MampA Integration

Mike Sum

7 July 2016

Introduction

2

GRAM

Introduction

2

GRAM

The MampA market ndash exampleshellip

Lest we forgethellip

4

Orhelliplsquohow mergers go wrongrsquo

5

Merger Integration Explained

6

Agenda

7

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Agenda

8

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

A quiz to beginhellip

9

bull ___ of acquirers believe that they create value from their MampAs

bull hellipbut the evidence shows that _____ fail

bull Almost ___ of synergies are paid in the purchase price

bull ___ of acquirers fail to deliver their synergy targets

bull It takes acquirers __ months on average to feel in control

bull Over __ of failures are blamed on lsquocultural incompatibilityrsquo

bull Number one learning point ndash ldquo_____________rdquo

lsquoThe moral is not that merging is always wrong but that it is riskyrsquo

The Economist

Why do mergers fail

10

Keys to successhellip

11

hellipa blend of lsquohardrsquo and lsquosoftrsquo factors

It is not enough to focus on the rational

12

Failure mode

bull Poor planning

bull Under-resourced

bull Poor implementation

bull Closely observed failure

bull Difficult to turn round

bull Fear and uncertainty

bull Mourning of the past

bull Low commitment

bull Siege mentality

bull Lack of mobilisation

bull Focus on the lsquowhy notrsquo

bull Hidden collective

resistance

bull Sabotageinfighting

bull Ambiguity

bull Takes attention away

from market

bull Time consuming

bull Credibility of change

team challenged

Rational

Emotional

Political

Symptoms Outcome

The critical importance of synergies

13

Destroy value

Va

lue

$M

Price paid Value creation

Synergies

Create value

Dis-synergies

hellipbut remember to protect standalone value

The challenge is to realise full value

from an acquisition

14

bull New products and

services

bull New markets

bull New customers

bull Pricing power

bull Improved innovation and

investment pipeline

bull Enhanced talent pool

bull Enhanced business

portfolio

bull Preserve customer

relationships

bull Retain best talent

bull Mitigate dis-synergies

Protect standalone value

bull Eliminate duplicate costs

bull Merge overlapping

functions and locations

bull Leverage combined

procurement power

bull Merge systems and

processes

bull Eliminate surplus capacity

+$m

Deliver synergy

efficiency benefitsCreate long term value

+$m

+ +

which requires a systematic approach to Integration

The first 100 days are critical to

success

15

Stakeholder perceptions are formed in this

period and are difficult to change

0 25 50 100

Employees

Board

Shareholders

Customers

Gone

Conflict

Switching

Critical

Va

lue

Typical results of poor integration management

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Lest we forgethellip

4

Orhelliplsquohow mergers go wrongrsquo

5

Merger Integration Explained

6

Agenda

7

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Agenda

8

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

A quiz to beginhellip

9

bull ___ of acquirers believe that they create value from their MampAs

bull hellipbut the evidence shows that _____ fail

bull Almost ___ of synergies are paid in the purchase price

bull ___ of acquirers fail to deliver their synergy targets

bull It takes acquirers __ months on average to feel in control

bull Over __ of failures are blamed on lsquocultural incompatibilityrsquo

bull Number one learning point ndash ldquo_____________rdquo

lsquoThe moral is not that merging is always wrong but that it is riskyrsquo

The Economist

Why do mergers fail

10

Keys to successhellip

11

hellipa blend of lsquohardrsquo and lsquosoftrsquo factors

It is not enough to focus on the rational

12

Failure mode

bull Poor planning

bull Under-resourced

bull Poor implementation

bull Closely observed failure

bull Difficult to turn round

bull Fear and uncertainty

bull Mourning of the past

bull Low commitment

bull Siege mentality

bull Lack of mobilisation

bull Focus on the lsquowhy notrsquo

bull Hidden collective

resistance

