Navigating to M&A Success
A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Finding What You Need
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
2
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
While it’s impossible to predict the movement of the global economy over the next
few years, it’s a safe bet that deal making will continue as a time-tested way for
companies to refocus, sometimes retrench and ultimately grow more profitably.
It’s an equally safe bet that the risks of deal making will also increase, given the
mounting complexities of managing in a highly interconnected, technologically
sophisticated global environment. All this puts more pressure on business leaders
to quickly demonstrate a deal’s financial and operational value.
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
Lessons
From the
Front Lines
Deal Making
of
An Introduction to Our M&A Services
Deal success always begins with the right strategy and transaction goals —
whether for acquisition, merger, spin-off or divestiture. But ultimately, realizing
a deal’s value by any chosen metric comes down to how well the strategy is
executed.
Over the years, Towers Watson has been involved in thousands of deals, helping
M&A teams conduct effective due diligence before closing and then plan,
integrate and implement post-close. We have a deep bench of global experts, and
considerable experience on the ground with virtually every type of domestic or
cross-border transaction across geographies and industries.
We know what works. More importantly, perhaps, we know how to identify and
handle the challenges and obstacles that inevitably arise — from struggles to
retain key talent, to different agendas among organizational functions, to building
an aligned leadership team, to integrating cultures, to helping affected employees
cope with uncertainty.
We’ve created this deal navigator to help you find the information you need quickly
and easily — whether to prepare for an impending transaction or address an
ongoing situation. You can navigate by the phases of the typical deal process or
by the type of deal. Throughout, you’ll also find references to what we call the
significant seven. These are the seven areas of critical value that can make or
break a deal’s success from an operational and workforce standpoint. They cut
across every type and phase of a deal, and should form the core of your plan for
integration and implementation.
Welcome to the fast-moving and ever-changing world of M&A.
Mary Cianni, Global M&A practice leader
3
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
The
Significant
Seven
The
Keys
to
Deal Success
There are seven areas that materially affect the success
of a deal. They come into play in virtually every type of
deal and at every stage in the M&A life cycle to greater
or lesser degrees, but they can’t be ignored or given
short shrift at any stage.
Explore each area to see what’s involved and how
Towers Watson can help.
•Leadership
•Culture
•Change Management and Communication
•Talent Management
•Compensation
•Benefits
•HR Service Delivery
4
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
The
Significant
Seven
Organizational
Readiness
Due Diligence
The
Keys
to
Deal Success
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Leadership
Selecting, retaining and equipping the right leaders for the
new entity is critical to success, and identifying leaders who
are capable of delivering on a new business agenda can be
daunting. Towers Watson’s support includes:
••Assessing retention risks for executives and key talent
••Designing financial and nonfinancial retention strategies and
vehicles
••Designing programs to enhance change leadership skills
••Conducting leadership assessments to identify the strengths
and gaps in individual leaders, leadership teams and/or
leadership segments
••Customized assessment tools including 360-degree
feedback surveys, structured behavior-based interviews,
personality and leadership capability instruments, and
business simulations
••Aligning executive performance and rewards with drivers of
shareholder value
Global Reach
M&A Tools
Culture
5
Change Management
and Communication
Talent Management
Compensation
Benefits
HR Service Delivery
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
The
Significant
Seven
Organizational
Readiness
Due Diligence
The
Keys
to
Deal Success
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Culture
Reconciling different corporate cultures can be one of the
toughest aspects of a merger or acquisition. And when
a deal also involves workforces from different countries,
language and culture issues compound the challenge.
Towers Watson’s support includes:
••Assessing the cultures of the various entities involved in
the transaction
••Developing an organizational culture change strategy
and set of interventions to address and align differences
••Choosing an approach and methodology to measure
ongoing leader, manager and employee engagement
••Helping build an understanding of regional and local
cultural norms and nuances that will impact workforce
policies, employee attitudes and the way work gets done
in cross-border situations
••Incorporating cultural considerations into integration
plans and communications
Global Reach
M&A Tools
Leadership
6
Change Management
and Communication
Talent Management
Compensation
Benefits
HR Service Delivery
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
The
Significant
Seven
Organizational
Readiness
Due Diligence
The
Keys
to
Deal Success
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
Change Management and Communication
Communication and change management support are
the glue that connects all the other areas of focus in a
transaction and ensures they move from the planning
template to practical execution. Our work in this area
includes:
••Helping shape an engaging employee experience
throughout the entire transaction
••Developing a change management strategy and plan
aligned with key integration milestones for each
stakeholder group
••Building change leadership toolkits and providing training
for HR, leaders and managers
••Creating a strategy and plan for all leader, manager and
employee communication
••Developing and managing the content and deployment of
messages from the announcement through integration
••Developing materials and processes that address
internal stakeholder needs
••Creating a variety of media to deliver messages in the
most effective ways, including websites and social media
M&A Tools
Leadership
7
Culture
Talent Management
Compensation
Benefits
HR Service Delivery
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
The
Significant
Seven
Organizational
Readiness
Due Diligence
The
Keys
to
Deal Success
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Talent Management
For some transactions, securing talent is the primary
objective. But even when there’s another rationale —
gaining formal entry into a foreign market, for instance
— the talent issue remains critical. What skills reside
in the target’s workforce? To what extent are they
complementary, redundant or essential to closing strategic
gaps in the new organization? What will it take to retain
those people or functions critical to the business? When
and how can you identify who they are?
