This white paper discusses critical considerations for successful M&A from pre- to post-deal. It finds that while due diligence focuses on identifying synergies, those projected synergies often fail to materialize post-deal due to lack of communication and integration planning. It recommends using a virtual data room both during due diligence and post-deal as it facilitates secure sharing of information to enhance integration between entities. When utilized effectively, a VDR can help address cultural clashes and ensure all parties have access to necessary information to make informed decisions and successfully capture projected value.

1. White Paper
PART 3 OF 3
Executing Effective M&A:
Critical Considerations from
Pre- to Post-Deal: Part III
M E R R I L L D A T A S I T E

2. Contents
PART 3 OF 3
Executive Summary 3
Due Diligence Post-Deal: Turning projections and “wishful thinking” into reality 4
A Failure to Communicate: How a lack of information can derail integration 4
Using Technology to Facilitate Post-Merger Integration: VDRs provide
a common forum for secure communication 5
Conclusion 6

3. Executing Effective M&A: Critical Considerations
Executive Summary
Executive Summary
M&A transactions that succeed in creating enhanced value always follow certain steps
before, during and after the deal itself.
In the previous instalment of Executing Effective M&A, we examined some of the best
practices for due diligence during an M&A transaction.
In this, the final instalment of our 3-part series, we examine industry best practices for
maximising value and capturing synergies after the deal is done. Thinking innovatively
and leveraging best-in-class technology to facilitate communication can enhance
prospects for a successful post-merger integration of two entities, and the creation of
lasting value post-transaction.
Much has been written over the years about once-promising M&A deals that were
initially greeted with breathless excitement by all parties involved, but which ultimately
and definitively disappointed. (AOL/Time Warner seems to stand out as the poster child
example of a “failure to thrive” in the post-merger world.)
At its simplest, the maths behind mergers or acquisitions is straightforward: The
participants believe they have found a way to make 1+1 equal 3, i.e. creating a final
entity that is greater than the sum of its parts. The stated goal is always to target, select
and then accomplish a deal that provides true, accretive value to the final entity,
whether that value comes in the form of opening up a new market or geography,
improving gross sales, streamlining costs, gaining access to technology or intellectual
property, or some other more intangible benefit.
To that end, during the due diligence process, deal teams on both sides of the table
aggressively look for untapped opportunities and synergies that can be profitably
exploited post-merger. Great care is taken during this phase of the deal to examine all
The reasons for the failure the nuts and bolts of the potential partner’s customer list, assets, positioning in the
of M&A deals are myriad, market, prospects, distribution chain and much more. Every contract is intently
but the underlying fact examined for portents that might reveal the future fortunes of an asset, or any hidden
seems to be that the value secrets. Inventory and other assets are counted and verified almost up to the moment
the deal teams thought the final M&A documents are signed. Management claims are checked, double-checked
they saw during the due and triple-checked, all in an effort to prove to the acquiring company that what it sees as
diligence process failed to potential value is real—and that the value can be profitably capitalised upon once the
materialise once all parties rice has been thrown and the new marriage begins.
had shaken hands and
However, even with all that painstaking care, many, if not most, mergers “fail” in one
walked out of the room.
way or another. Sales fall. New markets prove anaemic. Clashes occur between sales
professionals and strategy becomes fragmented, or worse, non-existent.
The reasons for the failure of M&A deals are myriad, but the underlying fact seems to be
that the value the deal teams thought they saw during the due diligence process failed to
materialise once all parties had shaken hands and walked out of the room. Now, instead
of 1+1=3, the sum of the whole proves decidedly less than its parts.
That’s why smart dealmakers realise that executing effective M&A extends far beyond
the conference room, and that for a deal to be truly successful, a thoughtful, considered
post-merger integration plan must be identified, communicated to all employees and
then methodically implemented over a period of months or even years, with periodic
updates designed to measure any value created and the synergies being realised.
3

