Unity’s Acquisition of Delta: Integration Challenges and Goals

Oct-Nov 2006: Smaller company acquires a market leader June 2007: major integration: systems & operations Unity’s integration goals: • Save $60 million worth of IT expenses within 3 years on staff and infrastructure • Wants to be the world’s #1 provider of share registry services • Maximize shareholder wealth CIO, Stuart Irving worries: • Lack of due diligence because of legal problems • Hart Scott Rodino Act prevented proper communications • Unknown bugs within Delta’s operations might affect the integration’s timeline & budgetary goals • Present a short and efficient integration to the investors • OVERVIEW

UNITY Strengths • • Very efficient technologically Professional and experienced staff members Good incentives, innovative projects: keeps staff motivated and stimulated Remarkable ability to attract talented professionals Family oriented work environment • • Weaknesses Small player in US market Difficulty hiring entry level programmers because BLAIR uses COBOL • Strengths Delta has more clients and is a bigger brand in the US LEADER: uses object-oriented programming language • • • DELTA Weaknesses Technological challenges Limited capabilities Duplication of resources due to systems’ limitations Failed integrations in the past Clients can’t view portfolio of investments • • • • • • PROBLEM STATEMENT A. Determine the enterprise platform? B. Staff motivation issues C. Create a new organizational structure? D. Attract star performers? E. Start building the infrastructure for the new organization? DISCUSSION OF KEY ISSUES A. Determining the enterprise platform Delta has 4 different systems Clients/Employees on different systems No consistency in user experience Leader: Delta’s attempt to consolidate all of its systems Unity has one system: BLAIR Written in COBOL (hard to find employees/training costs) Issue: What is the best way to integrate the two organizations?

Clients can’t view their investments as a portfolio Clients experience differences in services because of the different systems Inefficient Staff and infrastructure is costly/Creates wasted resources A. Determining the enterprise platform SCENARIO 1: US Demand increases SCENARIO 2: Stock decreases because of previous integration failures NEGATIVE: Integration is too timely to show investors that it’s a successful integration SCENARIO 3: Increase in Delta star-performer resignation POSITIVE: Easier to hire entry level programmers, develop new features and customize system SCENARIO 4: US Demand Decreases ALTERNATIVE 1: Upgrade Leader to BLAIR’s capabilities: $45 million POSITIVE: Ability to easily hire entry level programmers.

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NEGATIVE: Less funds to test and develop Leader. Taking a risk of using a new system with remaining users. NEGATIVE: Leader hasn’t been tested in the field ALTERNATIVE 2: Use BLAIR to provide services under Delta’s brand POSITIVE: BLAIR has been tested in the field and proved to be efficient POSITIVE: The use of BLAIR will shorten the integration time. NO EFFECT NEGATIVE: BLAIR is proven to be inefficient in US market NEGATIVE: Difficulty hiring entry level programmers and developing new features. ALTERNATIVE 3: Keep both systems temporarily POSITITVE: Both systems are tested in their fields and employees are experienced NEGATIVE: Costly. Inefficient.

NEGATIVE: The goal of the acquisition is not achieved POSITIVE: Allow Unity to retain star performers and evaluate them further NEGATIVE: Less funds to maintain both systems and infrastructures DISCUSSION OF KEY ISSUES B. Delta’s staff - motivation issues Staff is not unified No effective communication Lack of information flow from Delta to Unity Decreased team work Feeling of “Unity vs. Delta” among employees Fence sitters Skeptical about new management’s promises Fear of uncertainty DISCUSSION OF KEY ISSUES C. Creating a new IT Organizational Structure Issue: How to create an efficient integration team? Unity or Delta? Who should be in control?

Delta employees knew their systems Unity is the acquirer If things are left as they are: Cost inefficient/Timely Trainings Duplicated jobs/salaries Affected by disengaged staff Can’t be sure who is a star performer DISCUSSION OF KEY ISSUES D. Attracting star performers Limitations of due diligence Unity is only familiar with upper management of Delta’s staff Disengaged/demoralized employees Unclear who is a top performer Not sure how to motivate a staff until their services are no longer needed B. Staff motivation C. Organizational structure D. Attracting star performers ALTERNATIVE 1: Create team-oriented incentive programs/ competitive environment ALTERNATIVE 2: Integration task force 50/50 staff SCENARIO 1: Demand increases SCENARIO 2: Stock decreases because of previous integration failures

SCENARIO 3: Increase in Delta star-performer resignation SCENARIO 4: Sales decrease POSITIVE: Funds available to support programs POSITIVE: Competitive environment will speed up the process of integration POSITIVE: Staff is no longer demoralized and disengaged – able to assist with a speedy integration NEGATIVE: Staff is demoralized and disengaged – unable to assist with a speedy integration NEGATIVE: Increase in employee apathy and willingness to accept severance and look for employment elsewhere. POSITIVE: Allows to identify remaining star performers and retaining them NEGATIVE: Difficult to create and maintain a strong integration task force

NEGATIVE: Decrease in funds to support programs. POSITIVE: Staff is no longer demoralized and disengaged – able to meet demand NEGATIVE: Delta staff demoralized and unable to meet demand POSITIVE: People eager to keep jobs, demand met NO EFFECT ALTERNATIVE 3: Keep it Unity: all supervisors NEGATIVE: More Delta employees disengaged and looking to resign NEGATIVE: More Delta employees disengaged and looking to resign NEGATIVE: Trust in Unity decreases ALTERNATIVE 4: Issue contract expirations depending on deadlines NEGATIVE: People eager to keep jobs – unethical conduct increases – no longer family oriented environment DISCUSSION OF KEY ISSUES E.

Starting to build the infrastructure for the new organization Unity and Delta ran completely different phone systems, networking hardware, office servers, and PC systems Hardware changes were imperative in order for the organization to operate as a single unit How to decrease duplication of expenses on resources? Buildings/Hardware/Maintenance expenses must decrease Organization has to operate as a single unit Reductions = Savings Building the infrastructure for the new organization ALTERNATIVE 1: Create an expense evaluation team: Delta and Unity 50/50 SCENARIO 1: Demand increases SCENARIO 2: Stock decreases because of previous integration failures SCENARIO 3: Increase in Delta star-performer resignation SCENARIO 4: Sales decrease POSITIVE: Staff is able to evaluate and determine the best use of resource allocation NEGATIVE: Resources consolidated/ difficulty meeting demand POSITIVE: Assist in decreasing duplicated expenses thus amplifying earnings

POSITIVE: Ability to hire entry level replacements will decrease company’s wage expense NEGATIVE: More Delta employees disengaged and looking to resign POSITIVE: Assist in decreasing duplicated expenses thus amplifying earnings ALTERNATIVE 2: Geographic integrations: Keep Unity supervisors POSITIVE: Getting rid of redundant assets could increase earnings temporarily NEGATIVE: Unclear if this integration strategy will be successful NEGATIVE: Unclear if this integration strategy will be successful NEGATIVE: Trust in Unity decreases ALTERNATIVE 3: Close down all Delta buildings NEGATIVE: Resources consolidated/ difficulty meeting demand NEGATIVE: More Delta employees disengaged and looking to resign NEGATIVE: Trust in Unity decreases

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