Five Frogs On A Log

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"Five Frogs On A Log: A CEO’s Field Guide to accelerating the transition in Mergers, Acquisitions, and Gut Wrenching Change"

By Mark L. Feldman and Michael F. Spratt

(Harper-Collins, New York, NY, 1999, ISBN 0-88730-981-X)

Reviewed by Matt M. Starcevich, Ph.D.

Let’s get credentials out of the way. Both authors write from experience as partners and managing directors of PricewaterhouseCoopers’ global mergers and acquisitions consulting business—The Accelerated Transition®. Although the marketing implications of this book for their firm are clear, this should not cloud the value of the ideas for executing corporate change and capturing shareholders value.

The issue they are addressing is best summed up by this quote: "The facts are these: In most deals and in most major change efforts, notions of profitable growth and shareholder value are quickly smothered or a least sideline by a tidal wave of unanticipated events that drive down performance, prolong the post-deal transition, and reduce potential shareholder value creation". This book is about a process. "The plain fact is that implementation is everything. Words must be translated into actions, actions into early wins, and early wins into profitable growth….If your transition is not progressing along a hundred-day critical path, you are behind the power curve". The process—Value driver analysis is a rigorous, disciplined, financially driven process that helps executive teams rapidly reach agreement on the 20 percent of the transition initiatives likely to drive 80 percent of the economic value, with the highest probability of success, in the shortest possible time frame. The three steps in the process are:

Step 1: Get All the Key Executive and Managers to Ante up with Information. Via a value driver interview gather information in three areas:

1.	What actions, within your own area(s) of responsibility and control should be taken to increase revenue, decrease cost, or otherwise capture the value of the deal (or major change)?
2.	For each action identified, what is your guesstimate of the quantitative impact (on revenue operating expense, cost of goods sold, and so on), the time frame, and the assumptions underlying your guesstimate of impact (for example, units sold through the new channel, volume savings on purchases, capital expenditures or onetime costs required)? Use these assumptions to calculate a simple measure of shareholder value for each action (such as free cash flow).
3.	Assess the probability of success of each action identify (a) its interdependencies with other actions, (b) obstacles that would have to be overcome, and (c) resources required for implementation. Use these assumptions to arrive at an estimate of probability of success for the action in question.

Step 2: Rank the Value Drivers. Use the data captured to rank each value driving action based on its financial impact and probability of success.

Step 3: Make the Decision to Concentrate Resources. Conduct a value driver working session. The purpose is to build among the senior executive team commitment and consensus on the key post-deal actions and the relative impact they are likely to have on value creation. i.e., a common information base from which to carry on a meaningful dialogue about priorities.

This constitutes principal one and the majority of the book. The entire lists of principles with some of the author’s summary thoughts are:

1.	Base the transition strategy on the economic value drivers.
2.	Aggressively manage communications in order to secure stakeholder support and acceptance. No secrets, no surprises, no hype, no empty promises.
3.	Launch small, fast-paced transition teams that will accelerate implementation of the value drivers. Warning most companies create too many teams, put too many people on each team, and give them too much autonomy.
4.	Align organizational roles and responsibilities to ensure clarity of direction. Role clarity is achieved only when each manager’s impact on the value drivers is clearly define, not by drawing organization charts.
5.	Build a behavior-based culture around defining events dictated by the value drivers.
6.	Select and deploy role models that support the desired culture.
7.	Link incentives directly to the creation of shareholder value. What gets rewarded gets done.

There are alternatives available in implementing these principles, what is important is that they are all implemented. We like the completeness of this list and suggest it is a good template for managing transitions in mergers and acquisitions.

A final note, the book is a "CEO’s Field Guide". We think this is too narrow a audience, consultants and staff personnel tasked with facilitating change can also benefit from this practical book.

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