4. Due Diligence Post-Deal: Turning projections and “wishful thinking” into reality
It’s perhaps ironic that so much energy, time and effort is expended in M&A ventures
during pre-deal and due diligence phases, while relatively scant attention is paid to
continuing that level of observation during the post-deal time frame. In a sense, it’s as if
management and the deal teams feel that their job has concluded once the ink has dried
on the contract.
Nothing, of course, could be farther from the truth.
Let’s take a hypothetical example:
Imagine a large, well-established U.S. manufacturing company with a profitable, if
somewhat niche market has decided its core product line could ultimately be rendered
obsolete based on new technology that has been developed by a smaller company
located in China.
Post-deal, management at While the smaller Chinese entity is underfunded, it has established a solid core business
the larger company realised in an offshoot of the larger company’s industry, in addition to developing new
that a significant culture technology of its own. More importantly, the smaller business is run by a group of
clash was erupting between brilliant engineers/entrepreneurs who have developed a prototype of a less expensive,
their U.S. team and their faster and more efficient version of the larger company’s main product.
peers within the new
The larger company develops a long-term strategy that includes acquiring this new
purchase.
technology, along with the talent from the smaller, Chinese firm. It plans to fold the
new technology into its own product line, have its engineers collaborate with their new
colleagues in China to develop add-on innovations, and then eventually supplant its
current offerings with the new products.
Everything, as they say, looked good on paper…
Post-deal, management at the larger company realised that a significant culture clash was
erupting between their U.S. team and their peers within the new purchase. IT systems
were incompatible; work processes were widely divergent and both sets of engineers were
unhappy at attempting to communicate through significantly different time zones.
Worse yet, because human resource efforts were not adequately or quickly coordinated,
key talent from the smaller company eventually resigned, feeling poorly treated by their
distant corporate parent. Costs spiked as fruitless efforts to refine the new technology ran
into design and production challenges. Shareholders and investors became irate as the
larger manufacturing company struggled for months to find a way to capture the value
everyone had seen in the beginning.
In the end, this merger, like many others, failed to provide any benefit to either party
and, in fact, produced just the opposite.
A Failure to Communicate: How a lack of information can derail integration
It’s perhaps not too far a stretch to point out that most marriage counsellors feel poor
communication contributes to a majority of unhappy unions.
In a post-merger setting, the same holds true. After an acquisition or merger, it is
management’s job to ensure everyone within the newly formed entity embraces a
common goal and that information is shared quickly, thoroughly and deeply within the
new organisation.
While on its surface that mandate seems straightforward, multiple problems can crop up
which make it difficult to implement.
4

5. Executing Effective M&A: Critical Considerations
For instance, consider the HR issue mentioned in the earlier example. Because the HR
team at headquarters had inadequate information post-merger, proper agreements
incentivising certain key members of the talent pool in the Chinese firm to remain with
the company for a set period weren’t implemented swiftly. That meant both talent and
skill was lost.
Add to that the fact that the culture between the two entities was vastly different. The
management at the Chinese acquisition was used to behaving in a nimble, entrepreneurial
and even authoritarian fashion, making decisions quickly and decisively. They strained
under what they saw as the slow, ponderous, bureaucratic behaviour of their new parent,
which made them both unhappy and suspicious. Engineers on both sides of the situation
viewed their counterparts with mistrust, and were further hindered by the practical
difficulties of sharing and reviewing information in any organised fashion. Sales efforts at
both companies stalled, while management struggled to create a new system to focus the
corporate strategy.
All the while, the strategic synergies, information and knowledge that the deal teams
shared at the negotiating table were lost, buried under the pressing day-to-day problems
that operating the business produced.
Using Technology to Facilitate Post-Merger Integration: VDRs provide a
common forum for secure communication
During both pre-deal and the due diligence phases, savvy dealmakers realise they
absolutely must have complete, accurate, timely and accessible information in order to
pave the way for a smooth M&A experience. Deal teams have to be able to find the
information they need, when they need it, and to know they can easily pose additional
questions about that information to the correct party when they need to.
That’s why a virtual data room (VDR) has become an indispensable tool for use during
M&A proceedings.
While VDRs have become VDRs have made the entire deal-making process a smoother experience, putting mission-
commonplace as a critical critical information in the hands of reviewers, and offering site-wide search features
tool in the due diligence down to the page level which provide an unprecedented level of access to information.
process, they also serve as
While VDRs have become commonplace as a critical tool in the due diligence process,
an extremely cost-effective,
they also serve as an extremely cost-effective, efficient way to make post-integration
efficient way to make post-
efforts flow seamlessly.
integration efforts flow
seamlessly. The industry-leading VDRs are extremely secure document repositories located “in the
cloud” that can hold tens of thousands of pieces of confidential data. Accessible via the
Internet, a VDR removes the logistical problems that both distance and varying time
zones can create because any party who has been granted access can log into the VDR
from anywhere in the world, at any time, to find the information they need to make
decisions.
Users can immediately start to get their arms around the issues that affect their
departments and to better understand what new assets and expertise they’re gaining.
And because a VDR can be made accessible to anyone the VDR owner grants permission
to, it can be used as a tool to help drive information into a company. This means a wider
group of experts within an organisation can review information and thus management
achieves both buy-in and input when formulating a workable integration approach.
A high quality, industry-leading VDR enhances post-deal integration in a variety of ways:
5