bull Sabotageinfighting

bull Ambiguity

bull Takes attention away

from market

bull Time consuming

bull Credibility of change

team challenged

Rational

Emotional

Political

Symptoms Outcome

The critical importance of synergies

13

Destroy value

Va

lue

$M

Price paid Value creation

Synergies

Create value

Dis-synergies

hellipbut remember to protect standalone value

The challenge is to realise full value

from an acquisition

14

bull New products and

services

bull New markets

bull New customers

bull Pricing power

bull Improved innovation and

investment pipeline

bull Enhanced talent pool

bull Enhanced business

portfolio

bull Preserve customer

relationships

bull Retain best talent

bull Mitigate dis-synergies

Protect standalone value

bull Eliminate duplicate costs

bull Merge overlapping

functions and locations

bull Leverage combined

procurement power

bull Merge systems and

processes

bull Eliminate surplus capacity

+$m

Deliver synergy

efficiency benefitsCreate long term value

+$m

+ +

which requires a systematic approach to Integration

The first 100 days are critical to

success

15

Stakeholder perceptions are formed in this

period and are difficult to change

0 25 50 100

Employees

Board

Shareholders

Customers

Gone

Conflict

Switching

Critical

Va

lue

Typical results of poor integration management

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Orhelliplsquohow mergers go wrongrsquo

5

Merger Integration Explained

6

Agenda

7

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Agenda

8

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

A quiz to beginhellip

9

bull ___ of acquirers believe that they create value from their MampAs

bull hellipbut the evidence shows that _____ fail

bull Almost ___ of synergies are paid in the purchase price

bull ___ of acquirers fail to deliver their synergy targets

bull It takes acquirers __ months on average to feel in control

bull Over __ of failures are blamed on lsquocultural incompatibilityrsquo

bull Number one learning point ndash ldquo_____________rdquo

lsquoThe moral is not that merging is always wrong but that it is riskyrsquo

The Economist

Why do mergers fail

10

Keys to successhellip

11

hellipa blend of lsquohardrsquo and lsquosoftrsquo factors

It is not enough to focus on the rational

12

Failure mode

bull Poor planning

bull Under-resourced

bull Poor implementation

bull Closely observed failure

bull Difficult to turn round

bull Fear and uncertainty

bull Mourning of the past

bull Low commitment

bull Siege mentality

bull Lack of mobilisation

bull Focus on the lsquowhy notrsquo

bull Hidden collective

resistance

bull Sabotageinfighting

bull Ambiguity

bull Takes attention away

from market

bull Time consuming

bull Credibility of change

team challenged

Rational

Emotional

Political

Symptoms Outcome

The critical importance of synergies

13

Destroy value

Va

lue

$M

Price paid Value creation

Synergies

Create value

Dis-synergies

hellipbut remember to protect standalone value

The challenge is to realise full value

from an acquisition

14

bull New products and

services

bull New markets

bull New customers

bull Pricing power

bull Improved innovation and

investment pipeline

bull Enhanced talent pool

bull Enhanced business

portfolio

bull Preserve customer

relationships

bull Retain best talent

bull Mitigate dis-synergies

Protect standalone value

bull Eliminate duplicate costs

bull Merge overlapping

functions and locations

bull Leverage combined

procurement power

bull Merge systems and

processes

bull Eliminate surplus capacity

+$m

Deliver synergy

efficiency benefitsCreate long term value

+$m

+ +

which requires a systematic approach to Integration

The first 100 days are critical to

success

15

Stakeholder perceptions are formed in this

period and are difficult to change

0 25 50 100

Employees

Board

Shareholders

Customers

Gone

Conflict

Switching

Critical

Va

lue

Typical results of poor integration management

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Merger Integration Explained

