In any merger, acquisition, or joint venture, the sooner managers integrate their companies the faster they capture the expected synergies. So in the hectic days and weeks after a deal is announced, CFOs face a daunting list of responsibilities, such as managing the deal’s financial aspects, justifying the strategy to investors, negotiating with regulatory authorities, and ensuring compliance with the regulations that come into force once a deal is announced. And CFOs must manage all this while essentially flying blind, without access to legally restricted data.
In our experience, establishing a clean team to support integration efforts before a deal closes can help speed up the completion of critical tasks and improve the chances of capturing the merger’s synergies. Working under confidentiality agreements, such a team has unrestricted access to data from each of the companies involved—data legally off limits to the companies’ employees until the deal closes. After compiling and analyzing this information, the team can quickly deliver aggregated findings that help decision makers plan the structure and operations of the merged entity even before the deal has closed.
Given such virtues, it’s surprising that executives don’t set up integration clean teams more frequently. Many CFOs tell us they worry that there won’t be enough time for a clean team to accomplish anything before a deal closes. Some of them express concern that sharing confidential data will expose their companies to undue risk should the deal fall through—or that the impact of the clean team won’t justify the expense of assembling it.
Such misplaced concerns often lead to costly delays. We believe that a well-structured clean team almost always makes it possible to capture a merger’s value more quickly and can reduce the risk of failure. Such teams address myriad issues that are well within the limits of the regulations—and can help to resolve them well within the period between the announcement and the close of a deal.
Indeed, we find that managers consistently underestimate how much time may be involved at this stage, which for the 455 largest mergers in 2004 lasted an average of nearly three months. That is plenty of time for a clean team not only to conduct analyses and make decisions that expedite postclosing integration but also to prepare the merged company to be fully operational from day one. Thus the team’s work helps capture more of the merger’s synergies before competitors have a chance to react.