Insurance M&A
Services
Our work in this area includes:
••Analyzing the composition, flow, skills and cost of the
current and projected workforce
••Identifying actions to close workforce gaps and
implications for sourcing, deployment, engagement,
rewards and development
••Establishing an appropriate selection strategy, process
and tools, including a staffing operations center
••Developing retention and transition plans to retain talent
and ensure business continuity
••Deploying tools and processes to enhance managers’
ability to lead newly formed teams
Global Reach
M&A Tools
Leadership
8
Culture
Change Management
and Communication
Compensation
Benefits
HR Service Delivery
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
The
Significant
Seven
Organizational
Readiness
Due Diligence
The
Keys
to
Deal Success
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
Compensation
Pay and benefit decisions send an early and important
signal to the workforce, shaping perceptions —
intended or not — about fairness, equity, consistency
and competitiveness. It’s important to set the right
strategy early for harmonizing programs — to what
extent and over what time frame, as well as to ensure
that new programs will appropriately balance cost
constraints with talent considerations.
In this area, our support includes:
••Providing side-by-side analyses of compensation
and performance management programs to
clarify similarities, differences and key integration
challenges
••Drawing on our proprietary global databases to
benchmark programs against competitive norms and
best practices, and recommend the right strategy
••Using our Total Rewards Optimization (TRO) tool
and approach to determine how to size and allocate
reward monies in alignment with business goals,
actual employee preferences and cost constraints
••Aligning performance management programs to help
drive the behaviors needed for success in the new
organization
••Creating new global, regional and/or local salary
structures, career frameworks and, as relevant,
sales compensation programs
M&A Tools
Leadership
9
Culture
Change Management
and Communication
Talent Management
Benefits
HR Service Delivery
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
The
Significant
Seven
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
Keys
to
Deal Success
Towers Watson’s support includes:
Benefits
For organizations that are still in the earliest stages of adopting
a total rewards perspective for their benefits, pay and related
reward programs, a transaction can provide the opportunity to
accelerate their progress. A transaction often forces both parties
to look not only across their differing benefit programs but to
consider those programs within a more cohesive global whole.
That helps inform holistic decisions about how much they can
invest in total, and how to allocate that amount across programs
in line with legal and regulatory considerations, business goals,
cost constraints and desired employee behaviors. A total
rewards approach can also help inform decisions about when,
how and where to harmonize various benefit programs, taking
into account the varying local regulations, government subsidies,
competitive and cultural norms, and other factors that come into
play when crossing borders.
M&A Tools
Leadership
10
The
Culture
Change Management
and Communication
••Providing side-by-side analyses of benefit, workplace, work/life,
time-off and perquisite programs to clarify costs
••Identifying key liabilities (e.g., pension) and accounting implications
(i.e., balance sheet, P&L, cash) as well as key integration challenges
••Understanding current and legacy benefit programs as well as
local market trends, and cataloging those policies and procedures
••Drawing on our proprietary global databases to benchmark
programs against competitive norms and best practices, and
recommend a cost-efficient benefit strategy
••Developing plan designs to support the new company’s total
rewards philosophy and harmonize existing legacy programs
••Using our TRO tool and approach to determine how to size and
allocate benefit investments within a total rewards structure in
alignment with business goals, actual employee preferences, and
cost and legal constraints
••Articulating broad benefit integration challenges, risks and
mitigation plans
Talent Management
Compensation
HR Service Delivery
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
The
Significant
Seven
Organizational
Readiness
Due Diligence
The
Keys
to
Deal Success
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
HR Service Delivery
The intensity of most transactions complicates the
otherwise ongoing procedures for delivering services
to employees. It can affect everything from payroll, to
benefit enrollment, to fielding routine benefit questions
and changes, to running physical and virtual training, to
communication and technology implementations. The
biggest challenge is keeping the delivery engine running
smoothly while reviewing and reconciling differences in
how the various HR functions are structured, staffed and
managed.
