An operating model is one of the most powerful planning tools to deliver the promised value of a deal.
For a strategic acquisition that involves synergies, and an end goal of absorbing an acquired entity into the parent’s existing operations, operating model design is an important step to integration planning. This is not so true of a financial buyer who in most cases will continue to operate the acquired entity as a standalone business.
Operating model design is an often overlooked activity as acquirers are so consumed with planning for Day 1 and transition activities. However, it is important to design a combined organization that will support the deal synergies.
Operating model design starts with a solid understanding of how the acquired entity operates currently, the deal perimeter and where/how it will fit into the parent entity. This includes enterprise, BU and functional level operating models and the people, process, technologies and other assets that support them. It can be high level or detailed depending on the situation.
Some high level questions to ask when designing the operating model are:
How will the new entity go to market differently?
How will the two companies be integrated (people, process, systems etc)?
How will we structure the organization?
Do we centralize certain activities or keep them separate?
Who will own decision rights?
What are new capabilities needed to be stood up to grow the business?
What are the incentives needed to enable the right behaviors for change?
The operating model can be a set of strategic choices on how the two organizations will be combined, and often will evolve over time (day 1, interim state, end state etc.) depending on the budget and resources available to enable the change. It can help jump start integration planning, facilitate decision making/alignment and enable other areas of planning including budgeting, resource allocations and detailed org design.
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Merger integration is as much an art as it is a science. There are hundreds of moving parts, significant decisions to be made and stakeholders from two organizations and multiple functions to bring along on the journey. Reach out if you want to discuss your merger integration program and see how we can help.
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