6

Agenda

7

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Agenda

8

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

A quiz to beginhellip

9

bull ___ of acquirers believe that they create value from their MampAs

bull hellipbut the evidence shows that _____ fail

bull Almost ___ of synergies are paid in the purchase price

bull ___ of acquirers fail to deliver their synergy targets

bull It takes acquirers __ months on average to feel in control

bull Over __ of failures are blamed on lsquocultural incompatibilityrsquo

bull Number one learning point ndash ldquo_____________rdquo

lsquoThe moral is not that merging is always wrong but that it is riskyrsquo

The Economist

Why do mergers fail

10

Keys to successhellip

11

hellipa blend of lsquohardrsquo and lsquosoftrsquo factors

It is not enough to focus on the rational

12

Failure mode

bull Poor planning

bull Under-resourced

bull Poor implementation

bull Closely observed failure

bull Difficult to turn round

bull Fear and uncertainty

bull Mourning of the past

bull Low commitment

bull Siege mentality

bull Lack of mobilisation

bull Focus on the lsquowhy notrsquo

bull Hidden collective

resistance

bull Sabotageinfighting

bull Ambiguity

bull Takes attention away

from market

bull Time consuming

bull Credibility of change

team challenged

Rational

Emotional

Political

Symptoms Outcome

The critical importance of synergies

13

Destroy value

Va

lue

$M

Price paid Value creation

Synergies

Create value

Dis-synergies

hellipbut remember to protect standalone value

The challenge is to realise full value

from an acquisition

14

bull New products and

services

bull New markets

bull New customers

bull Pricing power

bull Improved innovation and

investment pipeline

bull Enhanced talent pool

bull Enhanced business

portfolio

bull Preserve customer

relationships

bull Retain best talent

bull Mitigate dis-synergies

Protect standalone value

bull Eliminate duplicate costs

bull Merge overlapping

functions and locations

bull Leverage combined

procurement power

bull Merge systems and

processes

bull Eliminate surplus capacity

+$m

Deliver synergy

efficiency benefitsCreate long term value

+$m

+ +

which requires a systematic approach to Integration

The first 100 days are critical to

success

15

Stakeholder perceptions are formed in this

period and are difficult to change

0 25 50 100

Employees

Board

Shareholders

Customers

Gone

Conflict

Switching

Critical

Va

lue

Typical results of poor integration management

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Agenda

7

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Agenda

8

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

A quiz to beginhellip

9

bull ___ of acquirers believe that they create value from their MampAs

bull hellipbut the evidence shows that _____ fail

bull Almost ___ of synergies are paid in the purchase price

bull ___ of acquirers fail to deliver their synergy targets

bull It takes acquirers __ months on average to feel in control

bull Over __ of failures are blamed on lsquocultural incompatibilityrsquo

bull Number one learning point ndash ldquo_____________rdquo

lsquoThe moral is not that merging is always wrong but that it is riskyrsquo

The Economist

Why do mergers fail

10

Keys to successhellip

11

hellipa blend of lsquohardrsquo and lsquosoftrsquo factors

It is not enough to focus on the rational

12

Failure mode

bull Poor planning

bull Under-resourced

bull Poor implementation

bull Closely observed failure

bull Difficult to turn round

bull Fear and uncertainty

bull Mourning of the past

bull Low commitment

bull Siege mentality

bull Lack of mobilisation

bull Focus on the lsquowhy notrsquo

bull Hidden collective

resistance

bull Sabotageinfighting

bull Ambiguity

bull Takes attention away

from market

bull Time consuming

bull Credibility of change

team challenged

Rational

Emotional

Political

Symptoms Outcome

The critical importance of synergies

13

Destroy value

Va

lue

$M

Price paid Value creation

Synergies

Create value

Dis-synergies

hellipbut remember to protect standalone value

The challenge is to realise full value

from an acquisition

14

bull New products and

services

bull New markets

bull New customers

bull Pricing power

bull Improved innovation and

investment pipeline

bull Enhanced talent pool

bull Enhanced business

portfolio

bull Preserve customer

relationships

bull Retain best talent

bull Mitigate dis-synergies

Protect standalone value

bull Eliminate duplicate costs

bull Merge overlapping

functions and locations

bull Leverage combined

procurement power

bull Merge systems and

processes

bull Eliminate surplus capacity

+$m

Deliver synergy

efficiency benefitsCreate long term value

+$m

+ +

which requires a systematic approach to Integration

