Successfully integrate add-on operations with Giorgio Beretta

Welcome Giorgio, 

Based on your experience of over twenty years advising on extraordinary financial transactions in medium and large Italian companies, what are the main issues to monitor in an add-on operation typical of investment fund platforms?

From my observations over the years, add-on transactions often fail to deliver the expected results because they appear to be planned on paper and experienced internally as being imposed from above. Conversely, all levels of management must be involved in the transaction.

It is essential to have a clear understanding of what is being integrated, as well as the mindset of managers in both the integrating and integrated companies. 

Therefore, it is essential to monitor not only the profitability of the business, but also technological and market synergies, the industrial organisational structure, and very importantly the reputation of the target. The reasons that led to the success of the companies being integrated must be defended.

It takes a lifetime to build something valuable, but just one poorly managed operation can ruin it. 

It is therefore important to correctly assess the soft skills of the companies, their history, and the culture to be passed on to the new legal entity.

The cost structure must also be carefully analysed to identify areas for optimisation, ensuring the necessary business efficiency, effectiveness and competitiveness of the product or service offered. 

So, what managerial skills do you think are needed to successfuly integrate companies with different cultures and business models, even if they operate in the same market sector?

The key managerial figures for successful integration in these operations are not only the CEO and CFO, roles for which PE funds would appear to be well equipped (but are we sure?), but also managers who focus on other critical aspects of the business, as mentioned above.

Two are worth highlighting:

– often, a lateral view allows for a non-preconceived approach and opens the door to true innovation, particularly when integrating companies with different Histories and Cultures;

– the role of Integration Manager is becoming increasingly popular, with a certain degree of success. This person has a complete overview of the stand-alone company and its future organization, guiding existing management towards the achievement of shareholder objectives, helping the company to overcome organizational obstacles to change and creating value as a result.

Finally, what are the characteristics of an external Transition Manager who can complete the integration of different business entities, and why should he or she be preferred over managers already present in the companies being merged?

Generally speaking, in this type of transaction, the new owners want to evaluate a “discontinuity” in management by “new” professionals whom they trust and who have specific experience, in order to achieve a complete change of pace for the creation of additional value. 

There are many processes to be integrated (IT, Procurement, Sales and Marketing, Logistics, Warehousing, and Production), not least the aforementioned issue of Corporate Culture, which is often the most overlooked and the main factor in the failure of Integration Processes.

The long-standing managers of the companies to be integrated may be resistant to change, failing to support the new vision in a positive way.

The CEO, who should be assigned the role of “company leader & conductor”, should be supported by technicians who work in unison and according to the guidelines he has established.

This is the role of the Integration Manager, i.e., to disseminate the CEO’s actions throughout the organization, understanding the technical reasons for resistance to change.

This figure is unlikely to emerge from historical professionals; in AXCEL Partners’ experience, the greatest successes have been achieved with professionals, often international, who have introduced a new culture and approach typical of multinationals, even in domestic businesses, such as companies that are typically the subject of add-on transactions.

What led you to consider a partnership with AXCEL Partners Italia to complement your professional career at BDO?

AXCEL’s international organization was the “decisive factor” in the decision; the systemic approach to the M&A market cannot avoid drawing on international experience. Our French, German, Brazilian, Swedish, and Chinese colleagues have an inclusive approach towards both companies and related managers, allowing for the implementation of accelerate and excellent solutions.

I was also favourably impressed by the professionalism demonstrated by the Italian partners responsible for the various industrial streams, as well as the “innovative” intervention model, which provides for the direct involvement of the Partner in the project developed with the Client and constant support from the Manager identified in AXCEL’s rich Talent Pool.