Remember ‘Mark and May’ during your next M&A
Updated: Nov 5, 2019
If you are interested in finance or follow current events, you likely have come across headlines about major mergers and acquisitions.
Also known as M&A, these transactions often generate buzz due to the well-known brands involved or the size of the transactions.
Market share, reach, shareholder value or competitive pressures are among the reasons cited and get most of the attention during M&A analysis. It’s rare, though, that the heart of the organizations involved – people – receive much discussion.
While the media tends to gravitate towards the financial rather than human capital involved because it’s easier to measure, several studies indicate many companies that initiate an M&A make the same mistake.
The Harvard Business Review published a great analysis of the turbulence that occurred following Amazon’s takeover of Whole Foods in 2017, observing a collision between “loose” and “tight” cultures that resulted in a lack of cultural compatibility.
A 2018 Mercer survey also cited culture as a reason for a high failure rate of M&As, reporting that:
43% of M&A transactions worldwide experienced serious culture issues that resulted in deals that were delayed, terminated or purchase prices that were negatively impacted
67% of deals experienced delays in synergy that were attributed to culture issues.
With such dismal results and so much at stake, it’s vital that companies devote just as much time to the frontline as the bottom line to generate a successful outcome.
Identifying gaps – and opportunities
If culture is an important consideration in a successful M&A, how can organizations take measures to achieve a smooth – and ultimately profitable – transition?
One tactic that we recommend conducting is a cultural audit. This allows both organizations to get an accurate picture of the current culture and where gaps – and also opportunities – exist.
Communication is also vital immediately following the completion of an M&A and before it becomes public. Staff should always hear key details first and from a key senior leader who is willing to not only share the what but the why of a deal. In some cases, doing nothing isn’t an option due to financial or competitive pressures so management has to have this candid conversation so staff have a full grasp of the rationale.
Supporting the C-Suite
Depending on the size and complexity of an M&A, additional support is often required by executive leaders. For example, we recently assisted a large machinery company with its merger with a smaller industrial services company.
With a range of distinct business areas involved, we interviewed key stakeholders on both sides of the acquisition and then we worked with the management team on a detailed change process that included tools and coaching to help drive a successful outcome.
One important note: While organizations often set a specific timeline – such as a 120-day plan – to spur a laser focus during the transition stage, our recommendation is to exercise patience and flexibility while a cultural integration occurs. This provides an opportunity to identify and assess any cultural risks and address them along with common concerns such as a fear of job loss, loss of identity or a change in reporting structure.
Embrace the heroes and the zeros
With the business world rapidly evolving (see our Future of Work post), mergers and acquisitions will continue to be a staple of finance and investing. Standing still simply isn’t an option.
While financial due diligence will always be a core part of the exploration process, isn’t it time that the Jills and Jays – and Mark and May – strongly figure in your next M&A? After all, without people, would you even have a company in the first place?
Pragilis Solutions is a boutique change management firm based in Vancouver, British Columbia, Canada that puts people first. If you are considering an M&A – or dealing with change – email us at firstname.lastname@example.org. We would love to collaborate with you.