Mergers and Acquisitions: Realize All Possible Value by Focusing on People
Mergers and acquisitions are a very typical way for organizations to grow and to try to return more value to shareholders. However, according to most studies, between 70-90% of acquisitions fail. When reviewing those articles, it is fairly typical to see what gets missed – the people and culture side of the equation. All too often, key employees leave, teams don’t collaborate effectively, and morale drops.
This occurs because in many cases, business deals are put together based initially on financial findings. While this makes sense at the outset, the true integration of two businesses and the ability to realize all potential value comes from having the humans be able to function inside of the new organization. This is a people and culture issue and is oftentimes overlooked or is considered only as an afterthought.
More and more, organizations are assessing the leadership team and culture and values of the acquired organization in a prospective fashion, often in the letter of intent or memorandum of understanding. Executives in these acquiring organizations understand that they are acquiring the people and leadership as much as they are the revenue stream. There are good approaches to assessing talent, and it does not have to slow down the acquisition process. An organizational and cultural analysis, which involves interviews with key stakeholders and a bench strength analysis, helps surface any potential culture-related issues. Many authors are citing this as an important part of the due diligence process that will become even more commonplace in merger and acquisition activity. Otherwise, continuing to buy organizations based purely on financials makes as much sense as marrying someone based solely on height and weight.
Through leadership assessments and the creation of cultural integration action plans, companies can make better decisions about how to structure the new leadership team. By identifying members of the parent company leadership team that possess the skills to lead the newly acquired organization, cultural differences between organizations can be bridged. Leadership teams can be blended effectively through ongoing integration initiatives.