Insurance M&A
Services
Our support in this area includes:
••Developing an HR strategy, structure and service delivery
model that fits the needs, constraints and goals of the
new organization
••Assessing, selecting and integrating HR technology
systems
••Providing transition services — including ongoing payroll,
compensation, benefits and HR program support —
during the transformation period to minimize interruption
and disengagement
••Assessing and harmonizing HR policies
Global Reach
M&A Tools
Leadership
11
Culture
Change Management
and Communication
Talent Management
Compensation
Benefits
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Explore by Deal Time Frame
•Organizational Readiness
Integration Planning
Implementation
•Due Diligence
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
•Integration Planning
•Implementation
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
12
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
13
Organizational Readiness The work required to close a transaction is significant
and varied. Given the increased complexity of deals
today, even experienced deal makers may not always
have the skills, resources or time required to execute
deals effectively and on schedule. New or occasional
deal makers often struggle to determine the most
efficient processes and find people to get the job done.
Towers Watson research and client experience confirm
that deals are concluded more successfully when HR
addresses people and culture issues early, strategically
and with discipline. Our well-tested and rigorous
readiness process can equip your HR team — even a
novice group — to handle the entire process, or we can
provide a refresher in key areas. We assist across the
spectrum of activity, helping your team:
••Evaluate the strategic deal rationale and fitness of
potential candidates — including their workforce
and culture, leadership styles, talent management
programs, cultural and communication styles, and HR
and related workplace programs and practices that
could affect integration
••Assess potential costs and risks — including the total
cost of the target’s compensation, pension, health
care, retiree medical, and related workforce and
reward programs
••Identify and prepare your staff to address the full
range of integration issues — from identifying leaders
and retaining key talent, to harmonizing workplace
programs and managing the communication strategy
so critical to the success of any organizational change
“Our
“
organization had to deal with a large number of
acquisitions over the last two years, and our HR team
had to hit the ground running. We turned to Towers
Watson for help in ensuring we were prepared to deliver
what the organization needed. The HR readiness
process gave our team a common framework and
language to deal with multiple, often complex, work
streams, as well as standardized tools and approaches for
due diligence and integration that helped us successfully
stay on top of such a large volume of activity.”
— Dennis T. Leonard, Vice President of Global Total Rewards & HR Services, Arrow Electronics
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
M&A Readiness and Program Management Office (PMO) Services
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
Our flexible stand-alone or bundled M&A HR readiness services
are tailored to fit your needs across any or all of the four phases
of a transaction. These include:
••Playbook Development
An M&A Playbook is your HR guide for the entire M&A process.
Customized to your unique circumstances, it includes a robust
set of tools and templates, and covers the latest HR best
practice standards for managing M&A activities, handling due
diligence, and assessing and integrating the people aspects of
the transaction. It enhances HR’s ability to partner with other
corporate teams by documenting connection points along the
way.
••HR Readiness Training
Our M&A HR Readiness Training is structured to prepare
your HR team to play a more critical and influential role in
supporting future transactions. Whether you’re an experienced
serial acquirer or starting your first deal, we work with you
to customize the training curriculum to meet the skill needs
of your team, the specific characteristics of your transaction
history and any current deal activity.
••HR PMO Services
Given the vast number of work streams and activities involved
in integration, an HR PMO can spell the difference between
success and failure in achieving deal goals. Our HR PMO
Services include:
••Providing strategic guidance for key decision makers to
ensure teams are focusing on the right priorities at the right
times
••Acting as a hub for information and communication —
connecting day-to-day activities with leadership priorities
••Pinpointing accountability and ensuring execution
••Delivering objective reporting to key stakeholders
••Managing the scope, schedule and budget, as well as the key
issues and risks
••Developing greater collaboration among work teams
••Aligning stakeholders with a consistent set of priorities
••Creating tools and templates to streamline work effort
For longer-term PMO support, we provide ongoing project
management support to keep integration on track and manage
change issues throughout all aspects of implementation. And in
the case of international or cross-border transactions, we bring
special expertise and experience in managing global PMOs.
“QBE
“
North America has grown substantially by acquisition in the last two years, more
than doubling the employee head count. Towers Watson has been our preferred HR
partner to both support legal Day One operations and develop an HR harmonization
program for the different U.S. businesses around one common footprint. In addition
to the large and varied HR complexities, Towers Watson performed a PMO function
and collaborated across other functional work streams to ensure alignment and manage
dependencies. QBE managed three distinct phases of HR acquisition, integration and
harmonization, and utilized Towers Watson on all three, based on the successes and
trust created in our partnership.”
