MERGERS, ACQUISITIONS & DIVESTITURES
I undoubtedly excel in the area of M&A. Take advantage of my expertise founded on many successful transactions, combined with many years of experience as an IT manager and CIO. I can manage all IT-related issues along the entire life cycle of your transaction. Alternatively, I will gladly provide selective support in specific areas, in an advisory or operational capacity.
My list of successfully executed M&A projects includes very large and international transactions. However, regardless of the transaction volume, industry, or size of the companies involved, the variety of areas and complexity in IT is often very similar.
I am particularly keen to help medium-sized businesses, because experience gained at large enterprises can’t hurt. Why not learn from the big ones?
Very often, companies miss the opportunity to involve IT in the early phase of an M&A process. This is despite the fact that by exercising due care and comparatively little effort during the due diligence phase, one can minimize many risks and attendant negative effects, which otherwise may surface only later.
As a rule, the expense incurred for proper due diligence is well-invested. The effort creates transparency for making decisions about the transaction. The findings of the due diligence can and should be used for contract negotiations, to ultimately influence the purchase price. Each such finding taken into account when drafting the contract, might avoid problems, frustration, and possibly negative surprises after the deal is signed!
I can help you analyze and assess the existing IT environment, as part of a comprehensive and neutral due diligence of the IT infrastructure. Depending on your requirements, I serve your team in an advisory capacity, or as the manager in-charge of this important phase of the deal.
Main areas of my expertise:
From the seller’s standpoint, a carve-out is often the biggest challenge in an M&A transaction. Based on the information gathered during due diligence, one collects further details and examines possible scenarios how to disentangle and separate all applications, data, and the entire IT landscape. Then we draw up the day-one strategy, and simultaneously start activities to separate the company or a part thereof. At the same time, one must ensure business continuity at all times.
Once the divestiture or separation is announced, employees, customers, suppliers and partners become aware accordingly. Thereafter, it is essential to keep the various interest groups closely in the loop. This calls for appropriately coordinated communication alongside ongoing activities, and ways to prepare the groups for upcoming changes.
A smooth transition of the operational business to the buyer on day one is becoming increasingly important, and is the ultimate goal of this joint effort. At this point in time, communication among the parties involved in the deal is still limited, and can only take place according to strict protocols. In my experience, however, as much coordination as possible should be done on a strategic and tactical level. With this approach, you can reduce the effort and costs to create a win-win situation for both sides.
A typical ERP solution is applied to support the core processes of most companies, often enhanced by more or less integrated systems to support production, interfaces to customers and suppliers, and for human resources management. Depending on the type of deal, legal conditions of the company and its particular tax setup in the countries concerned, you may have to register new companies on day one. Needless to say, it may become necessary to migrate ERP environments, with all dependent systems and relevant data.
Often, it is either not possible, or it makes little sense for strategic-tactical reasons, to physically separate all IT components completely for the handover to the buyer when the deal is signed on day one. In such cases, the buyer and seller agree to transition services for a certain period of time. As such, the seller acts temporarily as the IT service provider for the buyer. The agreed upon services are defined in the TSA (Transition Services Agreement), and they become a part of the contract between the parties. In addition to the contractual arrangement between the parties, the legal situation regarding licenses and the (temporary) provision of services must be clarified with the software vendors.
IT|POST MERGER INTEGRATION
From the buyer’s perspective, the results of the deal depend largely on IT and business-related synergies. It is essential to realize the underlying potential and savings under the business case, as quickly and sustainably as possible. It is crucial to adapt the post-merger IT strategy to the respective type of M&A, and support the primary M&A goals pursued.
The following key points must be considered when merging IT environments in the context of a post-merger integration:
In addition to the synergies within IT, the largest potential for synergies usually lies within R&D, marketing & sales, customer service, and purchasing. IT can also be a significant factor to help achieve these goals and reduce costs.
Undoubtedly, a post-merger integration is the ideal stage to critically review the IT portfolio and application landscape. It provides an excellent opportunity, for example, to eliminate functionally redundant applications and thereby cut costs.
EXPERIENCES WITH DEALS
A LOOK BACK
Having worked on many successful transactions, I draw upon these experiences involving strategies, tried-and-tested concepts, and corresponding execution approaches. This helps me save valuable time for my clients, and minimize monetary and operational risks. It also enables me to motivate people and actively shape the transformation.