6. First, if a VDR has been used to secure the merger or acquisition, then post-due diligence
information, documents, contracts and personnel information is already catalogued and
contained within the data room, complete with a user-friendly index that segregates
information into various categories, such as human resources or information technology.
The VDR owner can easily keep the data room open and operational post-merger or
acquisition, and then grant access to appropriate information, or sections of the site, to
key personnel responsible for integration of those areas.
if a VDR has been used For instance, it’s possible to allow the head of IT and his or her team to examine all the
to secure the merger or documentation about the acquisitions’ current operating systems in one easily searchable
acquisition, then post-due archive. This allows a “10,000 ft. view” of the acquisition’s current capabilities; lets the
diligence information, acquirer’s in-house team formulate actionable plans and discuss what they will need to
documents, contracts and do to bring the new system into parity with the parent company, and provides an easy-
personnel information is to-collaborate-in forum for sharing information with the other entity’s key personnel.
already catalogued and
And because the best VDRs offer unparalleled security to users, highly confidential and
contained within the data
technical information can be safely and easily shared between counterparts. In this case,
room, complete with a
the VDR removes barriers to communication and multiple users can see, and are making
user-friendly index that
decisions based on, the same information—which forestalls the problem of team
segregates information into
members “not knowing what they don’t know.”
various categories
Another benefit of a VDR is the comprehensive search functionality, allowing every piece
of information hosted on the site to be researched, especially for critical decisions based
on data that crosses functional boundaries within an organisation.
User activity can also be tracked inside the best VDRs, including pages accessed and
information reviewed. Team members can be certain that both they and their
counterparts have all the material they need to make informed decisions. An audit trail
feature within the VDR can be used to ensure that, in fact, all relevant team members
have indeed reviewed the information that affects their particular area.
Finally, should any questions arise regarding the documents housed within the VDR or
the data underlying them, a built-in Q&A function allows users to post questions in a
central location to be answered by the responsible party. This facilitates communication
because the workflow in the Q&A form allows an administrator to send e-mails to
department heads who will be responsible for those areas. Every aspect of the exchanges
is also tracked.
Using these tools, communication between both entities is improved because confusion
over who knows what is eliminated. It also automates the very labour-intensive, tedious
task of having to share, track and monitor data manually at each step.
Conclusion:
While a VDR has already become an integral part of both pre-deal preparation and due
diligence during a deal, it also offers a critical tool to users interested in improving the
odds of a successful post-merger integration. A VDR can be used to give employees a
common forum in which to confidentially share information at any time. Finally, a
VDR’s platform agnostic, centralised location “in the cloud” allows it to serve both as a
communication and a collaboration tool, both essential to post-deal integration.
6

7. About Merrill DataSite
Merrill DataSite is a secure virtual data room (VDR) solution that optimises the due diligence
process by providing a highly efficient and secure method for sharing key business information
between multiple parties. Merrill DataSite provides unlimited access for users worldwide, as well
as real-time activity reports, site-wide search at the document level, enhanced communications
through the Q&A feature and superior project management service — all of which help
reduce transaction time and expense.
Merrill DataSite’s multilingual support staff are available from anywhere in the world, 24/7,
and can have your VDR up and running with thousands of pages loaded within 24 hours
or less.
With its deep roots in transaction and compliance services, Merrill Corporation has a
cultural, organisation-wide discipline in the management and processing of confidential
content. Merrill DataSite is the first VDR provider to understand customer and industry
needs by earning an ISO/IEC 27001:2005 certificate of registration — the highest standard
for information security — and is currently the world’s only VDR certified for operations in
the United States, Europe and Asia. Merrill DataSite’s ISO certification is available for review
at www.datasite.com/security.htm.
As the leading provider of VDR solutions, Merrill DataSite has empowered nearly two million
unique visitors to perform electronic due diligence on thousands of transactions totalling
trillions of dollars in asset value. Merrill DataSite VDR solution has become an essential tool
in an efficient and legally defensible process for completing multiple types of financial
transactions. Learn more by visiting www.datasite.com today.
About Merrill Corporation
Founded in 1968 and headquartered in St. Paul, Minn., Merrill Corporation
(www.merrillcorp.com) is a leading provider of outsourced solutions for complex business
communication and information management. Merrill’s services include document and
data management, litigation support, language translation services, fulfilment, imaging
and printing. Merrill serves the corporate, legal, financial services, insurance and real
estate markets. With more than 5,000 people in over 40 domestic and 22 international
European Headquarters locations, Merrill empowers the communications of the world’s leading organisations.
101 Finsbury Pavement
London EC2A 1ER, UK
+44 (0)207 562 3200
Merrill Communications
World-Wide House, 5th Floor
19 Des Voeux Road Central
Hong Kong
+852 2536 6640
Corporate Headquarters
One Merrill Circle
St. Paul, MN 55108
800.688.4400
Offices in major cities
throughout the world
info@datasite.com
www.datasite.com Windows, Windows Explorer and Microsoft Outlook are registered trademarks of Microsoft Corporation in the United States and other countries.
All rights reserved. MD0219_1
M E R R I L L D A T A S I T E