The first 100 days are critical to

success

15

Stakeholder perceptions are formed in this

period and are difficult to change

0 25 50 100

Employees

Board

Shareholders

Customers

Gone

Conflict

Switching

Critical

Va

lue

Typical results of poor integration management

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Agenda

8

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

A quiz to beginhellip

9

bull ___ of acquirers believe that they create value from their MampAs

bull hellipbut the evidence shows that _____ fail

bull Almost ___ of synergies are paid in the purchase price

bull ___ of acquirers fail to deliver their synergy targets

bull It takes acquirers __ months on average to feel in control

bull Over __ of failures are blamed on lsquocultural incompatibilityrsquo

bull Number one learning point ndash ldquo_____________rdquo

lsquoThe moral is not that merging is always wrong but that it is riskyrsquo

The Economist

Why do mergers fail

10

Keys to successhellip

11

hellipa blend of lsquohardrsquo and lsquosoftrsquo factors

It is not enough to focus on the rational

12

Failure mode

bull Poor planning

bull Under-resourced

bull Poor implementation

bull Closely observed failure

bull Difficult to turn round

bull Fear and uncertainty

bull Mourning of the past

bull Low commitment

bull Siege mentality

bull Lack of mobilisation

bull Focus on the lsquowhy notrsquo

bull Hidden collective

resistance

bull Sabotageinfighting

bull Ambiguity

bull Takes attention away

from market

bull Time consuming

bull Credibility of change

team challenged

Rational

Emotional

Political

Symptoms Outcome

The critical importance of synergies

13

Destroy value

Va

lue

$M

Price paid Value creation

Synergies

Create value

Dis-synergies

hellipbut remember to protect standalone value

The challenge is to realise full value

from an acquisition

14

bull New products and

services

bull New markets

bull New customers

bull Pricing power

bull Improved innovation and

investment pipeline

bull Enhanced talent pool

bull Enhanced business

portfolio

bull Preserve customer

relationships

bull Retain best talent

bull Mitigate dis-synergies

Protect standalone value

bull Eliminate duplicate costs

bull Merge overlapping

functions and locations

bull Leverage combined

procurement power

bull Merge systems and

processes

bull Eliminate surplus capacity

+$m

Deliver synergy

efficiency benefitsCreate long term value

+$m

+ +

which requires a systematic approach to Integration

The first 100 days are critical to

success

15

Stakeholder perceptions are formed in this

period and are difficult to change

0 25 50 100

Employees

Board

Shareholders

Customers

Gone

Conflict

Switching

Critical

Va

lue

Typical results of poor integration management

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

A quiz to beginhellip

9

bull ___ of acquirers believe that they create value from their MampAs

bull hellipbut the evidence shows that _____ fail

bull Almost ___ of synergies are paid in the purchase price

bull ___ of acquirers fail to deliver their synergy targets

bull It takes acquirers __ months on average to feel in control

bull Over __ of failures are blamed on lsquocultural incompatibilityrsquo

bull Number one learning point ndash ldquo_____________rdquo

lsquoThe moral is not that merging is always wrong but that it is riskyrsquo

The Economist

Why do mergers fail

10

Keys to successhellip

11

hellipa blend of lsquohardrsquo and lsquosoftrsquo factors

It is not enough to focus on the rational

12

Failure mode

bull Poor planning

bull Under-resourced

bull Poor implementation

bull Closely observed failure

bull Difficult to turn round

bull Fear and uncertainty

bull Mourning of the past

bull Low commitment

bull Siege mentality

bull Lack of mobilisation

bull Focus on the lsquowhy notrsquo

bull Hidden collective

resistance

bull Sabotageinfighting

bull Ambiguity

bull Takes attention away

from market

bull Time consuming

bull Credibility of change

team challenged

Rational

Emotional

Political

Symptoms Outcome

The critical importance of synergies

13

Destroy value

Va

lue

$M

Price paid Value creation

Synergies

Create value

Dis-synergies

hellipbut remember to protect standalone value

The challenge is to realise full value

from an acquisition

14

bull New products and

services

bull New markets

bull New customers

bull Pricing power

bull Improved innovation and

investment pipeline

bull Enhanced talent pool

bull Enhanced business

portfolio

bull Preserve customer

relationships

bull Retain best talent

bull Mitigate dis-synergies

Protect standalone value

bull Eliminate duplicate costs

bull Merge overlapping

functions and locations

bull Leverage combined

procurement power

bull Merge systems and

