Between 70 and 80 percent of all M&A integration projects fall short of delivering anticipated value. This isn't because the acquisition target is somehow subpar, it's because the acquiring firm lacks a strong integration strategy. It's because stagnation and delays take away the momentum of a new project, and it's because the strategy and planning stage takes place after, and not before, the acquisition.
The first 100 days are most critical to creating long-term value. If the valuation has not been increased within that short time frame, the project loses momentum and risks longer-term stagnation. In recognition of the need for immediate action, more PE firms are building a 100-day plan into the closing stages of every M&A an PE transaction.
Those first three months after an acquisition are pivotal, and during that time, the PE firm has a narrow window of opportunity to set the pace of change, get KPIs in place, and establish a relationship with the acquired company's management team.
That window doesn't start on day one – it starts long before that during the due diligence phase, by creating an action plan that allows the firm to hit the ground running from the very beginning. Taking steps in that early part of the investment lifecycle will help to establish what has to be done to drive value from the deal. With most M&A deals, time is critical, and lost momentum means lost opportunities. With a 100-day plan in place before the deal is even made, a measurable impact can be seen much faster, often within the first 30 days of the plan.
The components of a 100-day plan
The first 100 days post-deal is critical to long-term success, and that means before day one, the 100-day plan must be firmly in place. The plan should be comprehensive and clear, and ready to implement before the ink is dry on the contract. There are two goals for the 100-day plan: To provide clear direction, and to build consistency and stability between the firm doing the acquisition, and the acquired firm's management.
The 100-day plan will outline details for all of the routine integration tasks needed for success, and in that sense, is a functional blueprint. But at the same time, the 100-day plan takes a longer-term strategic view that will inform the acquired company's future path.
The plan however, needs to remain flexible. Previously unidentified opportunities often arise after the fact, especially as more information that was not previously available during due diligence comes to light. The 100-day plan needs to allow the management team to take advantage of those unexpected opportunities, and address unexpected challenges, quickly.
The plan itself typically has four parts: Review of costs, strategy to build, a market analysis, and a roadmap. The review of costs is a deep dive into where the money is being spent, and how best to reallocate expenses. The strategy to build reflects a plan for re-shaping the organization to deliver a defined value, and the market analysis looks at the current environment in which the company operates. The roadmap will show specific metrics and targets that can be used to evaluate progress along the way.
In what is often a slow-moving process, 100-day results may seem out of reach, but if approached correctly very impressive results can be achieved, even within the first 30 days of the plan – in some cases, a 20 percent EBITDA savings can be seen within that first month's timeframe. At the beginning of the 100 days, keeping in mind that new information will become available post-acquisition, initial due diligence must be revisited and re-evaluated. Doing so will help identify new opportunities, avoid roadblocks, and accelerate time-to-value creation.