Synergies achieved through M&A can introduce additional earnings streams and competitive advantages. Unfortunately, in most M&As, the new company’s performance falls short of projections. But it’s not because product lines were not rationalised, risk mitigation processes not overhauled or legal documents not executed with care.
People issues. Most M&As fail because human capital issues were not adequately addressed. You pay for your employees’ skill and expertise, but don’t forget that the whole person – both emotionally and psychologically – must show up for work. Sure, some M&A failures are triggered by misguided financial rationales or economic reasons, but the ultimate success of M&A depends on how well “people issues” are handled.
Culture. In M&As, one company’s culture (usually the acquirer’s) predominates and there will be efforts to integrate the two or more cultures into a new operating culture for the integrated organization – an opportune time to redesign the company’s culture especially if it has become complacent.
Rationalisation. Typically, M&As result in two sets of functional people vying for positions in the integrated structure, hence duplicated functions are made redundant and others relocated. Meanwhile, if talented performers perceive a bleak future or cannot align themselves with the new culture, they will move on.
Any M&A must consider workforce trends such as shifting demographics, global supply chains, the aging workforce and increasing global mobility. Forward-looking organizations must rethink their approach to talent management to best harness talent. Then they will be positioned to succeed in a highly competitive marketplace. Furthermore, organisational culture, employee engagement and leadership development have a significant impact on talent retention – an integrated approach to talent management helps to sustain outstanding business results.
Here are some management insights on how to handle the soft issues of M&A to ensure the higher rates of successful implementation.
Management Insight #1: Don’t be too focused on doing the deal to the extent of neglecting post-acquisition people planning and integration.
Often, the M&A initiator or guide will spend substantial time studying and executing the financial and economic analysis but neglect the people planning and integration. Poor prior and post-M&A people planning and integration can cause the loss of key, high-performing and talented employees. So, identify the key positions and people, “guard” them and take them onboard the M&A strategy.
Management Insight #2: Don’t neglect existing businesses.
With the focus on new M&A initiatives, existing businesses tend to get neglected. Don’t let the M&A create undue distress amongst those who helm strong businesses and who may be left wondering about restructuring, divestment or business closure.
Management Insight #3: Merging different cultures is difficult.
Organisational culture, which concerns how things are done around the company, often determines the cohesiveness and effectiveness of the organisation and is largely influenced by the CEO. Integrating the culture is therefore crucial to a successful M&A but needs change management planning before, during and after the M&A.
Management Insight #4: Be mindful of employee de-motivation.
In any large-scale and highly publicized M&A, there is uncertainty and people are naturally concerned and may feel de-motivated and hesitant to make decisions for the long term. If this concern is not properly addressed and employee buy-in not obtained, there could be an exodus of good employees while those who remain might express discontentment through work slowdowns and even sabotage.
Management Insight #5: Beware of the loss of key and talented people.
Good M&A planning and implementation can prevent the loss of such people. For instance, early participation of strategic managers can create value as it enables technical leaders to join other executives in advising CEOs and directors on the strategic intent of potential acquisition and appropriate valuations. This involvement should continue up to the stage of due diligence and integration of the combined organizations. Hence, in an M&A, key personnel need to be identified, constantly kept engaged, involved and updated, although the management still needs to be watchful for possible fallouts when the new entity is publicised.
Management Insight #6: Handle the problems of skills transfer.
One of the compelling reasons for an M&A is the acquisition of certain types of competencies to strengthen key areas of operations and expertise. Often these specialised skills and experience are tacit and thus difficult to transfer. Besides, employees are reluctant to share their expertise in a climate of uncertainty, but this can be resolved when people are clearer about their future.
Management Insight #7: Do sufficient research on the acquired company.
Many M&As eventually fail because the M&A initiator had not done thorough research on the acquired company. Initial planning should include clarifying the strategic M&A intent including the value-add, financial and growth benefits and potential synergy that can be generated.
Management Insight #8: Avoid delays in making decisions.
People don’t like to wait in trepidation wondering what will happen to their careers. Hence, it is important that decisions once considered and evaluated are quickly made as decisiveness will allow changes to be better managed.
Management insight #9: Retain key talent whilst recruiting new talent.
Key employees in a company need to feel appreciated, excited and happy that they are learning and developing important skills that enhance their career advancement. An integrated talent management and succession planning framework greatly helps in fulfilling their needs and engaging them while recruitment of new talent is done simultaneously. This is to build talent bench strength and the leadership pipeline.
Management Insight #10: Create a competitive and conducive work environment.
In all M&As, companies must also remunerate and review the salary to match the amount of work and compensate according to the expertise, knowledge and contribution that the employee brings. It is vital to keep employees motivated, as they will resign if the company does not provide a conducive environment for sustainable career development and personal growth. A Gallup survey involving over 1,000,000 employees and 80,000 managers revealed that what most employees wanted more than anything else was a good boss. So, the “new bosses” must be trained to become competent bosses. Moreover, corporate leaders can coach or mentor newly acquired employees to acculturise them into the integrated organization.
