Key to a Successful Merger or Acquisition
The world moves at a rapid pace and you must be ready to take advantage of market opportunities, like a merger or acquisition, when presented or you may miss out. You have been working hard and wanting to grow your business for a while. An opportunity to acquire another company arises, which would allow your organization to operate on another level. Everyone gets excited. The “dream team” of brokers, lawyers, accountants, consultants, and other experts are assembled. The deal is shaped and presented. There is back and forth negotiations. It gets tense and stressful with lots of twists and turns. At the end of a long and laborious process, an agreement is made. We have a deal. Everyone walks away as winners and the celebrations commence.
All the hard work is done. It’s time to rejoice and enjoy the fruits of everyone’s labor, right? Wrong! This is where the real work begins and most business owners/leaders make mistakes. They bring the management team together, make the announcement, pump everyone up, and provide some basic guidelines in how, the now two entities, will work together as one. It sounds good, everyone moves out, and in a relatively short amount of time, things start falling apart. People get confused, communication breaks down, frustration builds, production drops, employees leave, and customer service decreases. What happened? How can something great turn into chaos so quickly?
Top-5 reasons why a Merger or Acquisition (M&A) is not successful:
- No or vague implementation plan
- Lack of leadership experience & engagement
- Cultural differences
- Communication gaps
- Lack of accountability
According to Harvard Business Review, 7 out of 10 companies will fail because of these challenges. Leaders underestimate the effort required, and by the time it becomes apparent, it is often too late. How do you prevent this from happening to you and your organization? Follow the proven M&A strategies outlined below.
How to avoid Merger or Acquisition disaster, execute, and WIN:
Due diligence – spend the necessary time to fully understand the dynamics of the company being acquired. It is highly encouraged to bring in outside experts (business coaches, consultants, brokers) to help navigate the process and leverage tools like SWOT analysis. Critical elements to review: financials, assets, customer base, values, culture, leadership, people dynamics, business maturity, processes, etc.
Target market – the two organizations must be focused on the same types of customers. There has to be synergy, or it will not work. A successful merger results in being able to serve clients better with more offerings from both organizations … value add and deeper market penetration.
Implementation plan – typically in a merger or acquisition, there is some sort of basic strategy surrounding the initial purchase, but once the deal is inked, there is no thorough plan for implementing all the crucial steps that need to happen down to the frontline employee level. This is a vital part of the M&A endeavor, but surprisingly, the most overlooked. The leaders involved in the acquisition go back to work and assume everyone knows exactly what to do and will do it seamlessly, which is normally not the case. Every single employee must understand the purpose of the M&A, affiliated goals and priorities, where they fit into the picture, what the new expectations are, and what success looks like at the end. When this does not happen, you are doomed to fail.
Leadership involvement – another mistake companies make is thinking the same leaders that got the organization to one level of success will be strong enough to take it to the next level. Most often, that is not the case. As a business owner/leader, you must understand where your other leaders/managers are in their professional development. Leverage assessments like DISC, performance reviews, and leadership evaluations that measure their leadership experience and potential. The worst thing that can happen after an M&A transaction is putting the wrong leaders in place to execute it. It will end in disaster and here’s why. The M&A is bigger than they may be able to handle. They cannot keep up and meet the new expectations. Their confidence goes down. When that happens, they panic. Their stress levels go up and affects their subordinates negatively. The employees get irritated, eventually lose faith, and leave the company taking all of the continuity with them. Put the right leaders in place, ensure they listen to, communicate with, and engage all the members of the team on a regular basis. Build buy-in and excitement, show them the way, and provide all the necessary resources and support they need throughout the entire merger and implementation process. When that happens, EVERYONE WINS!
Culture – this is the MOST IMPORTANT aspect of a successful M&A. You are taking two different organizations with their own history, culture, values, norms, experiences, successes, processes, performance measurements, etc, and blending them together as one cohesive unit. Easy right? Absolutely not! This is hard … extremely hard. This ONE thing will cause the merger or acquisition to derail faster than anything else. Hire experts to help in this process, because once the M&A is complete, the team dynamics start over again. If you do not usher the teams through the Forming, Storming, Norming, and Performing stages in an effective manner with proper Change Management techniques (Gleicher’s Formula or Kotter’s Change Process) people will go back to their “old ways or comfort zones” and the vision of the M&A may never be realized. Culture is about PEOPLE and negotiating change in a manner where they feel valued and excited about a brighter future.
Accountability – if there is never follow through on something, people will think it is not important. Be disciplined to the plan. Establish goals/milestones of success along the way so everyone understands where they are in the process, how well things are/are not progressing, and what needs to happen next. Keep people focused on the end state, not the “daily noise.” When going through significant change, you must communicate more frequently at every level of the organization, especially the frontlines. The more people know you care, the more comfortable they will be at implementing change. Adopt the style of Abraham Lincoln – Managing by Walking Around. People are dynamic. They need to be heard, felt, and understood. Expect people will have questions and concerns. Flush those out, be direct when addressing them, and do not allow too much time to go by in the process.
Competing in business is more challenging today than ever before. At the same time, there is no greater time to be in business. A merger or acquisition offers an excellent opportunity to grow and scale. Be prepared, foster the above principles, and make sure you have an expert partner/coach with you on the journey. As leadership author, John Maxwell says, “You are only as good as the people you surround yourself with.” When you do all those things, you cannot help but be successful. If you would like to learn more about how to lead your company through a merger or acquisition, please feel to reach out for a complimentary consultation.