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Posted 11th May 2018

M&A – Ensuring Success After the First 90 Days

Angelica Carr, Founder of Aim Business Coaching, explores how companies can ensure a smooth and swift transition during M&A deals.

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M&A – Ensuring Success After the First 90 Days
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M&A – Ensuring Success After the First 90 days

Angelica Carr, Founder of Aim Business Coaching, explores how companies can ensure a smooth and swift transition during M&A deals.

You’ve signed heads, done your due diligence, survived legals, agreed warranties and indemnities,  and signed the deal. Money, careers and much else are at stake and your employees, clients and competition are watching you intently.

Turning a merger into a success takes tremendous skill and often a very different management style than you’re used to. How can you avoid the value of your deal being crushed? After all, M&A statistics show that eight out of ten mergers fail.

To improve the odds there needs to be equal emphasis on project-  and people-management. Never lose sight of productivity, being ahead of competition and profit but equally never forget that without people and culture, the deal is nothing.

Some of the key elements to focus on should be planning, communication, culture, change management, speed, and talent retention. And the first months of the transition time are the most important.

Planning

Before announcing the deal to your people, make sure you can offer a strong and united leadership with clear direction. Consolidating two boards is political and complex so expect to devote a fair chunk of time to this in a private off-site setting and ideally with some external guidance. Make clear decisions on who reports to whom and specify everybody’s roles and responsibilities. This will get harder the longer you wait.

Establish a set of guiding principles or values, that all decisions are based on. And using the outcome of your culture due diligence, decide which differences are critical to the deal. Which cultural shifts will be necessary?

And crucially, agree on a sharp integration strategy using a process that balances competing priorities between scope, time, cost, resources, and risk. Define exactly how you will create value and then never take your eyes off these synergy-drivers.

Next, establish a communication strategy.

Communication – Day One

Don’t underestimate the opportunity the merger announcement brings. Make the most of Day One of integration by providing as much concrete information as possible to your employees.

Communicate your vision and integration plans clearly. It’s scary how many leaders adopt an ad-hoc approach to the transition period. You want your message to have the power to help pull the whole organisation in one direction.

It is natural for senior management to want to share their enthusiasm around the potential merger value and they often expect the same passion in return.  But the reality is that a natural defence- mechanism kicks in and employees are always going to be more concerned about their own survival: Is their job safe? How they will be affected? How can they maintain the wellbeing of their families?

Manage expectations. People will listen to the announcement with scepticism and fear, even hostility. Avoid the common pitfall of trying to buy loyalty by making promises you can’t keep which will later come back and crush management’s credibility.   Be vocal and upfront about change.

Aim to eliminate areas of uncertainty. A key message to remember is that ambiguity and uncertainty cause much higher stress levels than change does. If uncertainty persists, integration drags on, trust levels sink, productivity falls and some of the most valuable people leave.

Communication – throughout integration

Throughout integration, ensure communications are clear, non-stop, motivating and transparent. It is much better to say that you don’t have answers yet than to communicate nothing. And be very clear what you want from people and how you want them to behave. In this time of uncertainty and change it is critical to listen, talk, write, explain, walk around, and discuss unreservedly. People want to understand reasons and rationale behind your decisions. Stay engaged with people and make it easy for people to communicate. Create a range of forums where people can ask questions, even anonymously. And be honest about predicting problems around the merger so managers know what is coming.

And remember that people are keen to see any positive results. Try to communicate quick-wins; a new logo, brand strategy, news of additional clients, but even better, any-size concrete financial victories.

Protect your client bank by quickly communicating the benefits of the merger to them and to media. And step up customer contact and attention in the integration period.

Change management

Every acquisition is a financial proposition but it is often how people deal with change that can make or break a deal.

If we assume statistics are correct and nine out of ten managers are unprepared for change, we should consider the damage on the integration outcome, on productivity levels and to what extent it will put the merger at risk. The truth is that too much is at stake for you not to train your decision-makers, problem-solvers and general workforce in how to deal with the challenges of transition.

It is unrealistic to keep everybody happy during the complexities of a merger but what you can do is to get your people prepared for the path ahead.

One thing management should never say on announcing the deal is “There will be no change. There will be business as usual.” This is never the case. As soon as people learn about the merger, the corporate climate changes instantly. Even without practical changes there would be changes to do with loss, a sense of identity and the new company’s ideas beginning to infiltrate.

Employees typically resist change. But uncertainty causes even more stress. And if you fail to manage the expectations of your employees they will feel like merger victims.

The marketplace is changing fast. Look at the merger as an opportunity to make the changes you need to maintain a competitive edge. Challenge past patterns, regardless of which side of the merger they’re from and challenge the status quo.

Speed

The most common complaint by employees during integration is “Why are they taking so long?” Aim for closure after nine to twelve months. The average merger transition length of 24 months is too long. A slow integration period is a high-risk strategy in terms of productivity and morale. Make the tough decisions early on and take action asap. Make employees buy into your vision by offering relatively quick closure on your integration objectives.

Businesses generally have to become better at adjusting to change, and M&A is an extreme example where organisations need more fluidity and more power delegated for quicker decisions.

Culture

Most things discussed here concern corporate culture. And culture really is about the people of the organisation.

A merger can be like two different species meeting each other if you don’t plan ahead and focus on mission-critical high-impact areas even before integration begins. There will always be cultural differences, often in operational style.  And don’t underestimate the importance of culture wild cards, these high-voltage idiosyncrasies of a company that have a powerful impact on the way the organisation operates. An often highly debated example is tradition around holiday celebrations.

The key to efficient M&A integration is communication around these issues whilst at the same time looking at the future to decide what is needed in the new corporate culture. Remember that cultures are negotiable and that YOU create your culture. By looking at the future, for example, we’re aware that corporate success is highly dependant on speed and innovation. Culture change should focus more on where the company needs to go than where it’s been.

Welcome the shift towards cultural diversity where there is coexistence of many different types of people, working in different ways but with the same goals and vision.  Focus on turning this cultural diversity into a corporate strategic asset for creativity, new perspectives, added client targets, new market opportunities and increased productivity.

Allow both sides to mix and mingle early on encouraging different forums and events of integration.

Talent retention

Assume that there will be an increase in employee turnover. On average companies lose four out of ten managers in the first 24 months of a merger. If you have signed a merger deal, expect some of your best people to be job hunting.

As you don’t want your top-quality people to leave, and they will be the first ones to go, quickly take charge of talent retention.  Identify your key individuals and re-recruit them by offering higher salaries, merger-specific reward programs and other incentives. Actively engage with them and give them new responsibilities around integration. Avoid competition snapping them up.

Never stop focussing on productivity, people and profit.

Remember that a merger is a very strategic move with very little instant pay-off. Be prepared for lots of resistance and hard work at first. The potential benefits come later so position the organisation for future success.

Be proactive rather than reactive and adopt an entrepreneurial, fast and highly communicative management style.

And don’t try to just cope with change – prepare for it, be upfront about it and conquer it.

Categories: Finance, M&A


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