The following article was submitted by Jane Clarke, a director with business psychologists Nicholson-McBride and looks at why so many mergers and acquisitions fail to live up to expectations. And guess what? People are the key to making it all work!
Through the rose-tinted spectacles of any suitor their deal looks like the one to provide growth and synergy, gain access to new markets and solutions and – above all – create major efficiencies through the sharing of skills, technologies – and costs. The reality of course is different. Two-thirds of all mergers and acquisitions (M&As) fail to achieve their desired objectives.
So what goes wrong?
Most of the reasons for failure are associated with culture and behaviour – unsurprisingly, since it’s people, not processes, that really make the difference between success and failure.
Increasing the odds for success depends on planning. And if you view any merger as a marriage – whether made in heaven, or not – then the two key phases which need to be effectively managed are the pre-nuptials and the return from honeymoon.
In most M&As, enormous amounts of time and energy are dedicated to financial and legal due diligence, but little or no attention is paid to the cultural issues, yet so many of the problems stem from this area.
One of the most important factors in the run up to the merger is establishing whether the senior players will be able to work together. It’s vital that, before Newco goes live, the senior leadership team is in place – and working together effectively.
It’s also vital to include an aspect of cultural due diligence in the investigation process. This needs to be done from a neutral and positive perspective however. Look for areas of genuine synergy and ways in which the collective can be better than either of the individual cultures.
The return from honeymoon
Once the initial euphoria has died down – probably along with the share price – it’s absolutely vital to manage the change actively. In the past, leadership teams have focused much of their efforts on the tangibles – systems, processes and structures. Of course, these are important. But they’re not the only important factors. Teambuilding and vision are also paramount.
Without being overly hierarchical, anyone who is in a management position is critically important. Who is in and who is out – and the way in which they are selected – all send messages to the rest of the organisation. The recruitment process has to be seen to be objective and meritocratic.
Once in place, it’s vital that the team is all singing from the same hymn sheet. And what better way to ensure they are than getting them to devise and collectively own the vision. This should be future orientated and embrace the potential synergies. It should outline the sort of culture that Newco will aspire to create. And once created, the vision should be compellingly communicated to the rest of the workforce.
It’s a common mistake, however, to believe that communication equals commitment. This can be the case, but it’s certainly not the rule. Commitment will come by getting new teams together, throughout the business, to help them work through how they will translate this vision into the day-to-day reality. They need to be given the opportunity to meet one-another, to forge relationships and to work through the practical implications of the new world.
It’s important to find creative ways to keep the message going through the new company, even once life seems more settled, and to be flexible enough to adapt and update the messages as the new culture emerges.
So the merger of HP and Compaq may give HP the edge on the IT sector, but will it be able to successfully marry the two cultures? Only time will tell.
Jane Clarke can be contacted through the London office of Nicholson McBride Ltd at:
Nicholson McBride Ltd
10 Frederick Close
Tel +44 (0)20 7724 0232
Fax +44 (0)20 7402 3663
e-mail: [email protected]