— Kevin Sweeney, Head of Total Rewards, Human Resources, QBE The Americas
14
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
Due Diligence
Surprises are never welcome in a transaction,
especially if they’re discovered too late to address
the consequences. So it’s critically important to
undertake the necessary detective work — as early
in the process as possible — around business and
culture fit, workforce program costs and liabilities,
policies, and integration goals and strategy. We work
with your team to:
Case in Point
To expand its market, a U.S. electric and gas utility was considering a bid
••Identify costs, liabilities and accounting implications
for the target’s retirement, health care, retiree
medical and other reward programs
••Understand current and legacy programs as well as
local market trends
••Determine gaps in programs and integration risks/
issues
••Identify individual contract issues
••Review all executive compensation contracts and
vehicles
••Assess individual retention risks
••Conduct a high-level culture overview based on data
room information, observations and conversations
View
Towers Watson’s
Due Diligence
Tools
View
Towers Watson’s
Global M&A
Retention Findings
for a rival electric company. But when the company conducted its HR due
diligence, it discovered that the target was saddled with an underfunded
pension plan and accompanying rich retiree medical plan. Although the
underfunding was severe, the company felt the acquisition was central
to its business strategy, so it opted to renegotiate the price to offset
the additional unanticipated cost. It was also able to address some of
the cost issues via a new benefit strategy that included offering retirees
lump sum annuities, freezing the pension plan to new entrants, and
establishing a defined contribution retiree medical plan through a private
exchange for current retirees and pre-retirees.
“Towers
“
Watson ensured that our due diligence was
successful — getting the right resources on the ground
across different cultures and languages — and helped
develop our HR M&A Playbook. They had a strong
understanding of our business and corporate strategy,
and brought their considerable transaction experience to
bear in helping deal with our particular situation. They
are an indispensable partner to Hershey in helping us
achieve our growth goals efficiently and effectively.”
— Debora Robare, Senior Director, Global Benefits, The Hershey Company
15
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
16
Integration Planning
Once the deal has closed, the hardest work begins.
Depending on how much change it brings for individuals
across the organization, the deal’s completion tends
to usher in a period of intense highs and lows in the
workforce that can cut into productivity and raise
anxiety. People will likely have new managers, different
colleagues, new tasks and, often, different pay and
benefit programs. Keeping operations running smoothly
takes planning, time, resources and focus.
We help set priorities for the first 100 days, and
prepare HR and other specialty teams for this pivotal
period. Depending on your needs, we also supply
disciplined HR PMO support. Specific support during
this phase includes:
••Building a shared vision for the integration and
beyond, working with the new leadership team and
defining the characteristics of an integrated culture
that supports the business strategy
••Providing employees with the information they need,
when they need it, and advising ways to address
questions and concerns whose answers aren’t yet
clear
••Reviewing current jobs and roles, and creating a job
architecture and role definitions appropriate for the
new organization and its longer-term goals
••Evaluating all existing reward programs and
recommending what and where to harmonize or
integrate, and over what time frame — taking into
account talent management, financial and risk factors
••Helping balance competing priorities: from delivering
day-to-day HR services, to supporting business
integration needs, to integrating the HR function and
technology systems
Case in Point
When a highly respected global high-tech company decided to acquire a smaller
start-up to increase market share and expand its global footprint, it seemed like
a straightforward transaction. But success depended on retaining the key talent
that had built the start-up into an innovation powerhouse. Other risks included an
extremely short transaction timeline and big differences in corporate cultures.
First, the acquirer set up a PMO to ensure it could handle all the work streams
associated with the integration of the two companies. Then, its deal team used
culture diagnostics to identify key gaps in culture and employee experience.
Using that information, it developed talent management and total rewards
strategies to foster the creativity and collaboration that had made the start-up
a success. It also launched a new, company-wide, long-term incentive program
that appealed to the talent segments identified as key to long-term growth. The
multifaceted strategy worked, with high levels of retention both immediately and
over the longer term.
“As
“ a company that is continuously growing through acquisitions, GE is
committed to ensuring a seamless cultural integration process. A key step in
accomplishing this is the cultural assessment work we do with Towers Watson.
The assessments give us a deep understanding of employees’ perceptions about
the culture, help us monitor levels and key drivers of employee engagement,
and gauge the effectiveness of our culture integration plans. The insights we
gather are crucial in refining our integration process, and identifying enablers
and barriers to a successful integration.”
— Karunesh Prasad, Culture Integration Leader, GE Oil & Gas
View
Towers Watson’s
Integration Planning
Tools
View
Towers Watson’s
Global M&A
Retention Findings
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Implementation
Embedding change successfully is both a rational
and emotional process. It takes time, concentrated
leadership and management attention, and welldefined programs and processes that give employees
a clear and consistent view of the new organization
and what it stands for. The day employees start
identifying themselves as part of the new entity, rather
than their legacy company, is the day a company
knows it has begun a successful implementation.
How quickly and smoothly that happens depends on
a range of factors, including the size and scope of
the transaction, the number of people and countries
involved, the organization’s openness and flexibility,
and its willingness to work the process fully through to
completion.
