INTEGRATING ACQUISITIONS “A Best Practices Approach For Success”

Table of Contents l Executive Summary l Determining Optimal Integration l Why Elevate The Integration Process? l A Walk Through The Acquisition Time Line l Origination l On-Site Due Diligence l Negotiating The Acquisition Agreement l Deal Announcement l Post-Signing And Pre-Closing l Post-Closing: Full Integration Mode l Normal Operations l Conclusion

XYZ Executive Summary l Failure to integrate acquisitions properly can result in serious performance problems which could threaten the financial value of an acquisition to XYZ Inc. l XYZ should utilize several techniques to counter acquisition related performance problems which, if applied together, could dramatically improve XYZ's ability to achieve stronger business results faster. l The pieces of successful integration using a “best practices approach” (specifically from GE businesses) are all outlined in the following presentation. l The keys to establishing effective acquisition integration at XYZ are 1) getting integration teams involved early in each deal 2) committing resources to develop integration teams 3) proactively combating integration problems, and 4) rewarding behavior which advances integration objectives.

XYZ Determining Optimal Integration "Integration” Defined: Acquisition integration is the full process of preparing for, and actually blending an acquisition into the XYZ family. Broadly speaking it includes the following: l Preparing the acquired party to deliver on the XYZ objectives which motivated the purchase. l Developing a vision and strategy for the company's future. l Inspiring the new management and workforce to deliver on that vision and strategy. l Transferring technology, systems, and management practices. l Rationalizing the acquired corporate culture with XYZ's objectives. l Capturing the best attributes of the acquired company and transferring the value added of the XYZ relationship.

XYZ Determining Optimal Integration: Timing Planning for an integration begins long before the deal is closed l The earlier integration preparation begins, the more likely XYZ will be able to guide the acquired company to optimal performance. l To treat integration planning and execution as an afterthought is to accept the risk of avoidable performance problems and cultural conflicts.

XYZ Determining Optimal Integration: Corporate Culture Corporate Culture Defined: Corporate culture is that set of practices, artifacts, beliefs, values and norms that defines and significantly influences how the organization operates. It develops slowly over time and once developed, is rigid and resistant to rapid change. l Every corporation has its own sense of identity; its own way of doing business; its own corporate culture. This is true for XYZ and each and every one of its future acquired entities. l XYZ has an evolving corporate culture which will make integration more difficult. It is natural for acquired companies to reject cultural change from the outside. The more change insisted, the stronger the resistance. l Research indicates that fewer than 50% of all acquisitions meet performance expectations. Between 70%-80% of the failed mergers are the result of unresolved differences in corporate cultures.

XYZ Determining Optimal Integration: 7 Point Plan 7 Point Plan For Determining Optimal Integration : l Select integration managers who fully understand XYZ's strategic rationale for the acquisition. l Perform a full assessment of XYZ's corporate culture. l Through due diligence and other discovery methods, analyze and fully assess the culture of the acquired party. l Determine which factors of XYZ's culture should be transferred to the acquired party if XYZ's strategic objectives are to be met. l Determine which factors of the acquired party's culture are incompatible with XYZ's culture. l Determine areas of existing cultural compatibility. l Develop and implement a detailed plan for (a) implanting desired cultural factors and management practices, (b) eliminating incompatible factors, (c) opportunistically rallying around strong shared cultural values, and (d) capturing best practices of the acquired company.

XYZDetermining Optimal Integration: Keys To 7 Point Plan Keys To Successfully Deploying The 7 Point Plan: l Work from the understanding that the goal is not the "XYZtization" of the acquired party. Rather, the objective is to modify the practices, systems, values, and strategies of the acquired party in a manner that best serves XYZ's strategic objectives. l Optimal strategic integration achieves both the performance objectives of XYZ and allows XYZ to capture any best practices possessed by the acquired party. l Changes, which serve no strategic XYZ objective, but nevertheless render the acquired company more like XYZ, can be needlessly disruptive to the operation of the new company.

Why Elevate The Integration Process? XYZ "Doing The Deal" And "Making The Deal Work" l "Doing The Deal" And "Making The Deal Work" are two distinct goals which support the primary objective of improving the financial prospects of XYZ. l The focus of "Doing The Deal" is up front. It has an "ideal" resource commitment curve that wanes as the deal approaches closing. l The focus of "Making The Deal Work,"( i.e., integration) is strongest at the back-end. It has an "ideal" resource commitment curve that overlaps and extends past that of “Doing The Deal”. Resource Commitment “Doing The Deal Work” Deal Team “Making The Deal Work” Integration Team Waiting Period Transition Origination On-Site Due Diligence SigningClosing Normal Operations

XYZ Why Elevate The Integration Process: Performance l Typically, the acquisition process is deal driven and integration is a subordinate effort. l What's at stake is performance. l What protects financial results is committed integration.

XYZ Why Elevate The Integration Process? Performance Outcomes l Failure To Execute The Integration Properly May Result In Closed Deals Falling Far Short Of Performance Expectations l Letting Nature Take Its Course Can Yield Any Of These Four Performance Patterns Shown Below l The Mission Of The Integration Effort Is To Control The Process And Guide It Toward Pattern A Performance Change Event “Acquisition” Pattern D Time Initial Performance Level Pattern C Pattern A Pattern B

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