Post-Merger integration
Ensuring M&A delivers full value
For more information,
please contact:
Gabi Savini
Director, Human Capital
Tel: 011 517 4274
Email: gsavini@deloitte.co.za
Thiru Pillay
Director, Consulting
Tel: 011 806 5098
Email: thpillay@deloitte.co.za
Utilising Deloitte,
merging organisations can
maximise shareholder
value and realise
anticipated synergies.
Integration planning is rarely contemplated at the outset of an
M&A transaction, yet poor planning can lead to harsh results.
Sharing the vision of the new business
Deloitte’s global experience in merger integration has highlighted four best practices
its strategy teams use to guide businesses through the crucial integration phase:
• Articulate the vision and business benefit of the merger or acquisition –
clearly define the vision for the integrated organisation; identify each expected
source of benefit; identify and communicate expected synergies; select strong
integration sponsors.
• Develop an effective integration plan – identify, prioritise and measure
synergies long before the deal goes through, preferably at the due diligence stage.
• Assign a dedicated integration team – avoid losing focus on day-to-day
operations by allocating specific resources to manage the integration with a project
manager, strong executive support and results based incentives, where appropriate.
• Overemphasise people – don’t overlook the effect M&A can have on employees;
quickly implement a new organisational structure; prepare the HR team to
recognise and resolve cultural issues early; communicate the impact of the
transaction in depth and provide quick answers to questions regarding people’s
ongoing roles and responsibilities.
Utilising the extensive experience and expertise of the Deloitte, merging
organisations can position themselves to maximise shareholder value and realise the
anticipated synergies.
In the pre-deal phase, Deloitte provides strategic due diligence to ensure a better
understanding of the value of the assets in a transaction. Post-deal, the focus is on
addressing the critical integration issues, namely:
• integration and alignment of the transaction objectives with strategy
• managing communication and decision making
• tracking and capturing merger synergies
• dealing with legal and regulatory issues
• consolidating pay and incentive policy programmes
• retaining talent and eliminating redundant positions
• transitioning all business functions to a common platform
• managing divestitures
55
 The Deloitte’s strategy team has developed a deep understanding of what it takes to
integrate successful businesses, to maximise value creation, and to drive innovation
to deliver super growth and premium returns. The approach is characterised by
objectivity, extensive industry knowledge, superior financial expertise, innovation,
confidentiality and practicality. Benchmarking against global best practice is vitally
important in this context and is assured through Deloitte’s international network.

Deloitte offers comprehensive Programme Management to support a fully co-

ordinated and efficient integration, establishing a Programme Management Office to
provide the structure, control and execution across all aspects of the integration.

Specific “clean teams” – which offer an objective third party to both of the merging
entities - are established in situations where information cannot be shared openly
between the parties.

Deloitte’s integration expertise straddles all of the major strategic priorities:

• Synergy discovery and tracking – the Deloitte Value Capture Map, an in-
house developed tool, provides a practical approach to capture value with a
comprehensive listing of potential synergies and initiatives linked to income
statement and balance sheet components as well as tracking tools to monitor
progress and synergy realisation.
• Protecting human capital – extensive resources are applied to protect and drive
‘Clean teams’ have become HR priorities including HR due diligence, executive compensation integration,
a proven M&A integration retention of key groups and individuals, leadership transition and executive
contract consulting.
competency that can
• Successful “Day One” launch – the Deloitte philosophy for Day One is to
potentially lead to cost maximise business continuity and minimise business risk by ensuring there are no
savings as the team would lost opportunities for Day One, no threats to business operations and assurance

not be influenced by the that statutory requirements will be complied with. The objective is a business
operating in an integrated manner from Day One, realising and tracking synergies.
myriad of operational • Effective communication – enabling consistency in communications to all
conflicts often associated stakeholders with effective issues management processes and sequenced two-way

with M&A. communications, cascaded through the management chain.

• Addressing the people dimension – cost savings through workforce reduction
and through pension and benefits integration, HR transformation where required,
cultural integration and “employer of choice” consulting.
• Systems consolidation – Deloitte offers a full array of services to assist in all
aspects of IT integration. This includes consolidating data centres; facilities and
infrastructure; transitioning all business functions to common platforms; reducing
costs from duplicated processes and positions; and optimising the new entity’s
outsourcing relationships and services.