Our proprietary tools and techniques can help you
manage the entire range of implementation challenges:
••Leadership development
••Change management consulting
••Employee engagement surveys
••Team building and conflict resolution
••Training design and development
••Personal and group communication development
••Systems analysis and process reengineering
Global Reach
M&A Tools
View
Towers Watson’s
Implementation
Tools
17
View
The
Significant Seven
Critical Value Areas of a Deal
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Explore by Deal Type
•Domestic
Integration Planning
Implementation
•Cross-Border and Emerging Markets
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
•Spin-Offs, Divestitures and Joint Ventures
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
18
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
Domestic
Doing a deal in your own country generally remains
the most prevalent type of transaction, particularly
in large, diverse countries like the U.S. or China,
where the M&A options are many and varied within
national borders. It’s tempting to assume that
buying or merging two companies in the same
country simplifies the deal process, but other than
having fewer or no language or national cultural
barriers, experience proves otherwise. Domestic
deals still bring significant risks and challenges,
in part because the many apparent similarities
between the entities may lead the deal makers to
miss or underestimate significant differences —
especially if the organizations are from the same
industry or region.
••Provide employees with the right amount of
information, at the right time, in an effective and
engaging fashion
••Get the right people, with the right skills, into the right
roles for both the short and long term
••Integrating your overall reward programs and policies
to balance attraction, retention and engagement
needs against cost and risk factors
••Balance competing priorities — delivering day-to-day
HR services, supporting business integration needs,
and integrating the HR function and systems
We’ve helped hundreds of organizations conduct
domestic deals to expand their market share
within their borders, remove a competitive threat,
or enter into new product or service areas. We
work with your deal team to:
••Identify pension liabilities and other accounting
implications while determining gaps in programs
and integration risks/issues
••Build an aligned vision for the integration and
beyond, including effective leadership teams and
an integrated culture that supports the business
strategy
M&A Tools
19
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
Cross-Border and Emerging Markets
Cross-border deals are growing in number and size —
especially outside North America — although they still
remain the least prevalent type, largely because they
require a level of management, coordination, integration
and implementation that many companies have yet
to master. But they will need to develop that mastery
over time to compete effectively for capital, resources,
customers and workers in the global economy.
In the case of emerging-market deals, challenges and
complexities can exceed those in more traditional crossborder situations. For instance, with anticorruption and
anti-bribery laws under stricter enforcement, regulators
are now holding U.S. corporate buyers accountable
for prior U.S. Foreign Corrupt Practices Act violations,
even if those violations were not known at the time of
purchase. The impact is being felt by sellers in highgrowth markets as they share relevant information more
readily and by acquirers as they conduct more thorough
due diligence.
For both cross-border and emerging-market deals,
cultural differences are typically also more pronounced,
since both the companies involved and their
headquarters countries are likely to be at different
stages of development from a business standpoint. The
risk of talent loss can skyrocket.
Our presence in 38 countries gives us specific
knowledge and insights that can make a crucial
difference in addressing regulatory and cultural factors,
among other challenges.
We work with you to:
••Review and fully understand the deal context, country
nuances and key areas of risk during due diligence,
especially in an unfamiliar country or emerging
market where conducting the thorough due diligence
buyers in developed economies take for granted can
be far more difficult
••Prepare for post-closing due diligence to resolve any
local country issues not fully addressed pre-close
••Address talent and leadership retention — a key
business risk in cross-border and emerging-market
deals
••Set a total rewards philosophy and strategy that
appropriately reflects the corporate needs but
takes into account unique local conditions and
requirements
••Help design and implement reward programs, as
required
••Identify an approach to HR oversight/governance,
including oversight of local decision making
••Address local employee communication and
consultation requirements
••Evaluate the right approach to supporting the HR
infrastructure (payroll capabilities, policies, systems
and procedures) — whether through on-the-ground
resources and support, a shared service approach or
a fully outsourced model
View
Towers Watson’s
Culture
Tools
20
“Towers
“
Watson
continues to impress
us with their strong
M&A HR integration
expertise, deep
understanding of our
company’s business, and
precise interpretation
of local policies and
regulations. Their
approach of customerfirst and pragmatic
working style is not only
evident in our project
outcomes but also in the
mutual collaboration we
experience throughout
the process. We look
forward to continuing
our relationship and
achieving even more
successes in the future.”
招商局集团人力资源部
— China Merchants Group
Human Resources
View
The
Significant Seven
Critical Value Areas of a Deal
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
Spin-Offs, Divestitures and Joint Ventures
The catchall term “M&A” is commonly understood to
cover a far broader set of transactions than mergers
and acquisitions. Lately, more than ever, these include
spin-offs, divestitures and joint ventures, which
business executives often view as a way to return value
to shareholders amid challenging market conditions.
