What is the right cycle time for mergers and acquisitions? How do you prepare for integration? What would you do in the first 30 days after closing?
—Bernhard Klinger, Linz, Austria
Or, in other words, how do you not screw up M&A?
While organic growth gets better press, and is certainly less fraught with blood, sweat and tears, not to mention risk, M&A remains the fastest, most powerful tool a company can use to change its competitive game.
But, as your questions suggest, there’s no rule book for M&A.Fifty years into intense worldwide M&A activity, with thousandsof examples to learn from, companies still botch it, too often not realizing the anticipated benefits of a deal.
On top of that, many people who live through the “A” part of the process will tell you the whole thing felt a little like a death to them, with their lives turned upside down. Still, no company should shy away from M&A, and it doesn’t sound like you plan to. Here, then, is our list of rules for avoiding the six most common pitfalls of M&A.
Beware of any “merger of equals (MOE)”
The idea is noble, the reality a mess. The reason is built right into the premise. If the merging companies are so darned equal, both sides wonder, why should either adopt the practices, policies or people of the other?
MOE deals routinely come undone by that question, as teams spend months duelling over who’s in charge.
Recognize that the cultural fit of two companies is as important as, if not more than, strategic fit
Oh, how exciting it seems when a merger or acquisition makes perfect sense in terms of products, technologies and numbers. But what a disaster it can and will be, if the two companies operate with distinctly different values. The facts are, some cultures don’t combine, they combust.
Run for the hills if you find yourself entering a “reverse-hostage situation”
Sometimes, an acquirer wants a company so badly, it starts making concessions and, by the time the negotiations are over, the acquired company is virtually in charge. Don’t get yourself in a position where you’re wondering, “Why did I pay so much for something I don’t really own?”
To quote the angel Gabriel, “Be not afraid”
When it comes to integration, boldness is the most sensible approach. Ideally, the integration process should be complete at the time of the closing, and certainly within 90 days after; otherwise uncertainty can morph into inertia or, worse, fear. Both cripple morale—and operations.
Don’t succumb to “Conqueror Syndrome” by marching into your new “territory” and installing your people everywhere
Look, one of the main reasons you do M&A is to get twice the talent to pick from. Of course, acquirers feel loyal to colleagues but, for the new and expanded company to thrive, it needs the best team, even if that means letting some of your own go.
Don’t pay too much
We’re not talking about 5%—that will be lost in the rounding off if the deal really works. We mean premiums of 20 or 30%, which happens too often. The culprit is “deal heat”, the negotiating frenzy fanned by competing bidders and investment bankers. Remember, there is no last best deal; only overheated desire that makes it feel that way.
Now, we realize that six traps are a lot to avoid, especially in the turbulence before any deal. But if you fall into one or two along the way, acknowledge your mistake, and climb back out. Organic is great, but M&A can add real firepower to your growth arsenal.
I really believe in my company’s product and respect my colleagues and bosses. But I’m overwhelmed by the ever-increasing demands of work and my young family. Part of me wants to find a new job, but maybe that’s shortsighted. What’s your advice?
—Name withheld, Chicago
Stay! You’ve got a good thing going. How often does someone say he really likes the “big three” of work: company, product and people? But we hear you about burnout. That’s a problem in any high-powered job, and a dynamic certainly exacerbated by conflicting demands. A person just can’t give 100% to everything and everybody, all at the same time.
So, you’ll need to make a trade-off. Maybe it will be working some place less draining. Maybe it will be spending less time with your family. But don’t decide until you’ve tried every strategy to make your balancing act more livable. In your stressed condition, the last thing you need is the additional stress of knowing you left a good thing behind.
Give work a chance.
Write to Jack & Suzy
Jack and Suzy are eager to hear about your career dilemmas and challenges at work, and look forward to answering some of your questions in future columns. Jack and Suzy Welch are the authors of the international best-seller, Winning. Campaign readers can email them questions at firstname.lastname@example.org. Please include your name, occupation and city. Only select questions will be answered.