Les Baird: Developing a Merger Integration Thesis

Although companies can design a great deal thesis, they often fall short in executing the integration program. Les Baird, a partner in Bain's Mergers & Acquisitions practice, shares how companies need to develop an integration thesis that asks the what, when and how of successfully capturing the full value of the integration.

Read the Bain Brief: Change Management in Merger Integration

Read the transcript below.

LES BAIRD: Many companies are actually quite skilled and have well-developed M&A capabilities, including creating a well-articulated deal thesis during the diligence process. However, we find many companies still stumble out of the gates when it comes to kicking off an integration program. That's in large part because they fail to take the intermediate step of developing an integration thesis.

It turns out that a deal thesis is great for doing diligence. But it's entirely insufficient for running and starting an integration program.

An integration thesis actually takes that deal thesis and puts a lot more specificity around it. It starts with the integration's ambition—not the deal's ambition, but the integration's ambition. What is the scale and the scope of the integration? What are the sources of value? What are the key levers? Gets that down on paper. [It] then talks about what needs to get integrated. And a lot of times, in any one deal, you can have an integration take place where you have elements of integration, reverse integration, or just leave things as they are. That can vary by geography, by business, and by function.

[It] also talks about when. So phasing is critically important; are we going to tackle cost synergies and revenue synergies simultaneously? Or is it better to actually stage those? We want to articulate that before we stand up an integration team.

It also talks about how and what's the integration structure? What are the teams going to look like? What's the governance model? What are the operating principles?

Articulating all of these things into a well-defined integration thesis puts in place a blueprint for an integration leader and ultimately, integration teams, to stand up quickly out of the gates. We find that doing this with CEO sponsorship, where the judgment and intuition of business leaders helps set the direction early on, and doing it very early in the process—oftentimes, preannouncement, the best companies do that, but certainly, preclose—that those things have high correleation with success, and that integration thesis actually becomes the blueprint and the roadmap to go build detailed integration plans to capture the full value.

Read the Bain Brief: Change Management in Merger Integration