Successful Integration of Acquired
Company's Back Office
Deploying a Process-First Approach to Analyzing Integration Planning and Execution for a Successful M&A Integration
Our client, a mid-sized company specializing in consumer goods, recently acquired a competitor. The acquisition aimed to expand our client's market presence and enhance its operational capabilities. However, integrating the new company's back-office operations presented significant challenges.
To ensure a seamless transition and maximize the value of the acquisition, our client partnered with Levreg to undergo a comprehensive integration strategy across Finance, IT, and HR, rationalizing operational strengths and addressing redundancies.
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Challenges
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Before the integration, our client faced several challenges:
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1. Operational Redundancies: Both companies had overlapping processes and technologies in their Finance, IT, and HR departments, leading to inefficiencies.
2. Disparate Systems: The use of different technologies and platforms hindered effective communication and data sharing.
3. Geographical Disparities: Multiple office locations in high-cost locations increased operational costs and complicated the integration process.
4. Employee Bands: Different employee structures and benefits packages created discrepancies and potential conflicts.
5. Vendor Management: Both companies had different outsourcing vendors, leading to fragmented vendor management and higher costs.
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The Levreg Solution
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To address these challenges, we implemented a strategic integration plan focusing on rationalizing operations, merging processes, divesting redundant technologies, and streamlining locations and employee bands. The plan also included integrating existing outsourcing vendors to enhance efficiency.
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1. Operational Rationalization: We conducted a thorough analysis of both companies' operational strengths and redundancies. By identifying best practices and eliminating duplicative processes, we used process excellence techniques to streamline operations across Finance, IT, and HR departments.
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2. Technology Integration: Disparate systems were evaluated, and redundant technologies were divested. We integrated the acquisition company's data into the existing acquiring company's ERP system, ensuring a unified platform for all financial and operational data. This integration facilitated better data sharing and decision-making as well as contributed to reduced cycle time for reporting, lower operational costs, and a unified view across reporting functions. It's important to note that both companies were already operating on similar instances of SAP, which made this integration simpler than others we have performed.
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3. Geographical Consolidation: We consolidated office locations to reduce overhead costs and improve collaboration. Key offices were retained while redundant locations were closed, resulting in a more centralized and efficient operational structure.
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4. Employee Band Harmonization: Different employee structures were harmonized to create a unified workforce. Benefits packages and job roles were standardized, ensuring fairness and consistency across the merged entity. This alignment improved employee morale and reduced potential conflicts.
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5. Outsourcing Vendor Integration: We integrated the acquisition's outsourced processes into our client's existing vendor management framework without activating force majeure penalties. This consolidation reduced vendor management complexity and leveraged economies of scale, resulting in cost savings and improved service quality.
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Outcomes
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The integration yielded impressive results across various metrics:
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1. Streamlined Operations: By eliminating redundant processes and divesting overlapping technologies, our client achieved a 35% increase in operational efficiency and significant reduction of operating costs (in the multi-millions across a three-year horizon.)
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2. Cost Savings: The consolidation of office locations and divestment of redundant technologies resulted in significant cost savings. Our client reduced operational expenses by $1.2 million annually.
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3. Enhanced Employee Productivity: Harmonizing employee bands and standardizing benefits improved employee satisfaction and productivity. Employee engagement scores increased by 19%, and productivity improved by 28% while churn of key personnel was minimal (<1%).
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4. Improved Data Management: Integrating the acquisition company's data into our client's ERP system improved data accuracy and accessibility. Financial reporting accuracy increased by 22%, enabling better decision-making and strategic planning.
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5. Vendor Management Efficiency: The integration of outsourcing vendors reduced vendor management complexity and costs. Our client achieved a 15% reduction in outsourcing expenses, saving approximately $400,000 annually. The quality of outsourced services improved, leading to higher operational reliability.
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6. Seamless Transition: The comprehensive integration plan ensured a seamless transition for employees and operations. There was minimal disruption during the integration process, and key performance indicators (KPIs) were maintained or improved.
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7. Market Position Strengthening: The successful integration of the acquired company's operations further strengthened our client's market position. The combined entity could now leverage synergies to enhance product offerings and customer service, resulting in a 14% increase in market share.
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Levreg's integration of the acquired company's back office operations through operational rationalization, technology integration, geographical consolidation, employee band harmonization, and vendor management optimization resulted in significant improvements across various metrics. The streamlined and optimized processes, coupled with the seamless transition to existing outsourcing personnel, enhanced the efficiency and effectiveness of the merged entity.
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By embracing a comprehensive integration strategy and focusing on leveraging operational strengths while addressing redundancies, Levreg successfully maximized the value of this acquisition. This success story serves as a testament to the power of strategic planning and execution in achieving measurable and sustainable business growth post-acquisition.