processes

bull Eliminate surplus capacity

+$m

Deliver synergy

efficiency benefitsCreate long term value

+$m

+ +

which requires a systematic approach to Integration

The first 100 days are critical to

success

15

Stakeholder perceptions are formed in this

period and are difficult to change

0 25 50 100

Employees

Board

Shareholders

Customers

Gone

Conflict

Switching

Critical

Va

lue

Typical results of poor integration management

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Why do mergers fail

10

Keys to successhellip

11

hellipa blend of lsquohardrsquo and lsquosoftrsquo factors

It is not enough to focus on the rational

12

Failure mode

bull Poor planning

bull Under-resourced

bull Poor implementation

bull Closely observed failure

bull Difficult to turn round

bull Fear and uncertainty

bull Mourning of the past

bull Low commitment

bull Siege mentality

bull Lack of mobilisation

bull Focus on the lsquowhy notrsquo

bull Hidden collective

resistance

bull Sabotageinfighting

bull Ambiguity

bull Takes attention away

from market

bull Time consuming

bull Credibility of change

team challenged

Rational

Emotional

Political

Symptoms Outcome

The critical importance of synergies

13

Destroy value

Va

lue

$M

Price paid Value creation

Synergies

Create value

Dis-synergies

hellipbut remember to protect standalone value

The challenge is to realise full value

from an acquisition

14

bull New products and

services

bull New markets

bull New customers

bull Pricing power

bull Improved innovation and

investment pipeline

bull Enhanced talent pool

bull Enhanced business

portfolio

bull Preserve customer

relationships

bull Retain best talent

bull Mitigate dis-synergies

Protect standalone value

bull Eliminate duplicate costs

bull Merge overlapping

functions and locations

bull Leverage combined

procurement power

bull Merge systems and

processes

bull Eliminate surplus capacity

+$m

Deliver synergy

efficiency benefitsCreate long term value

+$m

+ +

which requires a systematic approach to Integration

The first 100 days are critical to

success

15

Stakeholder perceptions are formed in this

period and are difficult to change

0 25 50 100

Employees

Board

Shareholders

Customers

Gone

Conflict

Switching

Critical

Va

lue

Typical results of poor integration management

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Keys to successhellip

11

hellipa blend of lsquohardrsquo and lsquosoftrsquo factors

It is not enough to focus on the rational

12

Failure mode

bull Poor planning

bull Under-resourced

bull Poor implementation

bull Closely observed failure

bull Difficult to turn round

bull Fear and uncertainty

bull Mourning of the past

bull Low commitment

bull Siege mentality

bull Lack of mobilisation

bull Focus on the lsquowhy notrsquo

bull Hidden collective

resistance

bull Sabotageinfighting

bull Ambiguity

bull Takes attention away

from market

bull Time consuming

bull Credibility of change

team challenged

Rational

Emotional

Political

Symptoms Outcome

The critical importance of synergies

13

Destroy value

Va

lue

$M

Price paid Value creation

Synergies

Create value

Dis-synergies

hellipbut remember to protect standalone value

The challenge is to realise full value

from an acquisition

14

bull New products and

services

bull New markets

bull New customers

bull Pricing power

bull Improved innovation and

investment pipeline

bull Enhanced talent pool

bull Enhanced business

portfolio

bull Preserve customer

relationships

bull Retain best talent

bull Mitigate dis-synergies

Protect standalone value

bull Eliminate duplicate costs

bull Merge overlapping

functions and locations

bull Leverage combined

procurement power

bull Merge systems and

processes

bull Eliminate surplus capacity

+$m

Deliver synergy

efficiency benefitsCreate long term value

+$m

+ +

which requires a systematic approach to Integration

The first 100 days are critical to

success

15

Stakeholder perceptions are formed in this

period and are difficult to change

0 25 50 100

Employees

Board

Shareholders

Customers

Gone

Conflict

Switching

Critical

Va

lue

Typical results of poor integration management

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

It is not enough to focus on the rational

12

Failure mode

bull Poor planning

bull Under-resourced

bull Poor implementation

bull Closely observed failure

bull Difficult to turn round

bull Fear and uncertainty

bull Mourning of the past

bull Low commitment

bull Siege mentality

bull Lack of mobilisation

bull Focus on the lsquowhy notrsquo

bull Hidden collective

resistance

bull Sabotageinfighting

bull Ambiguity

bull Takes attention away

from market

bull Time consuming

bull Credibility of change

team challenged

Rational

Emotional

Political

