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Merger—or mayhem?

Lisa Jackson //March 29, 2010//

Merger—or mayhem?

Lisa Jackson //March 29, 2010//

If you’ve been acquired, are about to acquire or are leading a deal — this perspective is for you.
Research shows two out of three mergers fail to achieve the promised financial results(about on par with the nation’s divorce rate).
Most common reasons cited?

• Management in acquiring firm not as strong as expected (including systems);
• A weak strategy (with no clear plan to unify the two company strategies),
• Lack of effective integration of the cultures,
• Key management leaves the acquired firm.

Most mergers have a high degree of legal and financial expertise behind the deal, which predicts potential, but fail to perform adequate analysis about compatibility. Yes, compatibility is the best predictor of execution. Basic post-deal expectations are rarely set out properly: “They told us everything would stay the same” is neither realistic nor appropriate.

Here are seven tips to get your post-honeymoon marriage off on the right foot:

1) Pre-nups aren’t just for couples. Acquiring a company is like buying a used car – you can kick the tires, look under the hood, and drive car around block, but you’ll have a hard time finding out what the seller doesn’t want you to know. Spell out what WILL change (“Nothing” is the wrong answer). The conversations may seem hard, but you’ll be glad you did.

2) An ounce of cultural due diligence = faster productivity. Have you assessed the two cultures to identify “hot spots” and “smooth sailing” issues? If you have not clearly identified the contentious and difficult areas to manage during integration of people and systems, you are setting the deal up for a long cycle of productivity losses, as people lock horns and decisions languish in holding patterns.

3) Over-communicate. A merger is a guaranteed culture shock – it doesn’t matter how big or small it is. People second-guess, re-sort their place in the sandbox, and jockey for roles. This is even trickier when you are not in the same physical location or involving global cultural differences. (Our latest client is dealing with post-merger culture integration issues 10 years later.) Leaders need forums (written and face-time) to share the minute, the mundane, the inside scoop. It shows you care about the chaos people are going through.

4) Unify where it counts – Take a hard look at where it is really necessary to have a unified approach. Less is more. Empowered, decentralized teams who are measured by doing what’s best for customer is the best practice. Ask: “Without merging this system, will we still be competitive?”

5) Ask v. Tell. Leaders with all the answers set up for resistance. Seek ideas for how to do the integration better. Telling people to change what they do every day is like putting new step-kids in a shared bedroom and hoping they’ll work it out. Assume resistance, prepare for compromise.

6) Decide who decides. There is no such thing as a true merger. One party always has more power and is buying a promise from the other. Identify key decisions around vision, strategies, structure, and operations – and name ONE decision maker. A collaborative decision process is good – but empowering ONE person to make the final call is crucial.

7) Don’t leave people in a state of “question.” The most stressful part of life is uncertainty. Even if the answer is “I don’t know” – you send a big message by creating a regular way where people can ask questions and interact with leaders.

Like a marriage, acquisitions work better when you both want the same things. Performing due diligence about how you will co-habitate and outlining mutual expectations is a whole lot easier before the deal is done. And it’s the best way to increase the odds that your deal is the one that succeeds after the bloom is off the rose.

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