Senior management is constantly examining business
units that aren’t closely aligned with the company’s core
business or have persistently low-growth rates — and
choosing to spin them off or divest completely in order
to achieve their bottom-line financial goals. And they’re
often simultaneously setting up joint ventures with one
or more partners in order to reach growth goals that
they couldn’t achieve on their own.
Spin-offs and divestitures can be strategic, operational
and financial game changers. They may lead to
additional restructuring, require corporate support
for new operational functions or otherwise introduce
new organizational complexity in managing the
financials. Common challenges include lack of a
detailed divestiture process, failure to plan the new
organization, resource allocation issues, and an overall
miscalculation of the complexity and importance of
people issues.
And in the case of joint ventures, problems that arise
can often be traced to the early stages of negotiations:
the leaders selected to represent each company, their
preparation, and their advisors’ type of advice or level
of experience.
In these areas, Towers Watson can help:
••Assess retention risks, and design strategies,
and financial and nonfinancial approaches to
retain critical talent
••Create processes and tools to drive the selection
process for leaders
••Develop executive transition plans, and equity
and/or incentive plans for the new entity
••Conduct analyses of future workforce needs and
gaps
••Assess the culture of the parent company, and
develop recommendations and a change strategy
that leads to the right culture for the new entity
••Benchmark current rewards against competitive
norms and best practices, and recommend an
appropriate reward strategy
••Review benefit, workplace, work/life, time-off and
perquisite programs to understand liabilities and
spin-off challenges
••Develop an HR strategy, structure and service
delivery approach that reflects the needs of the
new entity
••Establish a framework for transition services
••Develop an overall change management strategy
and communication plan
View
The
Significant Seven
“When
“
Eastman Kodak
Company divested its
Personalized Imaging
and Document Imaging
Businesses — to form
our new company, Kodak
Alaris — we knew we
had to be completely
ready for Day One. By
partnering with Towers
Watson, we were able
to quickly and painlessly
address retirement and
benefit issues for 4,000
employees in 35 countries,
and ensure that they all had
benefits coverage in place
by deal close. Following
a successful launch of our
new company, we are
now working with our
Towers Watson team on
key implementation issues,
including helping to build
a leadership team and a
new global HR function
for Kodak Alaris.”
— Gary Fisher, HR Director,
Kodak Alaris
Critical Value Areas of a Deal
21
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Case in Point
A multibillion-dollar global conglomerate headquartered in the U.S. with
employees in 30 countries decided to spin off two businesses — an
industrial air company and a defense supplier — it felt would fare better
operating separately. The deal required coordinating the spin-offs across
multiple countries with limited data on the non-U.S. employees, and ensuring
that employees of the divested companies had appropriate employment
offers and compensation and benefit packages as of Day One. Because
of the complexity of the deal, HR started with organizational readiness —
developing a playbook to follow throughout the process, training HR staff
and establishing the PMO. It then turned its attention to building unique
compensation and benefit programs that were appropriate for the smaller
size of the new companies, and for the types of employees being hired or
retained. The plans needed to have a common philosophy, yet conform
to local regulations. Before Day One, HR had successfully established
HR functions for all the businesses and had leaders in place at each
organization. Communications to employees were also well under way — and
a schedule had been set for regular communications over the next year, with
compensation and benefit programs up and running.
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
22
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
Partnering With Towers Watson
Towers Watson has the experience, knowledge and
expertise to help your organization achieve its deal
objectives, no matter the deal type, location, time
frame or business sector. Our global team has worked
on thousands of transactions across industry sectors
and geographic borders, participating in every phase
from target evaluation, through due diligence, to postdeal integration.
This breadth of experience, coupled with our extensive
research-based knowledge of the employee mindset
and human resource and benefit issues, gives us a
strong foundation to help you make the right decisions
for your workforce. Our practical experience also
means we know how to shape solutions to reflect
specialized industry and cultural distinctions and
nuances. While we understand that each deal is as
unique as the organizations entering into it, we also
know how to apply a time-tested set of processes and
tools to bring clarity, efficiency and order to what often
feels like a chaotic process.
Equally important is how we work with you. We view
ourselves as part of your team, and we anticipate
being on site, working alongside you, throughout the
process. We take a collaborative approach, with a
focus on understanding and working toward deadlines
and goals, identifying and helping address issues as
they arise.
We know M&A. Shouldn’t you know us?
“Towers
“
Watson has been a partner to BP for many
years, working with us on multiple transactions
and helping to build up our internal capabilities.
We can count on them any time of the day, any
day of the week, to provide focused support for us
and our business partners going through deals.”
— Gary Hibbard, M&A Manager, BP*
M&A Tools
*Quote reflects personal views.
