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M &A integration involved a lot more than just complex project management. As the buyer brings together companies with potentially differing cultures, differing operating models and differing approaches, the challenge is trying to match those without destroying the value of the company being acquired.

There are a lot of elements in M&A that are unusual--not least the people and the change management challenges, says BT Global Services' VP for M&A integration practice David Furniss. "You have to be alert to those challenges and design approaches that allow you to release the capabilities of the company being acquired:'

He noted that it's important to mesh the company into your underlying operating model.

BT focuses on implementation and quickly realizing the value of the new company while many companies focus on the deal. "The deal part is easy--sort of," he said. "The day you acquire the business is when the real work starts, which is why we focus so much on the implementation phase."

One of the key reasons for setting up the integration center was to recycle learning so they don't make the same mistakes again and develop best practice and domain expertise. "We set up the center to anchor that learning and ensure we could deploy it repeatedly transaction after transaction," he explained.

BT also looks outside and talks to other "serial acquirers" like HI?, Cisco and the Royal Bank of Scotland to understand their approach and incorporate the best parts of their strategies into its M&A approach.

The objective in approaching M&A in a repeatable way, he said, is to have a high level of consistency when you're reporting and measuring so you know where you are at any given time and have a good idea of what the outcomes will be.

Standardized approach

He said BT has demonstrated that it's quickly moving to some degree of standardization and accelerating the speed of alignment, which has enabled the sales teams of the acquired businesses and BT Global Services to quickly execute new transactions.

He attributed BT's high success rate in integrating new businesses is the fact that it starts planning early. He claims many businesses start to worry about integration the day after they buy the business. "We start when we're doing due diligence--way back during the pre-transaction phase."

He calls the implementation an exceptional period of time because the business is in a true state of transition. "We try to get to business as usual--a continual operating model where the business has been meshed in with BT's operating model--as quickly as possible because the shorter you make that exceptional cycle the less uncertainly you create for employees and customers."

A clear measure of the success of an integration is customer retention. "A good sign in any acquisition is when a customer resigns after we've acquired that business. A major customer resigning with us is a strong measure of confidence in a new business," he said.

Furniss said a lot of this is about people as it's increasingly important to retain staff, who are the main value in most acquisitions, as well as ensuring they are motivated and positive. "That's why we spent a good deal of time focused on people programs and change management."

He said BT is so focused on M&A and improving the integration process because it's becoming a clear source of competitive advantage

To get an idea how fast its business is moving, he said that as of July BT had completed 40 transactions in the last three years, mainly in its professional services area, bringing in more than 12,000 new employees.

Regarding the company's approach to M&A, Furniss said BT doesn't have an inorganic strategy--it's a strategy that includes an inorganic approach. He pointed out that the company looks for businesses that deliver capabilities it needs--ones that deliver geographic expansion, capability expansion and sometimes transformational deals.

Smart M&A

He said BT purses a strategy of smart M&A, which means looking at other options before acquiring--such as could you partner, could you build that capability organically or is buying the best approach? It's also about when you've decided to acquire a business, looking at the right way of doing it.

"Once we start to pursue a company, we also decide how we're going to approach the transaction. We're a very clean acquirer. Many companies buy complete businesses, then take the risk that they'll be able to divest the pieces they don't need. We don't do that. We try to negotiate carve-outs up front, which leads to faster integration."

Part of its strategy is to use M&A to target new geographies, which because of their economic development or increased presence of multinational customers, the company seeks to acquire a presence in those areas. When it started to expand its European operations four years ago, it was clear it had no presence in Italy. "From zero presence in Italy we've managed to build a 1-billion-euro business in three years, matching the requirements of our customers."

Furniss said customers are vital to driving its M&A strategy, noting that "we go where they need us to go."

Its acquisitions are also focused on increasing its professional services capabilities and increasing its network and managed services capabilities. He mentioned Frontline and Counterpane as specific examples.

Another important aspect of M&A is to ensure that you can leverage the capabilities acquired in one region in other areas to maximize the value.

So how is BT doing in terms of customer service and financial outcomes? Given that around 50% of acquisitions globally fail to achieve their financial results according to management consultants such and KPMG and Deloitte, Furniss said "we're doing a lot better than that."

COPYRIGHT 2008 Questex Media Group, Inc.
COPYRIGHT 2009 Gale, Cengage Learning