There are many reasons why a business would merge or acquire another. Whether the goal of a merger is to expand product lines or capabilities, increase geographical reach, respond to a crisis, or simply to increase scale, there are factors that are critical in determining whether the post-merger integration is successful. Here are four areas where the most positive impact can result from a merger.
1. Keep Your Expectations Real - And Communicate Them
Internally, it is important that folks on both sides of the merger are aware of the business reasons behind the merger. There should be no doubt as to value that the merger is intended to create. This is a change management process, and in order for change to be accepted, folks
want to know why they’re being asked to do something different. They want to understand how the business and its customers will benefit. Be cautious not to create expectations that you can’t deliver on. Your people will be challenged with uncomfortable situations and new expectations – and morale can quickly turn if they don’t believe their efforts are going to bring benefits to the company and themselves. Externally, don’t forget to communicate to your customers the rationale for the merger—specifically, how it will mean value to them. If you don’t tell them, someone else such as a competitor will, and likely not in the way that you want. Your best customers will want to know that they won’t be negatively impacted – and that your focus on them will not waiver. As much as possible, this should be done in person.
2. Make Sure to Reap the Benefits of Synergy - And Communicate Them
Mergers take incredible planning, and the minutia of the process itself can cause management to lose sight of big picture once all the paperwork is completed. First of all, foster some early successes that provide a vivid example of the value that the merger was intended to create. No doubt mergers cause a disruption. So management needs to use this disruption to their advantage wherever possible. One such opportunity is in implementing difficult changes. Most employees will resist change to some degree. They will see the merger as interrupting their routine and threatening their role. A merger and its “unfreezing” impact on the organization often can provide the impetus needed to improve client-service, re-focus discipline and accountability and improve stale systems and procedures. Whether or not cost reduction was a key strategy behind the merger, eliminating redundant costs is an important victory and should not be ignored. Anticipate that you will have some unexpected cost increase from the merger. So be prepared to offset this by cutting where you have the opportunity.
3. Stay Focused on the Core Services
The merger may create compelling new opportunities but if too much of your focus and energy is on creating something new, you risk alienating the people and customers that you started with. Don’t forget that your competitors most likely are aware of your merger. They’ll be quick to look for opportunities to go after your people and your clients – will look for signs that you are taking your eye off the ball. The best way to accomplish this is by keeping your integration team small enough so that everyone else remains focused on the core business.
4. Remember that Talent Wins in the End
You’ll need to take steps to retain and incent your most critical people to make a merger work. To really optimize the value of a merger, consider whether your business is now capable of attracting some real difference makers. This is a challenging objective in a merger because your organization will be in flux and there will already be politicking over who gets which role. All merging companies should have a post-integration team assigned to take on the important but temporary work that a merger creates. This team is critical to keep outliers and egos in check, and to allow the bulk of the core business to operate. Too big a team gives the outliers a voice and an outlet and can have the effect of dragging out distractions into the future. So make sure your team has leaders who are assured to have an important role in the combined company – and can stay above the fray. This will allow top management to stay independent and objective, and create an opening to bring in fresh talent and perspective to take the business to the next level.
Merger integration is difficult. It is the biggest reason why such a high portion of mergers fail outright or don’t achieve the intended benefits. Keeping the above principles in mind will enhance your chances of looking back on the transaction as a success.
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Contact Dave at dave.scudder@newportboardgroup.com
