Navigating M&A Remedies in Integration

Balancing Integration and Divestitures - PwC PoV

Companies navigating divestment remedies in M&A integrations need to balance the integration and divestment processes, while keeping long-term value front of mind. In our experience, key success factors include: 

1. Synchronized Technology Programs

Managing the separation of IT systems while simultaneously planning for their integration is a crucial aspect of the process. This involves coordinating scenarios such as the seller providing a Transition Services Agreement (TSA) to the buyer for IT services linked to the carve-out, even as the acquired business is still integrating into the buyer’s IT landscape.

2. Define the Target Operating Model  

Establishing (joint) target operating model early in the process is crucial for creating a clear framework for future operations. Communicating this model throughout the organization brings clarity to the teams involved, ensuring everyone understands the vision, aligns their efforts effectively, and minimizes ambiguity.

3. Duplicated and Aligned Governance Structure

Establishing a highly aligned governance structure is essential in these settings. There is a unique requirement for double governance, meaning companies need to establish Project Management Offices (PMOs) to oversee both the integration and divestment processes while ensuring alignment with the overall deal objectives. Additionally, once signing takes place, the buyer of the divestment assets becomes an additional party that should be taken into consideration.

4. Monitoring Trustee Collaboration

When dealing with anti-trust authorities and merger clearance processes, it's essential to maintain a strong, informed relationship with the Monitoring Trustee (MT), who serves as an independent party tasked with ensuring compliance with the conditions of the merger clearance. Regular compliance reports are crucial and should be managed by a dedicated individual experienced in handling MT. This approach will leverage the MT’s knowledge and skills to enhance the compliance process.

5. Plan the journey

Once the deal is announced and the integration planning starts, it is important to plan and anticipate all scenarios. We often see that these processes can take longer than expected, especially when divestment is required. Key aspects for planning include:  

i) Resource allocation – carefully map resources to avoid strain and prioritize critical areas such as IT, supply chain, and workforce transitions. While antitrust schedules cannot be expedited, a forward-looking plan that identifies integration and changeover interdependencies can help reduce unnecessary costs;

ii) Data boundaries – define clear separation of data and processes to ensure business continuity and compliance; and 

iii) Stay focused – prioritize the completion of the divestment to minimize disruption and keep integration on track. 

Divestment remedies are transformative events that redefine a company’s strategy and operations. With our Transact to Transform framework, PwC helps clients navigate these complexities by combining extensive divestments and integration expertise, industry-specific insights, and advanced tools. We have supported some of the largest and most complex regulatory-driven transactions, always focusing on ensuring compliance, mitigating risks, and creating sustainable, long-term value.