Extracting value by integrating business units - Bain & Company

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Case Study

Extracting value by integrating business units

Our client, an Asian conglomerate, needed to successfully integrate two business units. We helped mitigate key integration challenges, identify six key sources of value and objectively design an integrated organization. The integration exceeded synergy targets, improved profits and increased the stock price.

  • min read

At a Glance

  • 50% increased stock price over the market index
  • 60% widened profit gap vs competitor

The Full Story

Opportunity

Industrial Co* is a highly diversified multi-billion dollar Asian conglomerate with more than 50 businesses. The company had decided to privatize and integrate two of its businesses, which operated in complementary industry sectors.

Industrial Co's aim was to create a scale global player in its field. Management was keen to extract significant cost synergies and revenue upside from the integration.

Industrial Co engaged Bain to:

  • Identify and drive maximum value and synergy from the integration
  • Design a new organization that could extract maximum value from the businesses
  • Implement a platform for sustainable growth and industry leadership

Approach

A structured, coordinated and inclusive process helped to mitigate key integration challenges.

  • Bain's process addressed resistance to change by clearly articulating the need for change and ensuring broad-based involvement as well as a comprehensive communication process.
  • Bain took an objective approach to designing the new organization. The senior team had significant involvement and an iterative process was implemented.
  • Industrial Co put in place clear targets and taskforce teams were made accountable. The implementation also benefited from a rigorous project management process.

Recommendations

Six key sources of value were identified.

  • A progress tool for services outsourcing was created to set and track targets.
  • New organisation models were developed through senior team workshops.
  • The program office also developed a communication plan and schedule.

Results

By focusing on value sources, IndustrialCo exceeded EBIT targets and widened the profit gap between it and its competitors, while its stock price increased 50 percent over the market index.

 

* We take our clients' confidentiality seriously. While we've changed their names, the results are real. 

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