56
Change management
Leadership alignment, culture and communication

In most M&A transactions, people are a crucial issue, and

For more information,
please contact:
Trevor Page
Principal, Human Capital Advisory
Tel: 011 517 4263
Email: trepage@deloitte.co.za
failure to deal effectively with HR priorities contributes to the fact
that post transaction, many leaders leave after a relatively short
time, and there is a high rate of deal failure internationally.
The Deloitte change management team focuses on leadership alignment, culture, and
change communication to shareholders and all internal and external stakeholders.

People and change

Keys to success People Risk

and Impact
• Start with the business Management
strategy
• Get the key stakeholders Leadership
Learning and
involved Alignment and
Capability
Stakeholder
• Design organisations with Transfer
Engagement
pencil, not pen
• Develop an implementation
People
plan Workforce Communi-
Dimension of
Transition cations
Transformation

Talent
Requirements
Culture
and HR
Programmes

Activities
Organisation
Change Leadership
Design and
Organisation / HR
Governance
Learning

Corporate culture - identifying the corporate DNA to

avoid an M&A pitfall
Companies often focus so intensely on structuring a deal that they don’t define the
human objectives clearly. Deloitte has found that while getting the people issues right
is vital in M&A, determining culture is paramount. The essentials are to understand the
cultures of the transaction parties, to determine what it should be, articulate the new
culture and inspire the necessary change.

It is common cause that mergers and acquisitions are often disrupted and sometimes
fail as a result of corporate culture issues. Deloitte has brought a unique new
dimension in business science to this area through its joint venture with Blueprints,
an innovative technology which applies scientific methodology to determining,
entrenching and monitoring corporate culture.

57
 The Blueprints model is based on the proposition that every organisation has a
scientifically definable “DNA” – a genetic code that makes each organisation
Keys objectives
unique. This corporate DNA can be reduced to a mathematical formula to show the
• Retain key staff aspirational state of the company into the future. The formula, in turn, is translated
• Minimise disruption into an art gallery to visibly communicate the corporate culture, and the formula is
• Capture knowledge then monitored over time to rate the degree of alignment to the DNA.

• Be kind but confident

Other culture assessment tools and methods, including our behaviourial led strategy
approach, are also available for mergers, acquisitions and divestitures.

Workforce transitioning
Many transformations can have a major impact on organisational structure. In fact,
we believe that a well-designed organisational model is an essential prerequisite for
transformation, providing a platform for unlocking the full capabilities of people,
processes, systems and channels. Also, from an employee’s perspective, a restructured
organisational model is often one of the most tangible outcomes of the entire
transformation effort.

Accordingly, the area of organisational design and governance can encompass

everything from determining who does what, how decisions are made, and how
work flows to defining the competencies and standards against which employees are
evaluated. It also can define service levels and vendor relationships.

Workforce transitions
should never happen
by chance.
We believe that the most effective way to approach the difficult task of workforce
transitioning is through a well structured, rational approach that leaves little to
chance. Workforce transitions require short-, medium-, and long-term preparation
and planning. An effective workforce transition strategy articulates why changes are
necessary, while creating optimism about the future.
An effective plan should also include specific provisions for working with labour unions
and work councils.

58
Human Capital
Getting the people issues right in M&A
For more information,
please contact:
Gabi Savini
Director, Human Capital
Tel: (011) 517 4274
Email: gsavini@deloitte.co.za
People clearly dominate the current strategic agenda of
companies across the globe. This is the key finding in a
recent international study by Deloitte and the Economist
Intelligence Unit.
The study revealed that while business leaders view people issues as strategic priorities,
there is also an increase in tension between the needs of companies and the ability
of their Human Resource divisions to transform themselves from administrators to
strategists. The study concludes that HR will need to more fully address all aspects of
value creation in the future, including revenue growth by way of M&A.
Human capital has long been recognised as a strategic priority by Deloitte in business
generally and specifically in M&A. Deloitte’s HR specialists are skilled in working
with clients to align human resource and business strategies by focusing on the
organisation and people related factors that affect success.
Deloitte helps businesses achieve exceptional management of change, learning, total
rewards, performance and HR service delivery solutions in virtually all aspects of people
management and organisational effectiveness.
The Deloitte human capital team has diverse strengths to contribute throughout the
HR transition in an M&A deal:
• During the pre-merger phase, with employee readiness for change, the
organisational climate, cultural compatibility between the deal parties, leadership
style and competency and employee benefits.
• During the post-merger phase, with merger stress, communication strategy, diversity
management, cultural concerns, leadership development and HR audit needs.
Organisational design
In an M&A integration, critical organisational priorities include the following:
• harmonisation and alignment of job structures, roles and performance expectations
• change and transition management for leaders and managers
• interim incentive programmes
• retention and upgrading of skills
• re-design of governance processes and HR performance metrics
• harmonisation of cultures to ensure compatibility.
The Deloitte team of organisational design, change management and communication
specialists, brings essential expertise to M&A transactions, focused on “what has
to happen”, “who goes who stays”, leadership integration issues and the flow of
information. Our objective is to get the benefit to the client to emerge as soon as
possible and to drive behaviour to avoid HR risks.
59
Information Technology
A powerful enabler in any transaction