LIST OF M&A PROJECTS
Spin-off of automotive (seating) division at Johnson Controls (2016): 200+ manufacturing plants and engineering offices globally, ~75,000 employees, ~US$ 17 bn turnover | press release Milwaukee Business Journal (engl)
Project lead for legal entity separation (prerequisite for the carve-out) / project budget ~US$ 36 m / project team members >200
Key tasks: Planning, preparation and execution of ERP and production systems migration into new legal entities, optimization/industrialization of migration process (parallel migration of up to 20 critical production plants) | interview CIO-Magazin (german)
Carve-out Automotive Interiors Division at Johnson Controls, and establish new joint venture with partner Yanfeng Automotive Trim Systems, China (2015): 40+ manufacturing plants and engineering sites globally, ~16,000 employees, ~US$ 3.5 bn turnover | press release Worldwide Partnership (engl)
Project lead for IT carve-out | project budget ~US$ 16 m | project team members > 250
Key tasks: IT carve-out and support Chinese partner in establishing new joint venture
Carve-out for sale of Automotive Electronics Division to VISTEON Corporation (2014): 13+ manufacturing plants and engineering sites globally, ~4,800 employees, ~US$ 1.3 bn turnover | Media Center release Johnson Controls (engl)
IT project lead as the CIO of the divested automotive electronics division
Key tasks: IT due diligence (seller side), definition and coordination of the day-one strategy, roadmap, IT carve-out, communication, change management
Carve-out for sale of product line “HomeLink” to GENTEX Corporation (2013): ~50 employees, ~US$ 200 m turnover | press release aftermarketNews (engl)
IT project lead as the CIO (seller side)
Key tasks: IT due diligence (seller side), definition and negotiation of the day-one strategy, IT carve-out, separation and hand-over of relevant assets and historical data
Acquisition of 50% shares and assuming operational business responsibility of Pricol’s manufacturing and engineering site in Pune, India (2012): ~300 employees in manufacturing and engineering | press release Presseportal (engl)
IT project lead as the CIO (buyer side)
Key tasks: IT due diligence (buyer side), coordination and negotiation day-one strategy, ensuring operational continuity at day one, risk management, “light” integration and IT modernization post day one
Carve-out for sale of “Automotive Diagnostics” unit to SPX Corporation (2007): one manufacturing plant and split of administrative/engineering staff from shared headquarter (France), ~240 employees, ~ € 100 m turnover | press release ElectronicDesign (engl)
IT project lead as the CIO (seller side)
Key tasks: IT due diligence (seller side), definition day-one strategy, IT carve-out, transition services
Carve out for sale of product line „Engine Control“ to VALEO (2005): two manufacturing facilities and physical separation of shared headoffice in France (administration/engineering), ~1.700 employees, ~€ 350 m turnover | press release aftermarketNews (engl)
IT project lead as the CIO (seller side)
Key tasks: IT due diligence (seller side), definition of day-one strategy, IT carve-out, develop and implement security concept at “shared headoffice” (physical/logical), transition services, physical move of critical legacy systems from divested facility back to headoffice prior to day one, establish reverse transitional services to secure support for critical systems post day one
Acquisition of BORG Instruments AG (2003): two locations in Germany (manufacturing and engineering), ~400 employees, ~€ 55 m turnover | press release PRESSEPORTAL (engl)
Acquisition of Automotive Electronics unit SAGEM SA, France (2001): seven manufacturing plants and engineering centers globally, ~2,600 employees, ~€ 600 m turnover | press release The New York Times (engl)
Appointment as CIO for the yet to be created Automotive Electronics division (2003), post-merger integration of SAGEM SA and BORG Instruments, definition of IT strategy for the new business, identification and realization of synergies, harmonization and standardization.
Key tasks: function as the CIO for the newly appointed leadership team. Develop the newly-created Automotive Electronics business unit by merging and integrating BORG Instruments (acquired in 2003) and the Automotive Electronics division of SAGEM (acquired in 2001). Define the IT strategy, realize the synergy potential by integrating and transforming the new business unit. Align the IT strategy as a prerequisite for global expansion and planned growth, develop an IT master plan, replace legacy systems and terminate TSA services, develop the organization, build team(s).
