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To achieve the planned synergies from a complex merger, Pernod Ricard knew that integrating and streamlining its IT systems was vital.
With Accenture's help, savings of 30 percent have been identified and the group's progress toward high performance materially advanced.
In July 2005, with the acquisition of Allied Domecq, Pernod Ricard moved up to the No. 2 spot in the world spirits and wines market.
The company's leading international brands include Ricard, Ballantine's, Chivas Regal, Kahlúa, Malibu, Beefeater, Jameson, The Glenlivet, Jacob's Creek, Montana, Mumm and Perrier-Jouët. Headquartered in Paris, France, Pernod Ricard operates as a set of regional organizations and has strong distribution networks on all continents, realizing more than 80 percent of sales outside France. The company reported spirits and wines sales of €6.1 billion ($7.4 billion) in 2005/2006.
Pernod Ricard acquired Allied Domecq in a complex financial deal involving the sale of some newly acquired assets and operations to Fortune Brands, another smaller player in the industry.
The deal complexity was compounded by differences in the business and IT models, market strategies, company structures and cultures of the two companies. A family-owned business, Pernod Ricard emphasized entrepreneurship, decentralized regional operations and local decision-making, contrasting with Allied Domecq's centralized structure and global operating model. At the same time, Pernod Ricard's leadership—and the financial markets—had high expectations of quickly realizing full value from the deal.
In particular, the integration of the IT landscapes and organizations across the two companies posed unique challenges:
In parallel, there was the challenge of carving out organizational units, IT services and infrastructure to sell off to Fortune Brands as part of the complex transaction.
Pernod Ricard realized that significant work would be required to complete the merger integration planning, execute the business and IT integration, quickly capture the expected deal benefits and implement the business and IT transformation. Faced with the challenge of successfully completing the merger integration within six months, Pernod Ricard turned to Accenture for assistance.
Pernod Ricard selected Accenture for our extensive IT merger integration and consumer products industry insights and experience, as well as our proven proprietary tools and methodologies. Accenture recognizes that IT is a critical enabler in helping companies rapidly complete merger integration and realize full deal value. Drawing on several years of research and client successes in significant global mergers—including five of the 10 largest deals in the world—Accenture estimates that IT is a key enabler to realizing expected merger synergies in over 60 percent of post-merger transactions.* Not surprisingly, therefore, when merger and acquisition (M&A) transactions fail, lack of successful IT integration is often one of the main reasons. Accenture's ongoing research has identified a number of best practices in IT integration and the impact they have on M&A execution. These practices include driving IT integration from a vision of future capabilities, while ensuring that day-to-day operations continue to run uninterrupted. IT integration can deliver significant synergies in the IT function and, moreover, is crucial in enabling overall business synergies in most mergers.
*Gary A. Curtis and Ravi Chanmugam, "Reconcilable Differences: IT and Post-merger Integration," Outlook 2005, Number 2.
The Accenture team and Pernod Ricard's chief information officer established a six-month program in which Accenture assisted in four major tasks:
Using well-developed methodologies and tools, including Accenture's proprietary Merger Integration Playbook, the Accenture team performed a detailed review of the IT landscape—including spending and investments, organization, applications and infrastructure—to identify potential synergies and cost savings while helping the company achieve high performance. Accenture worked with the client on separation planning and coordination, supporting the transitional operation of and eventual sale of selected IT assets to Fortune Brands. Accenture also applied insights and our Synergy Evaluation methodology to identify, estimate and monitor the capture of potential synergies—both quick wins and long-term value drivers—and advised Pernod Ricard on synergy monitoring systems. Accenture also participated in each stage of workforce transitioning. Accenture's objective analysis of a shared services approach helped the client clarify decision criteria and formulate a recommended approach.
Pernod Ricard and Accenture crafted an IT master plan and road map addressing the enterprise solutions, business applications, IT infrastructure and human resources needed to support the business transformation of the merged company. The plan provides a comprehensive overview of discrete IT plans and their potential impacts on the company. The plan and road map contain detailed timings of key activities to maintain and accelerate the IT transformation, a synergy performance tracking plan, and a new governance process and structure.
To knit together all these streams of activity, Accenture provided overall program management support to ensure that Pernod Ricard's merger objectives were accomplished and that integration proceeded at an accelerated pace, while safeguarding uninterrupted business operations. A joint integration team, with representatives from Pernod Ricard and former Allied Domecq executives, met monthly to facilitate the integration process and ensure that each of the merger integration streams of work continued to maintain tight alignment with the vision of future capabilities in the merged organization.
With Accenture's assistance, Pernod Ricard is well on its way to completing the integration, realizing significant merger synergies and becoming a high-performance business.
Pernod Ricard's broad IT strategy remains in place, with fine-tuning designed to accelerate the pace of the IT transformation and more closely align IT investments with the company's overall strategy. In just six months, the team identified the major sources of potential synergies and assisted with the completion of separation activities.
The realignment of IT consistent with Pernod Ricard's business model has produced savings of more than 30 percent in the annual IT budget. The savings are expected to be fully realized by mid-2007. These results are consistent with Accenture's research on the traits of high-performance businesses. Among the traits identified is the ability to rationalize and simplify IT to lower the total cost of ownership while enhancing productivity. High-performance businesses not only spend less than their peers on IT, but also free up more of that investment for new initiatives. These organizations rigorously analyze where performance improvements can be achieved and generate greater value from their IT investments.
Armed with an IT master plan and a streamlined operating structure, the IT organization is quickly moving toward operational excellence and is enabling Pernod Ricard to realize full value from the merger.
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