Hi,

I wanted to know if Six Sigma could be of any help or rather which all aspects could it help us in an Mergers and Acquisition process.

Thanks

 

Gopal

Hi Gopal,

          Generally speaking, M&As happen either for expansion or survival of the existing business. Further, if involving six sigma therein, it needs to be seen if the organisation going in for M&A (generally for expanding business) is already a Six Sigma one or not. It also should be seen if the M&A process is being carried out by the merging cos themselves, or if they plan to hire a third party (M&A specialists) to facilitate the same. If so, then whether that party applies Six sigma methodology in their work approach. 

         Per the insights I've got so far (from VK sir in particular & others) in this forum, Six Sigma cannot solve problems such as :-

1. Poor leadership

2. Failing business strategy

3. Financial restructuring

4. Creation of business model

These are the problems existing at the fundamental business level & need to be dealt separately (before the deployment of Six Sigma).

         So, per your querry, if the M&A process is due to the above reason(s) (which can be classified under the head 'M&A for survival' of business), then it becomes out of scope for Six Sigma aplication. However, if it ( M&A process ) is due to any other reason (eg M&A for expansion of a business), it may warrant a Six Sigma application, if the acquiring or merging co(s) mgt(s) are forthcoming on the same.

         Further to the above, which broaches on the broad reasons for M&A being the deciding factor for application of Six Sigma, if I got your question right, then when one talks about the aspects therein (M&A) warranting a Six Sigma application, one precisely is referring to the steps or the procedures involved in the M&A process.

         It is well known & understood by all those concerned, that a M&A process involves changes (Revaluation of Equity, Assets & liabilities, etc) to be done at the fundamental business level which precede Six Sigma deployment (as enumerated above). To bring about these  changes per se, the performance of certain activities or steps become  necessary from a corporate & legal standpoint (eg share swap ratio, employee absorption / retrenchment by compensation, redrafting of the A/A & M/A through EOGM, registration of the newly merged entity, etc). The procedure to be followed for these activities is already mandated in black & white under the provisions of the applicable (Corporate, Labour, etc) Law & cannot be changed without Government intervention to alter the respective Act pertaining to that law.  Thus, the application  of Six Sigma in these areas depend on the extent of flexibility permitted under that particular law, which is generally very limited or negligible.

         However, one can always look at it's (Six Sigma ) application in the areas (under  M&As) which are not necessarily under the purview of the governing law or statute, but have to be decided before the newly merged entity commences its business oerations, drawing examples from its past experience in those areas. Although these subsequently form a part of the routine business operations of the merged entity, they can always be covered as a part of the M&A process to have a better control over the functioning of new business, post the merger or acquisition. For instance 

1) Procedure for work operations in the newly merged co. 

2) Procedure for framing of new HR policies in the merged entity. 

3) Administration procedure.

4) Procedure for evaluation of a candidate ( eg-based on past work experience & related attributes) deciding his/her nomination for inclusion in the list of prospective board members (of the merged entity) before final selection (which is an initial & anually recurring feature), per the mandated procedure, etc.

         Without saying, the co mgt(s) involved in M&A process, buying the idea of Six Sigma deployment (if already not a six sigma co) in the process (whether by itself or through a third party) is imperative. The co mgt needs to understand & view the application of six sigma as a catalyst to the M&A process, & not as an added work & cost, to derive optimum benefits.

         Since, I do not belong to the concerned (CS / Corporate Law) academic & work background, I may not be in a position to elaborate further without having complete knowledge & clarity on the subject. Would appreciate more inputs from your (& others who thought on the topic) end on the steps involved in the M&A process to elicit a better response from others in the forum. 

 

Thnx & rgds.

A structured Lean Six Sigma deployment may not be needed here. However, experience with Lean Six Sigma tools like Concept FMEA for risk assessment, Decision Tools to choose the best option, Hoshin Kanri for policy deployment, VoC capturing methods for market study, CTQ focus for decision criteria shall be a big plus. This is exactly the reason why some of the world's largest banks want their VP - Strategy to have an MBB qualification. 

I would think of using Lean Six Sigma in M&A situation as below,

 

1) identifying areas of duplication, non value added process because of M&A,

2) as this is the time to revisit your processes, make use of it to benchmark it with the industry best standards / deploy a six sigma project here.