With 60,000+ M&A deals and ~6Trn USD in value, global M&A activity was at an all-time high during 2021 despite the pandemic. M&A activities are likely to gather more momentum and continue to stay as one of the primary growth drivers in the foreseeable future. However, the historical pain points around finding the right targets, doing extensive due diligence, and integrating businesses continue to make it a challenging activity. Unsuccessful integrations or missing critical steps can delay the entire transaction resulting in loss of time and resources and ultimately prohibits the acquiring firms from achieving a competitive advantage.
Firms using acquisitions as a core growth strategy need an efficient and scalable M&A model. An integration playbook can help build a scalable model for firms to integrate target companies quickly and preserve value leakages. A well-defined playbook is based on time-tested frameworks and methodologies. It offers a structured mechanism to identify and define program priorities, scope, complexities, resource needs, and timelines for deal execution. It is an accelerator that helps companies in executing a smooth transaction in a time critical deal.
Once the playbook is created, future transactions can be managed efficiently based on the learnings from the previous transactions along with the tools and templates created. This reduces dependencies on people and partners involved in the integration process. It is important to continuously update the integration model and adapt evolving best practices. Over the years, the M&A playbooks have evolved from being planning tools to execution accelerators. We have tried to summarize this evolution by mapping them to three archetypes.
Table 1: Playbook Archetypes
Infosys has developed customizable industry specific integration planners and multiple accelerators across the advanced archetypes. In this paper, we have focused on the first archetype and the description in subsequent sections is limited to it.
Playbook in the M&A Lifecycle
Before we explain the details of utilizing a playbook, it is imperative to view the phases involved during an M&A integration project
Figure 1: Typical M&A lifecycle
A playbook plays its role in the strategy phase to structure and accelarate the overall program execution by providing predefined activities, dependencies and estimation models to kickstart the process.
Infosys Proprietary Playbook
Infosys has a proprietary playbook on M&A integration. This playbook helps in turning over the planning phase at a faster rate. It entails Day 0 and Day 1 planning, prioritization of tasks, maintaining cross functional dependencies, guidelines and ready to use templates and checklist for due diligence. The below diagram shows the various elements involved in a playbook.
Figure 2: Multiple sources are utlized as on input to the playbook to achieve the outcomes shown on the right
Inside a Playbook
Due diligence: In this phase, the potential deal is verified from commercial, and operational (including IT) standpoint. It results in making more informed decisions about the deal. The observations from due diligence are used for future planning and roadmap creation.
- For instance, in a diligence process, it is observed that the seller company does not have a disaster recovery data center, and the buyer company will have to include these observations in its future planning and account for a data center. This helps the buyer company analyze the deal and plan accordingly
Questionnaire: It consists of a set of questions whose answers are used as an input to the playbook tool for identifying the scope, planning resources and budgeting.
- For enterprise asset management (maintenance department), it seeks information like “provide a high-level structure of maintenance organization”, “resource costing and metrics for cost allocation” etc.
Resource/effort analyzer: Every department (HR, finance, supply chain, IT infra etc.) is interviewed on its people, process, technology, and metrics usage.
- For the finance team, questions like “FTEs required to support general accounting function” gives the current FTE structure
All these elements are assessed along with cross functional dependencies to evaluate the scope and complexity. The Infosys playbook also covers an exhaustive list of activities across IT and key business functions including but not limited to finance, supply chain, HR, manufacturing, security, IT- infrastructure, IT – applications, change management, cross workstream management. These activities are categorized under each phase of the M&A lifecycle starting from Day 0 until the end of execution.
The playbook enables us to assign the task priorities along with the responsibilities through RACI (Responsible, Accountable, Consulted, and Informed) matrix among the business, IT, consulting, 3rd party vendors and other key units. It also has a pre-built set of cross functional dependencies based on prior experiences in the similar domain and provides flexibility to add or modify them.
A playbook also contains a set of templates, framework and project guidelines that channelizes the integration execution. The list of sample template is listed below:
- Detailed project activities
- Resource estimation
- Budget estimation
- Projected timelines
To understand this, let’s consider an example for HR process stream. The first task under HR would be to understand the organizational structure. This playbook would list all the level 1 task and level 2 sub-tasks under the organizational structure. This pre-defined task list enables the team in early planning. All the cross-functional dependencies are also clearly mentioned. Once this is established, the activities are marked based on its stage of execution i.e., Day 0, Day 1, Day 30, Day 60, and Day 90+. A responsibility matrix (RACI) is created for easy assignment of the sub-tasks. A playbook also contains a set of templates and frameworks which enables seamless delivery of these sub-tasks.
Key benefits of a playbook
· Significant time reduction (~40%) in planning phase
· Provides a clear sequencing of tasks without missing any critical task/step
· Prediction of resources and budget
· Enables the company to execute multiple integrations at the same time without compromising on quality
A playbook is a great tool to remain competitive in the market. It gives an additional edge by providing key accelerators to reduce time and manage efforts. These playbooks act as an anchor for the subsequent deals for the parent organization however the predictability of the model can vary based on the complexity of integration(s).
Rahul is Senior Principal in Infosys’s Health and Life Sciences Consulting practice. Rahul has worked with leading management consulting firms and performed varied engagements across the life cycle (Strategy formulation to Transformation management and benefits realization). He is currently focusing on M&A and brings diverse experience on pre-deal and post- deal engagements.
Praneev is a management consultant in Mergers, Acquisitions and Restructuring capability with over 9 years of experience in helping clients build their integration/divestiture strategies, digital transformation, due diligence, planning command center and project management primarily in the area of technology. He has majorly worked with Lifesciences, Manufacturing, and Hi-Tech customers especially in the area of IT infrastructure. He is actively involved in creating sales proposals for executing M&A and digital transformation projects.
Vibha has 7 years of experience across Business Consulting and IT Services. She specializes in Program Management, Value Realization and Strategy Consulting and has actively engaged with Indian and overseas clients. She has worked on large scale Separation Management Programs in M&A IT.