The merger process

[G4-13]

The commitment underpinning the new Kroton is progress in Brazilian education and academic excellence. This is how the company helps ensure that its students gain recognition in the labor market, that they grow professionally and improve their quality of life. To do this, the organization focuses on operational efficiency, pursuing positive results and generating value for its shareholders and for its other stakeholders.

The merger between Kroton and Anhanguera Educacional, announced in 2013 and carried out in 2014, plays a fundamental role in the fulfillment of the company's mission and business strategy. The similarity between the two companies' values and academic model was the starting point for the construction of the new organization. To ensure the consolidation of the merger process, Kroton presented the antitrust authority Cade (Conselho Administrativo de Defesa Econômica) with a series of arguments, ranging from Kroton's expertise in mergers, the geographical complementarities and the nationwide reach of the two companies and the shared high levels of quality in teaching. The company also assumed the commitment to restructure its businesses with a view to preserving competitiveness in the sector and the quality of teaching on offer.

The integration process was planned with a view to prioritizing each brand's best practices and promoting synergies between them. The proposal is to combine values, know-how, talents and competencies to boost the quality of the services provided and positively impact students, employees, shareholders and the community. The planning involved 192 people from the two companies, as well as nine consultancies contracted to support Kroton in this process. More than 490 meetings were held to define the stages of this process, which should be concluded by 2016. In 2014, important advances were made in the integration. It was possible to bring forward certain projects fundamental for the new company, such as the development of the KLS 2.0 academic system (further information in Academic model).

Stages of the integration

1) Development of strategy

Creation of war rooms, a process with 27 action fronts involving professionals from different areas in the two companies. During two days, leaders and guests took part in a process of identifying business risks and opportunities. This resulted in implementation plans, strategies and organizational models. The participants had 21 days to analyze and enhance the proposals. In the last meeting, held in the corporate office in Valinhos (SP), the strategies which should guide Kroton's actions over the coming years were defined. Similarly, the company's mission, vision and values were reviewed.

2) Planning

Construction of a strategic map comprising six themes: information and technology, competencies, processes, products and services, clients and finances. A series of 708 projects related to the integration of the two companies was elaborated, aimed at expanding the capillarity of the new organization. Actions included the creation of courses, organic expansion and the implantation of greenfield operations. To ensure fulfillment of the plans, nine new strategic committees, which meet periodically, were instituted. Ten groups of indicators were also created to enable monitoring of these projects.

3) Organizational alignment and operational planning

Definition of a schedule for each stage of the process, from planning through to finalization. The stages include communication, training and projections of revenues and expenses, among others.

4) Monitoring, learning and adaptation of processes

The structured management model, which includes indicators and action plans, helps to measure performance, to guide decision making and to facilitate the information flow. This permits the company to take measures to mitigate potential risks. Furthermore, the Kroton Management System, a monitoring mechanism to oversee process management, was created. The information provided includes step by step details for each action and target that has been established.