Symptoms Outcome

The critical importance of synergies

13

Destroy value

Va

lue

$M

Price paid Value creation

Synergies

Create value

Dis-synergies

hellipbut remember to protect standalone value

The challenge is to realise full value

from an acquisition

14

bull New products and

services

bull New markets

bull New customers

bull Pricing power

bull Improved innovation and

investment pipeline

bull Enhanced talent pool

bull Enhanced business

portfolio

bull Preserve customer

relationships

bull Retain best talent

bull Mitigate dis-synergies

Protect standalone value

bull Eliminate duplicate costs

bull Merge overlapping

functions and locations

bull Leverage combined

procurement power

bull Merge systems and

processes

bull Eliminate surplus capacity

+$m

Deliver synergy

efficiency benefitsCreate long term value

+$m

+ +

which requires a systematic approach to Integration

The first 100 days are critical to

success

15

Stakeholder perceptions are formed in this

period and are difficult to change

0 25 50 100

Employees

Board

Shareholders

Customers

Gone

Conflict

Switching

Critical

Va

lue

Typical results of poor integration management

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

The critical importance of synergies

13

Destroy value

Va

lue

$M

Price paid Value creation

Synergies

Create value

Dis-synergies

hellipbut remember to protect standalone value

The challenge is to realise full value

from an acquisition

14

bull New products and

services

bull New markets

bull New customers

bull Pricing power

bull Improved innovation and

investment pipeline

bull Enhanced talent pool

bull Enhanced business

portfolio

bull Preserve customer

relationships

bull Retain best talent

bull Mitigate dis-synergies

Protect standalone value

bull Eliminate duplicate costs

bull Merge overlapping

functions and locations

bull Leverage combined

procurement power

bull Merge systems and

processes

bull Eliminate surplus capacity

+$m

Deliver synergy

efficiency benefitsCreate long term value

+$m

+ +

which requires a systematic approach to Integration

The first 100 days are critical to

success

15

Stakeholder perceptions are formed in this

period and are difficult to change

0 25 50 100

Employees

Board

Shareholders

Customers

Gone

Conflict

Switching

Critical

Va

lue

Typical results of poor integration management

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

The challenge is to realise full value

from an acquisition

14

bull New products and

services

bull New markets

bull New customers

bull Pricing power

bull Improved innovation and

investment pipeline

bull Enhanced talent pool

bull Enhanced business

portfolio

bull Preserve customer

relationships

bull Retain best talent

bull Mitigate dis-synergies

Protect standalone value

bull Eliminate duplicate costs

bull Merge overlapping

functions and locations

bull Leverage combined

procurement power

bull Merge systems and

processes

bull Eliminate surplus capacity

+$m

Deliver synergy

efficiency benefitsCreate long term value

+$m

+ +

which requires a systematic approach to Integration

The first 100 days are critical to

success

15

Stakeholder perceptions are formed in this

period and are difficult to change

0 25 50 100

Employees

Board

Shareholders

Customers

Gone

Conflict

Switching

Critical

Va

lue

Typical results of poor integration management

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

The first 100 days are critical to

success

15

Stakeholder perceptions are formed in this

period and are difficult to change

0 25 50 100

Employees

Board

Shareholders

Customers

Gone

Conflict

Switching

Critical

Va

lue

Typical results of poor integration management

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

The emotional journeyhellip

16

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Early euphoria

Change is

exciting

Wersquore taking a

bold stepFear

Uncertainty

What does this

mean for me

What are my

priorities now

Paralysis

I canrsquot act with all this

uncertainty

My priority is to stay on

top of the news

Withdrawal

Irsquoll do what is necessary to

survive

Departure

This is not something I

want to be part of

Adaptation

The train is leavinghellip

I better get on

Itrsquos hard but we can do it

Commitment

It is the right thing to do

We will succeed

Time

Pe

rfo

rma

nce

P

rod

uctivity

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Summary balance is the key

17

Maintaining strong control

over the costs benefit

delivery quality and scope

of the programme

Ensuring there are clear

objectives and targets to focus

activity and critical resources

on areas that add the most

value

Balancing integration with driving core business performance

Effective management

of PEOPLE through a