23
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
24
Inside the Insurance Industry: Specialized Expertise
Towers Watson’s Insurance M&A Services
Towers Watson has the combination of deep
life and property & casualty (P&C) insurance
industry knowledge and M&A expertise to help
companies identify, evaluate and execute corporate
transactions.
As the largest global consultancy focused on the
insurance industry, our experts understand the
business of insurance. Our expertise spans the
entire M&A process — not just one phase of the
process or one specific technical skill — which
helps ensure that clients’ transactions achieve their
objectives. We assist insurance (and reinsurance)
companies as well as investment bankers and
private equity firms with merger, acquisition, sale
and restructuring transactions.
Our services include but are not limited to:
Strategy and Planning
••Strategy formulation and international/regional
market understanding
••Initial assessment and review of alternative
options
••Robust and documented windshield appraisals of
potential targets
••Managing stakeholders
••Team and process organization/education
Due Diligence
••Financial and risk due diligence
••Investment/ALM due diligence
••Distribution and strategic due diligence
••Reserve adequacy and claims
••Pricing and underwriting capability
••Capital management and modeling
••Operational efficiency
••Transaction structuring
••Negotiation support
Implementation
••Regulatory support
••Integration planning
••Post-merger integration/execution
••Financial modeling
••Distribution
••Restructuring
••Underwriting strategy
••Deal debrief
••Post-deal evaluation
••Purchase accounting
For more information on our insurance
M&A consulting offering, please contact your
Towers Watson consultant or visit us at
Towers Watson’s Insurance M&A Services.
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
Our 14,000 associates in 38 countries and regions
work together to deliver the perspectives that give
your organization a clear path forward.
••Argentina
••Australia
••Austria
••Belgium
••Bermuda
••Brazil
••Canada
••Chile
••China
••Colombia
••France
••Germany
••Hong Kong
••India
••Indonesia
••Ireland
••Italy
••Japan
••Malaysia
••Mexico
••Netherlands
••Philippines
••Portugal
••Russian Federation
••Singapore
••South Africa
••South Korea
••Spain
••Sweden
••Switzerland
••Taiwan
••Thailand
••Turkey
••United Arab Emirates
••United Kingdom
••United States
••Uruguay
••Vietnam
Global Reach
M&A Tools
25
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Tools and Resources
Having the Right Tools and Resources to Help the Deal Go Smoothly
Regardless of the kind of transaction you are planning, Towers Watson brings a multitude of sophisticated and
proven tools to any deal, including due diligence checklists and data requests, reporting templates, transaction
road maps, and others to support all aspects of people and culture integration. Here is just a snapshot of some of
our tools, templates and other resources:
Organizational Readiness
Due Diligence
••HR Readiness Training: Flexible stand-alone or
bundled M&A HR readiness services tailored to fit
your needs across any or all of the four phases of a
transaction
••Playbook Development: HR guide for the entire
M&A process, covering the latest HR best practice
standards for managing M&A activities, handling due
diligence, and assessing and integrating the people
aspects of the transaction
••Program Management Office (PMO) Toolkit:
Our change-enabled PMO Toolkit can remove the
administrative burdens to focus on issues that matter
most and bring objective rigor to the process
••BenTrack Side by Side: Detailed, side-by-side
comparison of benefits with the capability to pull in
peer-group data and determine valuation of programs
••HR Due Diligence Request: List of required
information, including General, Compensation,
Benefits, Industrial Relations, Employee Census Data,
Talent, Culture and Legal
••Side-by-Side Comparison of Programs and
Practices: Broad-based, side-by-side comparison of
programs, policies and procedures with high-level
recommendations
••Culture Assessment: Tools to support the deal
team in documenting and assessing initial cultural
observations and findings
Global Reach
M&A Tools
Learn more about our
HR Readiness and
Program Management
Office Services
26
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
Integration and Implementation
Change Management and Communication
••Change Management Plan: Sample high-level change
plan identifying key activities and deliverables for
strategy and implementation phases
••Change Management Two-Week Game Plan:
Visual format for two-week snapshot of activities
by stakeholder group and change lever (leadership,
involvement, learning, etc.)