Deloitte’s technology division includes a highly specialised

For more information,
please contact:
Michael John Robinson
Senior Manager, Consulting
Tel: 021 670 1704
Email: michrobinson@deloitte.co.za
team focused on IT strategy and implementation in the
M&A process.
Technology is a vital part of business today, because IT is integral to effective
operations, management information and financial reporting and is so frequently a
major component of operating and capital expenditure, it is a strategic resource for
management in extracting value from the M&A process.

Technology plays a key role in providing the critical information to support all
the other aspects of the M&A transaction, such as financial integration, people
alignment, and tracking and reporting the benefits of the M&A. Benefits tracking
and realisation is one of the main priorities for the CEO and CIO of the new
organisation, to ensure that all stakeholders in the new organisation are deriving the
benefits and value they expect.
Integration and
strategic alignment of Hence technology plays a dual role in any M&A transaction, both as a strategic

varying IT systems are resource to extract value from in its own right, and secondly as a key support for all
the other functions and processes in the M&A transaction.
core to mergers and
disposals of complex IT strategy is not viewed as a separate component of implementation in a merger or
acquisition, but as part of a holistic theme, in evaluating deals and contributing to
organisations. efficiencies in the first few years post a transaction.

Deloitte has found that clients want objective advice in evaluating the IT implications
of a transaction, i.e. the potential synergies, how IT can support the benefits across
all areas of the business and other important IT elements such as service agreements,
benchmarking, systems compatibility, IT infrastructure and specific culture issues.

The Deloitte team is skilled in identifying centres of excellence, seeking opportunities

for economies of scale from M&A, and exploring the alternatives for achieving
strategic alignment, e.g. in-sourcing vs. out-sourcing.

The core issue in IT strategy development is to define the role of IT and to determine
its strategic value in the organisation. There are two strategic alternatives:

• IT is an integral part of future strategy and of the organisation’s competitive

advantage, or
• the IT strategy is designed purely to minimise costs and optimise operational
effectiveness.

60
The challenge is how to bridge these alternatives and how to:

• define the future IT model

• mediate between the merging parties
• develop a blueprint for IT in the future
• determine whether IT is core or non-core
• develop a Roadmap to align and integrate the IT organisation of the merging
parties into a single effective IT organisation.

In a transaction, an important role of IT strategy development is to support the

measurement and management of the business benefits by creating a robust
measurement platform - the strategy team works with the parties in isolation and
subsequently merges information into one source of reality. For this purpose Deloitte
sets up a “clean team” unconnected to either party to collect the metrics.

The IT team is not regarded as a separate service and is driven by the wider Deloitte
strategic group. It thus plays an important role in ensuring that key overriding M&A
objectives are met, i.e.:

• no issues on the first day of business of the new merged organisation

• accurate and timely management reporting from month one
• maximum synergies at the end of the first year
• robust budgeting and reporting.

61
Tax and legal
Making sure it happens

During the implementation phase of the transaction, the Deloitte

For more information, Tax and Legal team will refine its structuring advice:
please contact:
Helgo Rapsch • Trace base costs where corporate tax relief provisions are used
Director, M&A Tax Leader
• Assist with making applications, reportable arrangements and tax affidavits
Tel: 011 806 5324
Email: hrapsch@deloitte.co.za
• Prepare detailed implementation checklists and provide hands-on assistance with
the actual implementation of the transactions
Anne Casey • Review all agreements, resolutions, circulars, prospectuses and all other relevant
Director, Taxation
documentation from a tax perspective
Tel: 011 806 5331
Email: ancasey@deloitte.co.za • Interact with our foreign offices to ensure that all cross-border advice is fully and
properly considered:
Nazrien Kader
Director, Taxation - thin capitalisation rules and transfer pricing