time of uncertainty

Objective challenge and

robust process to minimise

expected RISK

Maximise the expected

VALUE through focus on

areas of benefit

Delivering the benefits

whilst ensuring that

focus is maintained on

core businessrsquos growth

opportunities business

as usual activity and

other change

programmes

Managing key stakeholders

through the change your

employees your clients your

regulators

Source PwC global merger integration methodology

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Agenda

18

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Planning Merger Integration

Exercise Coles7-Eleven

bull Coles has announced an

agreement to acquire the

entire business of 7-Eleven in

Australia

bull The deal is expected to close

in 2 months

bull Until then the businesses

remain separate competitors

with limited access to people amp

data

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Teams

1 Coles CEO

2 7-Eleven CEO

3 Coles Integration Director

4 Stores amp Brand

5 Products amp Purchasing

6 Supply Chain

7 Finance

8 IT

9 People amp HR

20

Planning Merger Integration

Exercise Coles7-Eleven

Questions

1 How are you feeling

2 What are your key

priorities in this phase

3 What is keeping you

awake at night

15 mins to consider each team to play back for 5 mins

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Key takeaway complexity

21

Soft issues

Hard issues

Incentivisation

motivation

Legal

structureProperty

managementTax

restructuring

Product

extensions

Online

presence

IT strategy

Leadership

development

Skills gaps

analysis

Staff

retention

Financial

reporting

Market

strategy

Product

range

Customer

management

Incentive

Schemes

Management

information

systems

Brand

migration plan

Partnerships

Corporate

governance

Pricing

Training

External

expectations

Communication

Future financing

working capital

requirements

Organisation

changeBusiness

partnerships

Cultural

alignment

Org design

Growth

opportunitiesProcurement

synergies

Acquisition

accounting

IT systems

Policies and

procedures

Store portfolio

Redundancies

Business as usual

Recruitment

Best

practice

sharing

Infrastructure

Management

selection

Competitor

reaction

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Agenda

22

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

23

A short diversion ndash my househellip

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

1 Take a phased approach

24

Long-term integration

Deal

close

Deal sign

announcement

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning

ldquoI am ready

for Day 1rdquo

ldquoI know

what I will

change and

can see how

it will workrdquo

ldquoI can see

benefits

flowing

throughrdquo

4 Implementation1 Due diligence

ldquoI understand

where the

value

drivers arerdquo

ldquoI can see

further flow

through of

benefitsrdquo

bull Programme

setup

bull Day 1

preparation

Quick wins

Detailed integration planningSynergy

evaluation

Capture

learning

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

2 Clearly articulate the integration

strategy

bull What are the integration objectives

bull What decisions havehave not been made (the non-negotiables)

bull What will be merged

bull What will stay separate

bull Who is in charge

bull Who will be leaving

bull Which brands will staygo

bull Which products amp services will change

bull Which head office

bull Will there be redundancies

bull In which areas

bull How will the business model change

25

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

3 Set up a formal integration program

bull Who is on the Steering Group

bull Who is on the Integration team

bull What are the workstreams

bull What are the scope and

objectives of each workstream

bull What resourcesskills do we

need to be involved

bull Do we need external support

bull What does the timeline look

like

bull How will we make decisions

bull How will we communicate with

each other

bull How will we manage

interdependencies

26

WorkstreamAcquirer

lead

Target

lead

External

support

1 Customers [tbc] [tbc] [tbc]

2 Operations [tbc] [tbc] [tbc]

3 IT [tbc] [tbc] [tbc]

4 Finance [tbc] [tbc] [tbc]

5 Procurement [tbc] [tbc] [tbc]

6 HR [tbc] [tbc] [tbc]

7 Legal [tbc] [tbc] [tbc]

Integration

Steering Group

Integration Director

Program office

Typical Integration Program Structure

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

4 Plan in detail for Day 1

bull What will Day 1 look amp feel like

bull What needs to happen on Day 1Week 1

- Eg financial controls supply contracts

bull What internal communications will take place

- ldquoDo I want to work hererdquo

- ldquoWhatrsquos in it for merdquo

bull What external communications will take place (customers media

investorshellip)

