Increasing a Merger’s Chances of Success

In reviewing the statistics over the last 10 years on the success rates of merged entities, we find that approximately 65-70% of those corporate combinations do not succeed in achieving the established three year financial and operational goals envisioned at the time of the corporate combination.  In my experience, and in discussions with a variety of seasoned senior executives, it becomes clear that the primary contributors to less than stellar performance as combined entities relate less to structural and methodological differences between the companies, but rather, the inability of the acquiring company to pay close attention to the values and vision of the acquired firm.

Oftentimes in such unsuccessful alignments, the acquiring company superimposes its corporate cultural and organizational approaches upon the acquired company without spending sufficient time to assess and determine what values and processes the acquired firm brings to the combination.  When the values and corporate cultural benchmarks that were the hallmark of the acquired firm are not carefully considered in the incorporation , many of the lynchpins that have motivated and inspired the senior and mid-level management staffs of the acquired firm can cease to exist. The managers of the acquired firm can feel profoundly disassociated and disengaged.  They can feel that the time and effort that they have put into their firm has little value in the minds of the acquiring company’s C-suite.  With this diminishment of importance and devaluing of previously successful corporate cultural endeavors, the management staff of the acquired firm can quickly lose their sense of identity and resultant capacity to feel part of, and to contribute to, the newly aligned organization.  Clear instances of demoralization, disaffection and declining performance are the result, negatively impacting both firms.

How can such situations be avoided?  For one, timing is crucial. During the initial combining and final negotiation phases of a corporate combination, it is essential that the senior management and members of the board of directors of the acquiring firm spend significant time with the senior managers and board members of the acquired firm focusing specifically on the values and vision of the firm being acquired.  When delving into these components of the organization, the acquiring firm needs to bring humility and open-mindedness to the investigative effort with an eye towards recognizing the intrinsic value of the inclusion, in whole or in part, of the corporate cultural hallmarks of the acquired firm.  The conscious inclusion of some of those intrinsically important values and visions into the merged corporate environment will provide a sense of security, challenge, belonging and commitment on the part of the acquired organization’s managers and supervisors. This environment will recognize the newly acquired members’ contributions and will provide “hand-holds” upon which the acquired company’s executives can feel confident and in familiar territory.  These touchstones will enable all management levels of the acquired company’s staff to continue to make timely, progressive decisions without feeling second-guessed and, perhaps, less confident.

This investigative, information gathering effort is often best accomplished with executive and managerial off-sites where the agenda is clearly directed toward values and corporate cultural issues.  These off-sites require significant amounts of introspection on the part of executives from both entities with the purpose of devising a singular, inclusive culture with guidelines, expectations and freedoms to act understood right from the inception of the combination.

Also, post-incorporation, the initiation of a formalized mentoring program at each level of the executive and managerial hierarchy is essential. Here the sharing of values, vision and role clarity are constantly, carefully clarified and incorporated on a day-to-day basis.  This joint mentoring concept, both formal and informal in nature, will serve to maximize the alignment of the respective executive and managerial groups while also serving as a means to share highly creative and non-traditional approaches for the betterment of the combined organization.

PACES, LLC has a great deal of experience in aligning entities to achieve optimized results both pre- and post-merger.  Our experience encompasses a variety of industry types and ranges from Fortune 500 companies to smaller and medium sized domestic and global operations.  Please contact us to discuss the value of facilitated off-sites and mentoring programs. The results can be enhanced alignment and the successful evolution of a cohesive single operation.

 

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