One of the latest videos in our collection of shared thoughts and experiences is ‘Integrating mergers and acquisitions’.
Transcript of ‘Integrating Mergers and Acquisitions’for those unable to view on YouTube:
Hi, my name is Kevan Hall, CEO of global integration, specialists in matrix management, virtual teams and global working.
In our work we regularly get involved in the integration of mergers and acquisitions. A high proportion of these (over 70% according to Bain & Co) fail to deliver the shareholder value anticipated. One of the top three reasons for this is the failure to integrate different corporate cultures.
In our experience there are some practical steps we can take to minimise this risk:
Create integration teams early.
If the failure to integrate corporate cultures is a major source of problems, then we should pay more attention to this during due diligence. We need to train our integration teams to be able to analyze corporate cultural differences and identify the gaps are likely to cause challenges. The size of these gaps will often be a good predictor of areas where we should focus more attention in order to be successful.
Aligning intentions and actions.
In integration we usually have three options:
1. To assimilate the smaller organization into the larger one. This often happens when we acquire an organization for a specific technical capability or market share. The larger organization rolls out it systems, processes and culture.
2. To protect – where we want to preserve the unique characteristics, relationships or way of working of the partner.
3. To create new synergies based on the two legacy cultures working differently together.
However, in reality we often see a mismatch between the expressed strategy and what happens.
I worked with a small entrepreneurial software company before it was acquired by a large organization. The larger organization was attracted by their speed of response, flexibility and customer orientation. Their strategy was to protect this and learn from it.
Unfortunately, the managers in the large organization could not resist interfering in the acquisition. They introduced the large company’s grading, colour scheme and expenses guidelines. Pretty soon the most entrepreneurial of the acquired managers were looking for other jobs and complaining about ‘creeping assimilation’. I don’t think anyone in a large organization actively decided to destroy the existing culture, but, in the absence of a clear strategy, it just happened.
To prevent this, we (at Global Integration) have developed what we call the best of both workshops. These help to make clear choices about what aspects of the legacy corporate cultures to preserve or assimilate and to identify areas where new synergies can be created. Our clients use these workshops to help integrate teams with members from the two legacy cultures and to make clear and explicit decisions about what – or whether – they will share.
During merger and integration activity, we can become very focused on the finances and the structure of the deal – but these are rarely the factors that trip us up or cause M&A to fail.
The critical factor is how we create new ways of working and a new corporate culture that enables us to deliver the value we planned for.
If you would like to find out more about how to train your M&A teams, or newly integrated organizations, on how to get the best out of working together, you can find out more about this on our website page on M&As, or by talking to one of our specialists.
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