••Communication Plan: Full-scale sample
communication plan across all four phases of a
transaction with its own subset of tools, including:
••Announcement Employee Package
••Announcement Planning Guide
••Day One Employee Experience Communication
Planning
••Integration Planning Newsletter
••Selection Criteria for M&A Communication Team
••Integration Team Communication Planning
Workshop
••Senior Leadership Interview Guide
••Communication Team Kickoff Presentation
••100 Sample Employee Questions ••Integration Plan: Sample plan for pre-close, Day One
and first 100 days
••Online Employee Opinion Surveys: Employee
surveys that draw on advanced analytics, leadingedge technology and the world’s largest normative
database of employee attitudes
••Stakeholder Analysis Template: Matrix of stakeholder
importance and commitment, and template for
planning influence response
Culture
••Culture Alignment Tool (CAT): Culture diagnostic
that enables legacy organization executive leadership
to test alignment quality between current attributes
and new strategy, and even more important, ranking
of attributes, given planned strategy shifts
••Culture Cross-Match: Culture diagnostic that helps
employees pinpoint their company’s attributes across
a spectrum of relevant possibilities
••Culture Executive Interview Guide: Guide for
conducting culture interviews with executives
••Culture Focus Group Guide: Guide for conducting a
focus group to measure employee perspectives on
current culture, as well as values and behaviors
••Culture Change Road Map: Sample guide for
achieving culture change objectives
••Merger Monitor: Survey tool that identifies and
tracks progress on key deal priorities, including
drivers and levels of turnover and employee
engagement, to help fine-tune post-merger integration
planning and execution.
Leadership
••Change Leadership Toolkit: Sample toolkit for leaders,
covering responsibilities and materials to use post-close;
includes meeting exercises and a pre-close checklist
••Leadership 360-Degree Assessment: Multi-rater
input either through traditional 360-degree feedback
survey or through targeted qualitative, confirmatory
interviews with key stakeholders
Learn more about our
HR Readiness and
Program Management
Office Services
27
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
Talent Management — Retention and Selection
••Talent Retention Analysis: Outline for identifying key
retention criteria and candidates
••Re-Recruitment Tool: Tool to support leaders in
determining individual retention actions related to job
and career opportunities
••Selection Process Overview: Sample presentation
for early discussion on building the selection process
••Selection Success Measures: List of potential
success measures to guide development of selection
approach
••Selection Guiding Principles: Sample set of
principles to guide development of selection
approach and process
••Executive Candidate Selection Slates: Templates
documenting candidates reviewed and recommended
for executive positions
••Employment Termination Planning: Template for
reaching decisions on termination processes (can be
used as an HR manual after the transaction)
••Selection Leader Training: Provides leaders with
relevant information, timelines and talking points to
guide their role in completing the selection process
••Selection Weekly Scorecard: Summary statistics for
completed selection activity
••Project Plan: Staffing and Retention: Sample project
plan for staffing and retention tasks from integration
planning through post-close
Total Rewards
••Total Rewards Optimization (TRO): Online modeling
tool that uses a rigorous, quantitative analytic
process to help organizations optimize their reward
investment
Learn more about our
HR Readiness and
Program Management
Office Services
28
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making
An Introduction to
Our M&A Services
The Significant Seven
Explore by Deal
Time Frame
Organizational
Readiness
Due Diligence
Integration Planning
Implementation
Explore by Deal Type
Domestic
Cross-Border and
Emerging Markets
Spin-Offs, Divestitures
and Joint Ventures
Partnering With
Towers Watson
Insurance M&A
Services
Global Reach
M&A Tools
29
Successful Tactics
for Keeping Top Talent
To examine employers’ success in retaining essential
employees during a corporate transaction, we surveyed
248 organizations in 14 countries. In our 2014 Global
M&A Retention Study (our second study on talent
retention in M&A transactions), we looked at the
effectiveness of retention agreements — used by many
employers to keep top talent on board.
We found that employers that successfully retain more
than 60% of retention candidates for the full retention
period (high-retention companies) use strategies and
tactics different from those used by companies with
retention rates of 40% or lower (low-retention companies).
Compared with low-retention employers, high-retention
employers:
••Are more likely to identify retention candidates based
on the employee’s ability to affect the success of the
transaction: 73% of high-retention companies and
only 33% of low-retention companies do this
••Are more likely to consult the target company’s senior
leadership in determining which employees to keep:
66% versus 27%
••Are significantly more likely to consider management
discretion — that is, the opinion of the target
company’s leadership — in selecting employees for
retention agreements: 32% versus 8%
••Use cash bonuses (rather than other types of
retention bonuses) more often and are more likely
to include them — alone or with other forms of
compensation — in retention agreements: 80% of
high-retention employers use cash bonuses for senior
leaders, and 89% use them for other employees,
versus 50% and 55%, respectively, for low-retention
companies
••Are less likely to rely on data from the target
company’s HR systems to identify retention
candidates — only 28% of high-retention companies
use job description data, whereas 58% of lowretention companies use it, with just 36% of highretention companies using reporting-level information,
versus 67% of low-retention companies
••Offer higher-value retention packages — among highretention companies, the median value of retention
packages offered to senior leaders is 60% of base
salary, versus 35% for low-retention companies, with
a lesser disparity in retention packages offered to
nonexecutives (28% of base salary versus 16%)
To learn more about Towers Watson’s 2014 Global M&A
Retention Study and for a copy of the report, go to
2014 Global M&A Retention Study Report.
Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making