“Unfortunately for most companies, as statistics bear out, the vast majority of mergers just don’t go as planned. In fact, most mergers are driven by the need for growth, but at the expense of shareholder value.”
The new CEO of a Fortune 500 company leaned back in his chair and astutely offered this to his new management team, “Well, I’m convinced that merger integration is anything but business as usual. And from now on when we are integrating acquisitions, we must act quickly and decisively and not get caught up in the analysis paralysis of the past. A good decision made quickly is better than a perfect one made a month from now. I have learned over time that acquiring companies is “counter-intuitive” to our normal business practices and tenets.” This CEO’s company now had a chance to avoid becoming another disappointing statistic.
The push for critical mass in the 1990’s and 2000’s has continued to lead to critical MESS. Companies still focus on the assimilation of assets and hope the consolidation efficiencies will follow. The predictable result: more assets, little to no empirical efficiencies, a stagnant to declining bottom-line, loss of key personnel along the way and general chaos in the new organization.
So how does one avoid chaos and bring order to integrations? Every person involved must realize that the integration of companies and the realization of the synergies associated therewith is the most critical initiative for the ongoing business. There is nothing a company can do that will affect shareholder value more dramatically than the success or failure of integrating strategic mergers or acquisitions.
Combinations need to get the focused attention of the two organizations beginning with visible leadership. The integration event must be clearly sponsored by the CEO or the top of the operating entity. If the integration is not perceived to be of utmost importance to him or her, then it will not be important to the employees throughout the combined organization. In the case of the CEO in my opening comments, he engaged himself in the decision-making process for all major decisions as Chair of the Integration Steering Committee. He insisted on executive participation in initial integration planning prior to the announcement as well as having communications already prepared for both internal and external resources. He agreed to stringent behavioral and decision-making protocols for the integration process. He even put the leader of the integration in the office next to his own. He got It!
The organization was clear that the integration was a priority. Most companies struggle with managing all the nuances of their day-to-day business. Post-close and throughout the integration, companies must manage their own business as well as the business of the acquired/merged company while simultaneously integrating the personnel, customers, processes, and systems. Certainly, this is a daunting task inconsistent with the internal machinations of all but a few of the most sophisticated acquisition companies.
All the moving parts of two complex organizations being managed concurrently with the integration are indeed chaos creating. But it is manageable chaos. In addition to rapid decision making and leadership participation, sophisticated integration models and methodology can help you “bite-size” this overwhelming task by also applying a Counter-intuitive approach to staffing.
So, where do the best acquirer’s find the critical resources to ensure the successful integration? Rather than throwing the responsibility for integration to the folks who have to maintain the ongoing business, the best acquirers have learned to better utilize the new talent they just purchased. When two companies come together, there are usually many highly knowledgeable and talented executives and managers who may not be retained for the surviving organization but could bring significant capabilities to a project of this magnitude. Consider using these people to form the top layer of your Integration Management Team. Seriously. A special incentive package should be created for the team members with specific metrics tied to the success of the integration process. Again, using executives who may lose their positions within the new organization can be a far better and cost effective resource than burdening the operating group or hiring outside consultants. This counter-intuitive approach may appear highly suspect at first glance, but you bought this company because of its value, so why not leverage every piece of it. Rapid-fire decision making by a focused top executive, while leveraging the experience and knowledge of both organizations to drive the integration will payoff in huge synergies and value creation.
Photo: dexigner.com
______________________
About the Author: Jim Jeffries is the founder and Chief Executive at M&A Partners. He has held C Level positions in multiple consulting companies and industry. Mr. Jeffries’ background includes P&L responsibility at various size organizations during multiple stages of growth. He is also a CEO coach and advisor in global leadership development. His particular strength is in creating organizational vision to stimulate revenue growth while optimizing returns on invested capital. He has been quoted extensively in USA Today and in recent releases of The Art of M&A book series published by McGraw Hill.