A study by KPMG indicated that 84% of mergers and acquisitions (M&A) fail. The stakes are high, and so is the risk.
This period of transition is undoubtedly a challenging time for any business – cultural incompatibilities between two merging companies can be disastrous, and the uncertainty that surrounds an M&A can have negative effects on employee morale and engagement.
If you’re managing your M&A internally, it’s critical that your organisation, and the people and leaders within it, have the necessary skills to support the process.
Managing an M&A can make or break a leader. Success requires alignment on goals and strategies, as well as the ability to create, foster and steer culture. This is because, while M&A failures can occur for many reasons, it often comes down to the successful integration of two cultures.
When two businesses become one, leaders must manage the integration of different personalities, ambitions, behavioural traits and ways of working. Take, for example, Time Warner and AOL – the two companies botched their merger deal by not accounting for the impact of merging two very different corporate cultures.
A good leader needs to be able to manage this cultural change, keeping in mind that successful integration requires engagement and commitment from all employees. It helps if staff understand why the merger is necessary, and can appreciate the future vision of the merged companies.
But this is easier said than done. The difficulty with integrating two cultures is that employees can be stubbornly resistant to change. This is because every employee holds a core set of beliefs that inform their perceptions, opinions and behaviours. It can be hard to alter this mindset, so it won’t help to explain why the merger is a good idea – facts will do little to change mindsets.
A more effective approach to managing cultural change is to recognise, understand and engage with different mindsets in a language different employees will understand. Once a leader can identify what is important to different employees and determine how they like to communicate, they’ll be able to tackle any integration issues head-on, providing their employees with the information and strategies they need to accept the change.
The Whole Brain® Thinking framework gives leaders the tools they need to recognise different thinking styles and adapt their communication and leadership style as required. For example, an experimental thinker may be more capable of appreciating the big-picture vision driving the merger, while a practical thinker will feel more comfortable with changes to processes if they can access detailed plans and strategies.
Mergers are complex. The stakes are high and timelines are often tight, so fast and effective decision-making under pressure is imperative. Leaders need to be decisive, efficient and quick to adapt to a dynamic environment. That’s why it’s important to employ problem-solvers who can deal with situations quickly, no matter what’s thrown their way.
According to the HBDI, experimental thinkers may feel more comfortable with the high-risk nature of a merger. People who prefer experimental thinking tend to be more comfortable with ambiguity and surprises, and can envisage the big picture without needing all the details. Their innate curiosity and creativity also enables them to find innovative solutions to complex problems.
That being said, given the complexity of mergers, it’s important that decision-makers are able to look at problems from multiple angles. Fortunately, any type of thinker can learn to leverage the power of agile thinking and agile problem-solving (the ability to switch between thinking styles based on the situation at hand). Agile thinkers can anticipate challenges and make intelligent, fast and effective decisions to solve complex problems.
A successful merger starts with a strong strategy and comprehensive plan. While uncertainty is a given during the merger process, ensuring you’re conducting effective due diligence is an important (if not mandatory) step. Once you’ve identified the acquisition target, it’s time to call in the experts – your accountant, your lawyer and your tech people.
On the company side, you’ll also need your internal executive – the one who’s managing the process. This role might be best suited to a practical thinker. Practical thinkers tend to be more organised. They’ll ensure that you’ve assembled a diverse due diligence team and that no details are missed during the process.
The people person
The uncertainty and disruption that surrounds mergers can be stressful for employees. It’s important to have people that understand human behaviour and are good at reading the emotions of others.
Relational thinkers tend to be more people-oriented. They’re often more sensitive to others, have greater interpersonal skills, and have high emotional intelligence. Having these skills in the team is especially advantageous when merging two diverse groups. Relational thinkers tend to be “team players”, which means that they’re more likely to understand and get along with their co-workers, even if they’re vastly different.
How to manage a successful merger
Herrmann can help you and your team develop the skills you need to successfully plan, manage and mitigate the risks associated with integrating two companies. Get in touch to find out more.