Looking to Business Units and Corporate Development.
The minority of companies give the responsibility to a specific individual to take charge for achieving synergies with the new acquisition. It’s also common practice for companies to set additional targets and measure performance on a functional or regional level. Some companies also link the achievement of synergy objectives to the synergy owners compensation.
Traditionally a high value is placed on the completion of the transaction. We believe that this value should also be placed in the completion of integration and the success of the synergy. The business unit along with corporate-development need to work well together in order to come to a detailed, realistic synergy calculation that keeps both teams comfortable. This includes operations as operational teams are more than often hesitant to publish estimates that they may not be able to achieve.
The plan must be brought into the business unit early by the corporate development team in order to give them the appropriate amount of time and information to give a realistic synergy estimate.
At times the Corporate officer tells the operational professional what he thinks the synergy estimate should be while still holding the operational management accountable.
We consider this strategy ineffective. We feel that corporate development should also be accountable for the deal value ,synergy achievement and not only for the deal completion.
For establishing accountability, the use of formal performance monitoring such as a scheduled timetable for the tracking of synergy performance and reporting to corporate boards is most effective when enforcing accountability. We feel the cost and revenue synergies should be reviewed quarterly.
For further exploration into synergies click on the links below