Tel: 031 560 7065
Email: nkader@deloitte.co.za
Le Roux Roelofse
Director, Taxation
Tel: 021 670 1639
Email: lroelofse@deloitte.co.za
Murray Dicks
Director, Legal
Tel: 011 209 6311
Email: mdicks@deloitte.co.za
Dean Chivers
Director, Legal
Tel: 011 806 5159
Email: dechivers@deloitte.co.za
- minimisation of restructuring tax costs, domestic and foreign
- advice on optimum holding structure for target from a cross border tax perspective
- advise and assist on exchange control matters.
Much work is required post-merger to ensure that a transaction is a success. Deloitte
Legal is able to assist with the following:
• Implementation of the transaction agreements (setup of structures, drafting of
resolutions, confirmation of warranties, etc.)
• Employment related agreements and policies
• Share incentive schemes
• Executive disputes
• General legal advice.

62
Outsourcing
Allowing clients to focus on core
activities during a transaction
For more information,
please contact:
Werner Nieuwoudt
Director, Consulting
Tel: 012 482 0129
Email: wnieuwoudt@deloitte.co.za
A 2007 Deloitte survey
showed that most
companies are only
capturing a small
fraction of the value that
application management
can create.
Globally, corporates have embraced oursourcing services as an
important part of their overall business strategy.
Extended Business Services (EBS) (incorporating the traditional concepts of
outsourcing) have become a strategic business tool, enabling developing businesses to
progressively focus on their core activities and to selectively appoint outside providers
who can manage non-core or exceptional items more cost effectively, and in some
instances, entire business functions are moved to outside providers.
By delegating financial, operational functions and / or technology to Business
Process Solutions (BPS) service providers, corporates can create streamlined
processes, reduce cost structures and improve performance. In transactions using
BPS service providers can facilitate integration, enhance the synergies and maximise
competitive advantages.
Deloitte has extensive global capabilities in applying business process management
solutions for its clients, fully integrated within its unique worldwide multi-disciplinary
approach. The Deloitte solution, underpinned by global best practice methodologies, is
built on three core managed service areas:
• Finance and accounting – Deloitte takes over some or all of the clients back
office finance and accounting and related procurement business processes and
manages them on an ongoing basis. A full suite of services and solutions is
available, including financial management, accounting and reporting, statutory /
regulatory accounting and reporting, tax compliance, interim staff secondments
and transaction processing, covering payables, disbursement expenses, receivables,
receipts revenues, general ledger, etc.
The approach in the finance and accounting area is a highly collaborative blend of
client and Deloitte strengths, with each engagement customised according to the
client’s processes, internal controls and system requirements. Through its extensive
experience and resources in this area, Deloitte is able to help client’s effect
significant change at reduced cost and risk, whether it is on site, off site, offshore,
or as required per specific need.
In South Africa, the BPS services team, offers a uniquely comprehensive solution
- from consulting to implementation - to both domestic and global clients.
There is a specific focus on BEE, where the team can add value to developing
empowerment initiatives.
63
 • Human resource management – appointing a BPS services provider for HR
functions has three critical pre-requisites – confidentiality, processing accuracy
and meeting payment deadlines. Deloitte is widely recognised as a premier
provider in this area.

Through the creation of dedication service teams, Deloitte provides a personal

yet professional service that includes general as well as executive payroll
processing and administration, benefit administration, employee contracts /
recruiting, performance management, labour relations, staffing compliance
and training, including the adaptation and delivery of learning content through
electronic platforms.

Deloitte has a global delivery capability coupled with local tax and compliance
regulatory knowledge to ensure the appropriate scope of service is maintained.

• Application management – today application management has expanded from

maintenance and helpdesk support to encompass everything from change request
management and solution integration to quality management, performance
monitoring and user training.

In fact, application management is emerging as the primary engine for

continuously delivering business value from information technology.

A 2007 Deloitte survey showed that most companies are only capturing a small
fraction of the value that application management can create. Deloitte offers a full
range of services and solutions to bolster existing capabilities and to improve the
returns on application management investments. The service spectrum includes:

- strategy definition and implementation

- application maintenance
- continuous improvements and enhancements
- performance tuning (archiving)
- testing
- training
- application monitoring
- document management
- disaster recovery planning
- business case development and measurement

Whether a client needs a large, dedicated team to provide full service support
across multiple locations, or occasional on-demand assistance from a particular type
of specialist, Deloitte can design an application management solution to fit any
organisation’s needs.

64