Several years ago, a major strategic consulting firm examined some 40 mergers and acquisitions worth more than $1 billion apiece that had failed to deliver their expected results. To no one's surprise, the number-one reason for deal failure was "poor integration" – characterized by loss of key staff, inadequate due diligence and delays in communication.
Businesses can improve the chances for M&A success by involving organizational development (OD) professionals in pre-merger processes, rather than only after the deal has been signed, to help with post-merger integration.
Why is this important? Because OD professionals can provide both strategic insight and bottom-line savings throughout the M&A process. Specifically, they can contribute to pre-merger research, due diligence, discovery and courtship, planning and strategy formulation, restructuring, and communication – as well as post-merger integration.
Here are some strategies that OD professionals can employ to maximize M&A success:
- Invest as much time as possible to learn about the target organization to assess whether it will meet specific goals.
- Educate clients with respect to how incompatible cultures can jeopardize the target's potential to increase market share, allow for entry into new markets, attract and retain certain talent, allow for vertical integration, and produce new distribution channels.
Pre-merger Due Diligence
- Evaluate core competencies, value chains, and leadership strength as well as financial and legal aspects.
- Examine both organizations' structures, systems and strategies for potential incompatibility.
- Assess how the environments in which both organizations operate will define the structural (internal) and contextual (external) dimensions of the blended organization.
- Evaluate values, communications, organizational practices, governance, ethics, corporate citizenship, and other elements of organizational culture for compatibility.
Pre-merger Discovery and Courtship
- Utilize formal audits to assess culture and interviews and formal assessments to determine leadership capability.
- Discuss early on who will be in charge. "Saving face" for the acquired organization may seem laudable, but it can also cause confusion, create ambiguities, and waste valuable resources.
Pre-merger Planning and Strategy Formulation
- Reconcile differences in ways that leverage the strength of the merged firm.
- Explore strengths and potential synergies to decide what can be shared and what needs to remain different.
- Identify and reinforce core values. Explore differences by leveraging as well as being alert for potential obstacles.
- Formulate new vision, mission, goals, objectives, and strategies and a plan for communication.
- Decide how to announce the integration or assimilation effort and utilize a consultant who can effectively manage change, including sensitive issues such as ego, pride and turf.
- Assemble task forces or cross-functional integration teams and formulate a detailed and tactical operating plan.
- Communicate frequently, efficiently, and effectively to secure employee buy-in and to maximize retention and productivity.
- Use a variety of communication tools to announce new roles and structures, including presentations, videos, e-mail, and information on the Intranet or within employee portals.
- Honor the technological, economic and historical legacies of both organizations. Integration/assimilation is much easier when both cultures believe they bring value to the blend.
- Once announcements have been made, build relationships and trust by keeping employees up to date on outstanding issues and the integration/assimilation process in general.
- Ensure that employees know there is still advancement potential and make efforts to "re-recruit" key contributors.
- Communicate that organizational change temporarily decreases productivity, even when skillfully managed.
Post-merger Integration or Assimilation
- Launch the integration stage quickly, putting working systems in place as soon as possible.
- Continue due diligence teams as integration teams that can function as change agents and advocates. Visibly support team efforts and equip team members with formal training in change management and group dynamics.
- Use culture audits, employee surveys, focus groups, change agents and advocates to track the success of the integration/assimilation.
There is considerable challenge in managing M&A change. Many organizations have found that cross-border mergers and acquisitions create an even greater element of complexity. However, even when mergers are not global in scale, businesses should consider retaining experienced OD professionals throughout all stages of the process.
OD professionals should work closely with the senior leadership of both organizations and with integration managers or integration teams when they are in place. They should assist all of these groups as coaches and facilitators, as well as working with internal and external communications specialists, task forces, change agents, and/or individuals in the HR Department, where resistant forces manifest themselves in employee relations issues.