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Mergers & Acquisition Puzzle + Innovation Management

  1. © IBT, Los Angeles, California, USA M&A and Integration puzzle and Products, Programs & Innovation Portfolio Management Sample Document – June 2017 Sandeep (Sandy) Muju
  2. Enterprise Value Creation and Sustainability Driving Business Growth Innovation & Execution M&A, Partnerships, Business Strategy & Portfolio Management Global Sourcing & DFx Full Lifecycle NPI & Technology Commercialization Market Feasibility Testing & NPI M&A and Partnerships © IBT, Los Angeles, California, USA
  3. 1.0 M&A and Integration Puzzle: creating value in-organically Contents 2.0 Corporate Portfolio Management: sustaining value creation organically
  4. 1.0 M&A and Integration Pre-deal analysis Due diligence and contract negotiation Pre-close planning and integration launch Portfolio Hold Period ( 3 to 5 years typical) LOI/Term Sheet Sign / Announce Close / Day 1 Control and stabilize Capture and create valueFinalize financial plan of record • Revise key model assumptions based on diligence findings • Estimate synergies • Finalize deal terms Develop preliminary Target Operating Model • High-level decisions regarding products, customers, distribution, IT and operations • Estimate key integration costs • Identify key personnel to retain Develop detailed Target Operating Model • Perform confirmatory synergy analysis • Detailed future organizational design, plan, execution strategy and performance measurements for combined business Characteristics: • Developed and communicated early • Clear and unambiguous • Cross-functional Build integration foundation • Integration strategy and guiding principles • High-level roadmap • IMO capabilities, structure and tool set • Communications plan Refine and launch IMO • Prioritize Day-1 mission critical requirements • Day-100 planning • Identify “quick wins” and “keep list” • Ongoing communication Post Deal Integration Phase •Strategic rationale (the 9 C’s) •Key value drivers (12 Metrics) •Preliminary financial model •Transaction structure Completecriticaloperating tasks Day1communications Execute the Day 100 Plan • Operations / back-office / facility integration • Implement required post- close control actions Perform Day 100+ planning • Begin execution of detailed integration plans Roll out the operational plan • Implement new operating model • Align skills with key integration activities Post Deal Business Value creation • Transform to new operating model • Complete workforce transition • Manage country and regional differences • Implement, track and monitor integration plan and value capture initiatives • Operational efficiency and increasing operating margins. • Working capital, Inventory and Cash flow optimization • Sustainable growth strategies (a) for existing products/services, (b) for existing markets/ customers Ensure business continuity Execute “quick wins”
  5. Post Deal: Portfolio Company Value Enhancement through “Operational” improvements Working Capital, Inventory, Cash Flow Improvement Operational Efficiencies, Operating Margin Improvement Growth – New Markets/Customers, New Products/Services Sustainable Business Value Enhancement Pre Buyout Phase Sell Phase Portfolio Hold Phase (3-5 yr period) – Enhancing EV/EBITDA ……. ….. ……. ….. ……. …..
  6. Working Capital, Inventory, Cash Flow Improvement Lean Enterprise Operational streamlining, Cash-flow improvements, Inventory - JIT, VMI S&OP/SIOP/IBP Cash Flow Operational Efficiencies, Operating Margin Improvement Value Stream Mapping Supply chain and sourcing Cost reduction strategies Spend Analysis Profitability Analysis SG&A Analysis Profitability (Cost) Growth – New Markets/Customers, New Products/Services New products NPI/IPDS, PLM, PMO, BPM, Technology planning, New product portfolio balancing New markets Marketing processes, Sales incentives structure Adjacent markets Globalization Revenue (Growth) Organizational Development & IT Organizational Assessment, HCM Best Practices, Organizational Design, Employee Engagement IT infrastructure assessment & improvements Human Capital and IT Infrastructure Enterprise Value Post Deal: Portfolio Company Value Enhancement through “Operational” improvements
  7. Gain visibility on the projects portfolio Align the innovation investments with stakeholder objectives Make the right choices when prioritizing investments and projects 2.0 Corporate Innovation Portfolio Management Improve ability to execute on innovation value generation Organic Value Creation & Management Approach
  8.  Project information is hard to collect ◦ No standardized way to document projects ◦ Incomplete documentation ◦ Non-centralized information ◦ Projects at different stages of their life cycle  Inadequate portfolio view ◦ Project investments are unorganized No framework, no tool, no time, no resource ◦ Too many projects or information to analyze ◦ Programs reflect capital authorization instead of logical sequencing  Ineffective communication about the portfolio ◦ Business is not interested ◦ Unsure about what to communicate ◦ No clear executive view of the portfolio and its business impacts ◦ Unclear strategy execution Gain Portfolio-wide Visibility into Projects The issues The propositions A simple format to collect project information and to guide project managers about what to document A logical grouping of initiatives in a project-program portfolio hierarchy A single view of current and proposed portfolios (which projects, when, at what cost, for what purpose) highlighting financial & non- financial benefits, risks, and payback periods Project B Project C Project D Project A Program 1 Program 2 Portfolio Project E
