Prabir Jha

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M A The art of making it work Case Studies
of successful Mergers and Acquisitions
Prabir Jha 4 July 2008
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Safe Harbor Statement

• This presentation includes forward-looking
  statements, as defined in the US Private
  Securities Litigation Reform Act of 1995. We have
  based these forward-looking statements on our
  current expectations and projections about future
  events. Such statements involve known and unknown
  risks, uncertainties and other factors that may
  cause actual results to differ materially. Such
  factors include, but are not limited to, changes
  in local and global economic conditions, our
  ability to successfully implement our strategy,
  the market acceptance of and demand for our
  products, our growth and expansion, technological
  change and our exposure to market risks. By this
  nature, these expectations and projections are
  only estimates and could be materially different
  from actual results in the future

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Theme
Successful MA integration requires that you plan
before MA integration starts
Merger - transaction that results in a wholly new
firm Acquisition - transaction in which one firm
is absorbed by another
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Dr. Reddys Experience
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Due Diligence Pre and Post Deal
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Key Integration Challenges
Integration Challenges
Financial Challenges
Operational Challenges
Communication
Information Technology integration
Human Resource integration
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Communication Challenges
Anxiety and Uncertainty among the employees of
the acquired company
Continuous Communication from top Management
Inculcating sense of Pride

• Handling situation with sensitivity yet being
  tough on results
• Building a open culture/ open door policy yet
  discouraging grapevine
• Share the vision, big picture
• Build ownership, inspire ( WIFM)

Building Trust
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HR Integration People Diligence
Leadership
Org. Structure
Transition Team
Culture Values
Pace of Integration
Importance
Priority
Workforce Rationalization
Retention
Policies Processes
Band/Work Level/ designation
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Leadership Challenges

• Identify Leaders quickly
• To maintain focus on the business
• Enable a smooth transition process
• Leaders not only be from the acquirer company
• Assign a high-caliber, respected senior manager
  to manage the integration full-time
• Important to recognize Talent in both companies
• Deal with anxiety of tenure / top management
  changes
• Offer big retention incentives to top-level Hi
  potential executives
• Keep the performance pressure on
• Restore stability ASAP
• Run smaller focused integration teams which
  reach the top Don't let the army in
  immediately

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Organization Structure

• Important to finalize the organization structure
  for the merged entity in context of changed size
  of operation
• Incorporate learnings from different structures
  and approaches
• Focus on broad top line structure
• Centralization Decentralization
• Configuration of broad functions - with sub
  functions
• Detailed structures can evolve subsequently
• Detailing of roles and responsibilities

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Culture and Value Integration
Awareness Building

• Monitoring Performance

Specific actions to reinforce desired culture

• Planned global cascading for key initiatives and
  Processes
• Involving key stakeholders in major decisions
  design processes (eg. OD)
• Rigorous induction and orientation programs about
  companys culture and value system
• Planned exchange of people across geographies/
  businesses

• Internal Communication Forums
• Open House
• Values dissemination
• CEOs address
• Cross cultural e-handbooks
• Cultural sensitivity, etiquette training,
  language training

• Through Appraisals
• Through levels of employee engagement
• Through dip stick survey
• Through informal meetings
• Through Connecting with people across levels

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Transition Teams

• Identify a core transition team involved in
  integration
• Multifunctional Team
• Talent for both the companies in that Team
• Role of Transition team
• Planning the Transition
• Suggest Change Initiatives
• Provide Oversight Through Process
• Focus on communication
• Building trust of Key opinion leaders

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Workforce Rationalization
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Performance Management, Policies Processes

• Study Compare HR policies and processes of both
  entities Identify areas of commonality
• Ensure Minimum Loss to Employees on account of
  change in policies
• Consider Costs Carefully
• Setting the performance metrics and communicating
  the same at the time of integration
• Explaining the philosophy and rationale behind
  change in policies , processes and systems

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Retention

• Employee Engagement Inclusively
• Keeping all employees highly motivated and
  meaningfully engaged
• Managing aspirations
• Managing ambiguity
• Balancing change with continuities
• Integrating new ways of doing things, while
  retaining our unique culture and identity
• Talent scale up in the Critical areas of
• Global leadership
• Specific cutting edge capabilities

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Thank You.
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Backup Slides
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Some Key Rules

• Have a clear vision and get buy in from your
  people
• Find the holes in the ice
• There is no such thing as a merger of equals
• Integrate fast
• Get the right people in the right jobs
• Communicate. Communicate. Communicate
• Its never over

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Financial Challenges

• Accounting
• Reconciliation to main company GAAP and
  statements
• Reconciliation of accounting year
• Alignment/Roll-out of accounting policies and
  transactions
• Proforma financials for previous years
• SOX/ Compliance
• Significant Vs Non Significant Entity
• Changing process
• Creating a Control Mindset
• Risk Management

• Management of Control
• Governance Structure
• Integration of Business Processes
• Existing Grant of Authority Vs Company wide
  policies
• Communication with employees and business
  associates
• Execution Challenges
• Delivering Synergies as per board mandates
• Managing cash flows and return expectations
• Complying with debt covenants
• Tax and Transfer Pricing

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Operational Challenges

• Too much democracy
• Trying to please everyone
• Poor processes
• Reinventing the wheel
• Conflicting processes
• Allowing divergent initiatives
• Lack of facts
• Lack of Statutory/ Compliance Awareness
• Inadequate resources
• Using-part time players

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Information Technology Challenges

• Getting everyone on the same platform
• Information flow across locations
• Capturing data/information real time
• Integrating systems and processes
• Accessibility and Connectivity