This article has been first published in our initiative*magazine #14: „Mergers, Acquisitions and Carve-outs: Reshaping for success“ (free download).
MARCUS M. HAHN | THOMAS KÜNCHEN
Table of Contents
“WE bought YOU!”
Let’s take a look at the so-called “Day 1” after “closing”. The purchaser is now able to enter into closer operational contact with the acquired company. All functions are rushing towards their contacts in the acquired organisation in order to stabilise the business in the short-term, coordinate the next steps and plan integration in the medium and long term.
Even if many representatives of an acquiring company do not make the mistake of expressing these thoughts aloud, they should still admit that they often have them. This mindset, however, influences communication and individual actions. And why shouldn’t they allow themselves this arrogance? Aren’t they the economically more successful organisation? Haven’t they proven their superiority?
During this process, a company is rarely managed in a grassroots democratic manner. Especially in these exceptional situations, hierarchical management becomes apparent.
This is of course also expected by the responsible employees on the side of the purchased company:
“Well, here they come, the superheroes. They will explain our business and the world to us.”
“So what?”, the successful acquirer may think.
“They are going to get used to us and our way of doing business”.
While this view may be true in the long run, it ignores the damage it produces in the meantime – besides the fact that “getting used to” doesn’t mean “perform”. Indeed, changes of any kind, and in particular profound changes such as the ones caused by M&A, first lead to a drop in performance as the routine, which caters for efficiency, is interrupted and needs to be re-established. In addition, uncertainty, fear, resistance and opposition further promote the performance decline.
There is a wide range of established and verified Change Management tools available and one would assume they provide great service to successful Integration processes. Managers, however, do not question the necessity of these instruments as key ingredients for a successful Integration process. Although not openly expressed the signal is obvious: There are no capacities and financial resources ‘available’ to engage in the Change Management needed. There is an extensive acceptance issue and often absence of awareness which causes change projects to get stuck and never unfold their true potentials. It is the key factor for the failure of integration processes.
The adidas AG provides for one example highlighting the consequences of low attention to Change Management in regards to the Reebok integration. In the beginning, unclear definitions hindered the synchronisation of core leadership standards and programs. The important identity discussion was not completed, leaving employees unclear on how to cooperate as one firm after being competitors for so many years. As a result, there was a lack in role understandings, employees held onto familiar patterns and refused the necessary adjustments.
Even SAP, a company with extensive experience due to many Integration processes, that is not unfamiliar to changes and Change Management, sometimes faces suboptimal implementation progressions after successful kick-off workshops.
Change Management still too often dissipates in anonymous and generic communication towards the impacted people with insufficient time, budget and resources invested into an integrated Change Management approach.
Surprise the acquired organisation and be surprised
Appreciative listening, this is, first of all, getting to know the history and background of your contact person, and represents the first (and simplest) step in building mutual trust. In this context, respect and appreciation for what has been achieved in the past can be expressed. This not only serves to create a “feel good atmosphere”. Respect and appreciation mean much more than “etiquette-based politeness”. It also helps to gather information for project and integration managers on the buyer’s side:
• How well is my contact person integrated in the organisation? How good is his or her network?
• What is his or her (power) position in the organisation? Can he or she drive issues and make decisions?
• Can I rely on his or her professional expertise and experience during integration?
• What are the “Do’s and Don’ts” in the acquired organisation?
• What was successful, what was less successful in the acquired organisation?
The answers to these questions may pave the way to a much smoother Integration strategy and process. Trust is also a pre-requirement for transparency. And transparency is a necessity when it comes to identifying risks.
The establishment of a cooperation based on trust between the ones responsible for integration on both sides is essential. It also facilitate the process of finding the famous “skeletons in the closet” of the integration, which can in many respects become a legal or contractual threat.
Furthermore, the trust gained serves as a basis for employee retention strategies and programs. Especially in know-how-rich industries, it is an absolute success factor to retain experts. Often this exceeds the need for financial resources and is a direct contribution to the ever stressed “business continuity” that must be maintained, especially in the case of integrations.
Finally, the power of a positive surprise, a proof of respect and/or a touch of kindness should never be underestimated.
Remember: What goes around, comes around.
Prepare to surprise as an integration manager on the buyer’s side — the checklist
- Communicate and explain the “industrial logic” (business rationale) of the transaction. Provide outlook, expectation and goal.
- Listen. Create platforms and opportunities where “dialogue instead of monologue” takes place. Be the “bumper” if something is not going well. Admit that mistakes were made, that something is “sub-optimal” or still has “learning potential”.
- Show physical presence on site at staff or company meetings, whether small or large.
- Show commitment. Communicate what is known and decided. Explain, if necessary, the ambiguity or risks in which decisions were made. Say what you deliver and when. Deliver what you promised.
- Point out development perspectives, especially for middle management. They are the managers who are closest to the employees and who will be needed in the organisation longest from an integration point of view.
- Use an appreciative language (tonality) in communication. Put yourself in the position of your addressee and do not assume anything.
- When dealing with mistakes or “skeletons in the closet” of the acquired organisation, do not focus on problems or responsibility, but on solutions.
- Support the integration team of the acquired company with resources from your own organisation
Work “with” instead of “against “people
Why not continue the cooperation after „Day 1“ with dedicated Change Management instruments in order to further reduce opposition, resistance, fear and uncertainty – and ensure a successful Integration processes? Why not help employees, the engine of the organisation, to re-gain and maybe even increase their motivation and ability to perform? Is “WE bought YOU”, the triumph of the stronger party (at this point in time), reason enough to waste potential?
The many examples, in which the merger or acquisition resulted in disappointed expectations due to failed Integration processes, demonstrate clearly that the cost of not engaging in Change Management is substantially higher than the cost of engaging in it. Change Management is a required investment into the Integration process, not a “nice to have”. An insurance advertisement once said “if you can’t afford the insurance on your car, you can’t afford your car”. This thought equally applies to M&A: “If you can’t afford the Change Management for your acquisition, you can’t afford your acquisition.“
Besides the realisation that Acquisition and Integration processes trigger an extensive change effect, which impacts the sustainability of an entire organisation, it is important to acknowledge that this is not the only change the involved organisations may be exposed to at one time. Life outside the organisation goes on, too. In the VUCA world, organisations need to be prepared for disruptive external influences which might occur at any given time and could require far-reaching modifications of the existing business model.
Organisations are well-advised to choose wisely which battles are worth fighting – and to consider more constructive alternatives to the fight. In this context, Change Management, the willingness and the ability of the parties and people involved to direct their energy towards shared goals and joint actions is going to make the difference.
Did we miss an important point?
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