  9.  Project value is hard to define ◦ Unable to scope projects to deliver optimum value ◦ Can’t measure where the portfolio will have the most impact on value ◦ No link between portfolio and share price  Project performance targets are not specified ◦ Measurement is different for each project ◦ Hard to capitalize on project process maturity ◦ Too many variables (or inconsistent variables) complicate comparison of projects  Strategic Alignment is unclear ◦ Unable to obtain clear sponsorship from business (CSD versus BSD) ◦ No clear linkage between corporate strategic objectives and investment strategy ◦ Can’t identify where the portfolio fails to support business ◦ Corporate, Business and Innovation group roles and responsibilities are unclear Align Investments with Stakeholder Objectives The issues Our Objective: improve growth through innovation Our Portfolio: 65% of initiatives support cost reduction? (Better start asking questions…) A standard framework for identifying project impacts on balance sheet, income statement and share price MAINTENANCE A clear categorization of investment types, allowing alignment to business objectives (CSD, BSD) An adapted business case that reflects project diversity and enables comparison and prioritization of projects The propositions
  10.  Projects can’t be compared ◦ Investments underway are not the ones with the most value ◦ Projects types and benefits are too different  Project prioritization process is unclear ◦ Business Units don’t participate in project selection ◦ No common criteria to prioritize projects  Investments can’t be justified ◦ Politics play a bigger role than business value ◦ Incomplete or non-existent financial data ◦ Undocumented benefits ◦ Difficult to justify some types of projects Prioritizing Investments The issues A value / risk matrix clearly identifying the projects with the most enterprise value and the least risk or complexity A view of the planned benefits and their impact on the company for the next several years, which allows you to control the portfolio’s execution and impact on the company. The propositions A1 A2 A3 A4 A5 A6 A7 A8 A9 A10 A11A12 A13 I1 I2 I3 I4 I5 I6 I7 I8 O1 O2 O3 O4 O5 O6 O7 O8 T1 T2 T3T4 T5T6 T7 T8 Low Risk High Value Low Value High Risk Overall Benefits
  11.  Unable to adapt to changes ◦ Difficult to identify and discontinue troubled projects ◦ Portfolio does not adapt to changing objectives ◦ Business case evolves, but projects not re-assessed  Lack of comprehensive, continuous view of the portfolio ◦ Projects have conflicting objectives, timelines, and priorities ◦ Redundant or overlapping projects with double- counted benefits ◦ New opportunities at mid-year aren’t considered  Inadequate integration with the other business management processes and approaches ◦ Program Management not blended with 6-Sigma ◦ Portfolio management not linked with strategic planning and budgeting processes ◦ Continuous reviews not tied to PMO gates/checkpoints Develop Strategy Execution Discipline The issues The propositions A rolling execution process to monitor and maintain portfolio alignment with objectives. An ability to compare and prioritize projects of different length, styles, status at any stage of their execution. A consistent framework to integrate all rewards systems, standards, governance approaches into Risk/Reward balanced Value generation. Monitor Portfolio Status and Performance Identify New Opportunities Reprioritize / Optimize Portfolio Policies and Rewards Roles and Respons. Methods & Approaches Tools and Enablers Organizational Structure Deployment and Monitoring
  12. Determine Most Relevant Costs and Benefits for Each Project Type with Business Cases Innovation Portfolio Management Landscape Portfolio Landscape helps speed-up the journey through every step of Portfolio Management. Set up Portfolio Develop Prioritization Model CollectCollect ProjectProject InformationInformation Collect Project Information AnalyzeAnalyze PortfolioPortfolio Analyze Portfolio PrioritizePrioritizePrioritize Project & Programs Communicate & Report Deploy & Execute Portfolio Monitor Programs & Projects Monitor Changes Determine your prioritization criteria, input constraints, success KPIs, performance thresholds. Collect project data with standardized template Consolidate information and produce reports to highlight key Portfolio and Project data in support of the prioritization process A1 A2 A3 A4 A5 A6 A7 A8 A9 A10 A11A12 A13 I1 I2 I3 I4 I5 I6 I7 I8 O1 O2 O3 O4 O5 O6 O7 O8 T1 T2 T3T4 T5T6 T7 T8 Low Risk High Value Low Value High Risk Monitor the portfolio performance Completed per initiative sponsors Team Established/ Well Underway Target Identified $x$x $x $x $x $x Revised Original Target Identified Team Established/ Well Underway Completed per Initiative Sponsors Translates to a $x MM annual run rate Benefit Tracking Report Time EBITDAImpact($M) FY03 Opportunity FY05 Target - ΔEP=$200M ΔEBITDA=$330M
  13. Contact Cell: (323) 947-7029 Email: LinkedIn: Sandeep (Sandy) Muju brings a versatile and seasoned techno-commercial leadership background. He believes that in today’s global environment, effective enterprise value creation needs to not only focus on organic value creation levers but also explore in-organic avenues to fill-gaps and keep pace with hyper-competitive external environment. Building on his engineering technology foundation, he brings broad-based experience in business strategy, P&L financial management, startup/greenfield projects launch, programs (PMO) and technology management, lean six sigma business process improvements, product marketing and NPI, global operations and supply chain management, M&A and post-M&A integration, business transformations, personnel management and organizational development. He has served in senior leadership capacities with Fortune 500 corporations, served in management consulting capacity guiding and influencing global organizations as large as $60B+ in revenues with 100,000+ employees, as well as has hands-on P&L experience with mid-sized companies, and high-growth startup and entrepreneurial organizations. Sandeep “Sandy” Muju