business function of both companies under the microscope. We drew on our analysis to propose the most effective new organizational design, a post merger business strategy, and the best ways to capture value from the merger. We assembled cross-functional teams and conducted planning workshops to disseminate knowledge about the combined company and develop a clear consensus about the path it would take. Our team focused most on functions like sales and marketing and product development, which had the greatest potential for merger benefits but also posed the greatest risks if the integration efforts failed. Using the team and workshop methods, we became able to expose issues and organizational roadblocks before they could interfere with the integration effort.
When it really matters
The resulting smooth post merger integration put management’s worries to rest. We increased synergy capture in the first 12 months after the deal signing to 25% ahead of previous estimates—thereby enabling the new company to hit its EBITDA targets a year ahead of schedule. Our decision making was especially helpful to the combined sales organization, which used the coverage and quota models we built to drive its business planning. We also worked with the newly unified product design team to pinpoint product overlaps, define skills matrices, and identify key resources—all with a view to boost the benefits of the merger at the design level. Further, our analysis helped the newly combined marketing team to see where there were overlaps in spending on third-party vendors and to determine how best to convert leads into sales. Through our efforts, the culture clash that management feared never came to pass.