Post merger integration, foundation of FOAM Division within Johnson Controls’ Automotive Seating Group (1996): eight manufacturing plants and engineering locations across Europe, ~2.000 employees, ~ US$ 600 m turnover | press release NY Times (engl)
IT project lead as the IT manager at one of the acquired manufacturing plants, Waghäusel (Germany)
Key tasks: post merger integration support, connecting infrastructure and implementing corporate standards, project lead for replacing legacy ERP by strategic corporate standard ERP platform
Team lead and IT responsibility for corporate M&A transaction portfolio (2014 – 2018):
Establish and lead the team „Corporate IT M&A“, assuming goup-wide responsibility for all IT tasks and processes for the portfolio of strategic M&A activities: IT due diligence / day-one planning and IT carve-out / license and contract evaluation / risk management / TSA negotiation and pricing / TSA and TSA exit management / PMI – post merger integration activities / IT M&A “playbook “
Preparation for sale of product line “HVAC OEM” in North America (2017): ~700 employees, ~US$ 80 m turnover
Carve-out for sale of unit “Scott Safety” to 3M (2017): ~1.500 employees, ~US$ 570 m turnover | press release Forbes (engl)
Finalize sale of unit “ADT” (security services) from TYCO to Fidelity Security Group, South Africa (2016): ~10.000 employees, ~US$ 160 m turnover | press release PR Newswire (engl)
Finalize integration after acqusition of 100% shares from existing joint venture (TYCO – Suwaidi Engineering Group), United Arab Emirates/Qatar/Oman (2016): ~1.200 employees at nine locations | press release Trade Arabia (engl)
Take over 100% shares of existing joint venture (TYCO – Suwaidi Engineering Group), United Arab Emirates/Qatar/Oman (2016): ~1.200 employees at nine locations | Press Release Trade Arabia (engl)
M&A transactions are undoubtedly unique situations. For most companies, such projects are not commonplace, and firms typically lack the required internal know-how and experience. M&A deals are complex, and most of the time require immediate attention, due to their impact on organizations and deadline pressure.
M&A deals usually come with ambitious targets to be achieved very quickly. Additionally, many or even all employees are a part of the transaction, and are thus affected directly. Hence, the situation is emotional and creates uncertainty among people.
At the time when the deal is negotiated between the parties, many things still tend to be unclear. Numerous questions arise, in particular about how the transaction will and could be executed. Employees also have many questions and concerns, and this serves as the ideal breeding ground for ambiguity, interpretations, rumors, and fears among staff and managers.
There is no blueprint for a transaction, for neither the technical steps/execution, nor for dealing with employees, customers, and partners. The strategy and roadmap must be determined individually, while the day-to-day business and operations are ongoing.
I am available to advise you on the strategic options, and help keep the pieces of the multitude of tasks together. I provide the structure, and set up the project team with you. Transparency, communication, a tactical approach, clear prioritization of cross-functional tasks, and streamlined project management with direct access to senior leadership are the key ingredients of my recipe for success.
“You cannot not communicate!”
I consider change management to be absolutely critical for a successful M&A project. Ideally, one must pay explicit attention to this aspect, starting very early and continuing throughout the M&A process. The basic prerequisite is to properly coordinate communications with the various interest groups, especially the affected employees.
“Special situations require special measures!”
M&A projects are, as mentioned before, unique situations. Besides specialized know-how, these projects also require a specialized management style. My recipe for success is a mixture of streamlined project management with full transparency, direct coordination with the leadership, quick decision-making, clear directives as needed, pragmatism, the courage to leave gaps while moving forward on the basis of assumptions, intensive communication, and a good level of sensitivity for the people involved.
As an external interim manager with senior-level experience, I also represent a certain degree of authority that is helpful. In addition, I possess strong communication skills underscored by a change management background.
The success factor IT – plays a crucial role in successful transactions
Numerous studies have shown that early and holistic consideration and integration of IT in M&A projects is a decisive success factor. The overall importance of IT for companies has increased continuously over the years. In addition to well-known corporate applications, progressive digitization is the reason for IT’s increasing penetration into almost all departments. The increasingly closer integration of systems, processes and data, have steadily boosted IT’s importance and criticality in M&A transactions. IT has thus become a success factor and an effective lever for gaining synergy effects through the transaction.
On the other hand, IT can also become a risk factor, or possibly a deal breaker in a worst-case scenario. The most common problems are unexpectedly high costs, system outages, security gaps, data loss, or delays in the project. Typical reasons for the risks are usually insufficient or late involvement of IT, or only a superficial consideration of key areas of IT during the due diligence process.