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Thom Dennis

Serenity in Leadership Ltd

CEO

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How to lead well during a merger or acquisition

How you lead during a merger and acquisition can impact your people's psychological security
Mergers and Acquisitions

When it goes well, there are numerous benefits to a merger or acquisition, from unifying processes, resources, talent and systems, as well as economies of scale, new customers and markets, portfolio access and divergence. However, there are also potential issues from reduced competition to an increase in prices, disruption to service and the bringing together of different technologies and cultures.

Good communication is of course key. Employees are likely to be concerned about their jobs and what M&A entails

There can also be a negative impact on individuals as a result of Mergers & Acquisitions (M&A) from forced redundancies to office HQ location changes, increase in stress, a heavier workload and a change of company culture and new management. 

Kicking off the process

Whilst 2021 was a record year for M&A activity and in the US alone, M&A accounted for $581 billion, studies and anecdotal experiences repeatedly show that between 70-90% of mergers and acquisitions fail and a lack of support and care for the people in one or both companies is often at the heart of it. Research by King’s Business School and the University of Helsinki found that mergers are more likely to be successful if staff feel that their jobs are safe and they are treated fairly.  

On many occasions when the people are finally being considered in detail, it is too little too late because M&A can equally be a good incentive for workers to refresh and look for a job elsewhere. Resignations can increase the financial burden during a financially vulnerable period and impact the knowledge and skills required to lead a company post-merger. 

So how can we do our best to protect and support our workers by creating a people-centric strategy through M&A?

1. Synergy is important but culture is more so

Synergies are an important first step; both companies may in effect do the same thing or target the same customers. However, the shared cultures of two organisations are more significant and have to be part of the due diligence. Look at what the differences and similarities are and if the values between the two organisations are aligned. Honour the two cultures and then take time to define a new culture. Gaining a deep understanding of the cultures coming together must be a significant priority for leaders, along with retaining top talent right from the beginning.

2. Know who has high CQ

Employees with high CQ (Cultural Intelligence) will show their value and can have an exponential positive impact on teamwork, performance, cooperation and communication at this time. 

3. Ensure transparency or honesty to help stability

During M&A, workers may well feel uncertain, and they will look to their leaders to gain confidence. Managers who do not show an authentic and honest leadership style from the beginning will increase feelings of distrust and scepticism especially if false hope of job security is offered. The less transparency there is, the more trust and commitment is likely to be negatively impacted.

In the planning stages, leaders must decide how to adopt the software ensuring there is enough time to train staff if there are technology changes.

4. Listen deeply and act on it

Good communication is of course key. Employees are likely to be concerned about their jobs and what M&A entails. Share as much information as possible at each stage and openly invite input, always taking action where needed. Answering concerns regarding job safety and what this huge change means for employees will help them feel heard, supported and suitably prepared. 

5. Don’t let it drag on

There will often be tension between the needs for commercial secrecy and transparency amongst those impacted. So how quickly do you introduce change once the balloons go up?  Do things fast. Uncertainty breeds contempt, cynicism and anxiety. This means there will be a pain but hopefully in the short term rather than dragging things out.  

6. Look for power play in both teams

Is there proper representation from both sides? The dynamics of 10% from one company and 90% from another are never going to work. In large organisations, mergers are often perceived as acquisitions even at a departmental level. Alignment of the two teams is crucial, including the new leadership team around the governance of the new company. Many may have to go through difficult stages to get there. 

7. Be savvy and practical about shared technology

Bringing together different software and systems can cause huge difficulties and can lead to failure. Expecting one side to adapt their tools and communication strategies especially if this involves one business adopting an older version of the software which is less capable will cause resentment (and yes, it happens!). In the planning stages, leaders must decide how to adopt the software ensuring there is enough time to train staff if there are technology changes.

8. Prioritise DE&I. Always

Equality including pay, benefits and holidays is important for an unconflicted, healthy workplace. Encourage teamwork and employees to collaborate, benefit from diversity and get to know each other, especially if one of the companies is much larger than the other.

Employees may need to adjust to the new business and culture. Bringing in independent advisors may be the difference between success and failure

9. Create a new encompassing mission statement and values, and mean it

As part of the new culture, take time to create a clear sense of purpose and set of values that align with employee beliefs, which are built on principles like respect and trust and then ensure it is at the heart of everything you do.

10. Bring in transition and change experts

Employees may need to adjust to the new business and culture. Bringing in independent advisors may be the difference between success and failure. Advance investment in mitigating the impact is a necessity and a rewarding investment. Then measure the impact over the long term. Once the due diligence is complete, it often becomes clear that someone else will be left ‘holding the baby’ and that motivations, values, culture and purpose are not aligned – this realisation accompanied by early remedial action can save very large sums of money.

Interested in this topic? Read Company culture: how and why bad HR can bring down a promising merger.

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