bull Who will say what and where

bull What questions do we expect ndash and what are the answers

bull How should we treat overlapping customers suppliers from Day 1

bull What will change for me ndash location email manager job $$$

bull What should we say when the phone rings27

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

5 Consider using a lsquoclean teamrsquo

bull What confidential information do we urgently need to know as soon as

possible

- Overlapping customers

- Overlapping suppliers

- Marketing plans

- Detailed financials

- Employee details

- Etc

28

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

6 Deal with culture upfront

Example cultural assessment

29

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

7 Keep the team marching in step

30June 2012

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

8 Take a structured approach to the

First 100 Days

31

4 Implementation

Step Day

1 Baseline current business position

2 Identify options for the future

3 Evaluate preferred solution

4 Prepare for implementation

Steering Group updates

20 50 75 100

2 Pre-completion

planning3 ldquo100 dayrdquo integration planning1 Due diligence

bull Programme

setup

bull Day 1

preparation

Long-term integration

Quick wins

Detailed integration planningSynergy

evaluation

Example lsquo100 Dayrsquo Integration approach

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

9 Communication ndash the lsquoRule of 7rsquo

Example ndash Merger newsletter

Roadshows

Presentations

Videos

Focus groups

Cascade packs

Intranet

Emails

Surveys

Postboxes

32

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

10 Track amp report progress

Sales amp MarketingPermanent

Allocation

Formal notification to

employeesKey review Ongoing

maintenance

Depot Operations Scope Processes

alignedPilot Go Live

Procurement Understand required allocation of training resources Learning

centersBTVTampD Split

Finance amp Back Office

Deliver benefits statement - 15th BUPA contract

renegotiated

Flex continues

Message on Planet

Preparationbrief administratorsLetters to

employeesPolicy decisionsEmployee lists

Data transfers for ntl schemes

Key review

Providers

briefed

TIM

E

LIN

E

Project September October November December January February

Temporary

staff allocation

All separation plans complete

Processes

mapped

Ongoing

maintenance

ITSAP Payroll Planning Complete

Agree IR Transfer

Year end testing

complete

Activate

Test all required SAP

changes

Synergies Dashboard - Overall

3 Year Target YTD Q1

Target Actual Indicator Target Actual Variance Indicator Target Actual Variance Indicator StatusNotes

poundM poundM poundM poundM poundM poundM poundM poundM

Sales and Marketing 330 75 Red 110 75 (35) Green 110 75 (35) Amber Notes 1

Notes 1

Notes 1

Depot Operations 80 10 Green 12 10 (02) Red 12 10 (02) Red Notes 1

Notes 1

Notes 1

Procurement 360 95 Red 120 95 (25) Green 120 95 (25) Green Notes 1

Notes 1

Notes 1

Finance and Back Office 180 90 Green 60 90 30 Amber 60 90 30 Green Notes 1

Notes 1

Notes 1

IT 340 100 Green 120 100 (20) Green 120 100 (20) Amber Notes 1

Notes 1

Notes 1

Total 1290 370 Green 422 370 (52) Amber 422 370 (52) Green

One - Off Costs 110 24 Red 26 24 (02) Green 26 24 (02) Green Notes 1

Notes 1

Notes 1

Targets vs Actuals YTD

00

50

100

150

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual

Targets vs Actuals Q1

0020406080

100120140

Sales and Marketing Depot Operations Procurement Finance and Back

Office

IT One - Off Costs

poundM

Target Actual3 Year Tracker

-

20

40

60

80

100

120

140

poundM

Using both leading hellip

hellipand lagging indicators

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Agenda

34

1 ldquoThe Morning Afterrdquo

2 Planning merger integration ndash syndicate exercise

3 Implementing merger integration

4 Summary QampA

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Key take-aways

1 Two-thirds of mergers fail - usually because integration fails

2 Start early to ensure a running start on Day 1

3 Dedicate resources and take integration seriously

4 The power of balance ndash value risk people and BAU

5 Pace with structure

6 Communication culture leadership

35

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you

Questions

Mike Sum Partner

PwC Australia

Mobile +61 420 314 505

mikesumpwccom

36

httpwwwpwccomauconsultingmerger-acquisitions-integrationindexhtm

Thank you