merger and acquisition tips

It’s Raining Mergers & Acquisitions! How To Engineer Successful Reorganization in Your Company

merger and acquisition tips businessesIn lieu of a brisk cup of coffee, here are a few jarring statistics about M&A to start your morning:

  • Only 16% of merger reorgs fully deliver their objectives in the planned time
  • 41% take longer than expected
  • In 10% of cases, the reorg actually harms the newly-formed organization

Blame it on culture clashes or poor integration strategy, but a lot can go wrong in the course of M&A. Harvard Business Review amusingly calls this corporate maneuver “personally disruptive—often traumatic.” When you effectively adopt another company—or are yourself adopted—you take on not only their objectives, practices, and policies, but also more intangible & abstract things, like their politics, culture, and company values. Suddenly, new voices and checkpoints are injected into the chain of command. The balance of power shifts. People may butt heads over conflicting styles for executing the same task. Suffice it to say, feathers get ruffled.

Reorg itself can be likened to a marriage where each spouse brings their own childrenresulting a big, blended stepfamily. Just like such marriages, the resulting dynamic can be healthy and constructive, à la The Brady Bunch, or utterly disastrous for all involved. Business leaders tasked with engineering reorg have a hefty task on their plate. Many executives will turn to post-merger integration plan templates and checklists when developing a reorg strategy, although a one-size-fits-all template may not be their best bet.

It certainly takes blood, sweat, and tears to engineer a successful reorganization, but it can be done! By arming yourself with knowledge of common pitfalls, smart moves, and reliable strategies, your M&A is poised for success.

3 tactics to ensure M&A reorg success:

Designate a transition team – Call it an integration task force, if you will. Just as any company initiative benefits from having a dedicated team to oversee it, the M&A transition will be better off if it is overseen by a uniquely designated team. This team may be comprised of representatives from an array of management levels and business units, to ensure the needs of each unit are heard and tended to, as the transition unfolds. The team will (evidently) include reps from senior leadership, but this inclusive approach fosters a feeling amongst the team that they have a voice throughout the reorg. In addition, designating a team to strategize and execute the minutia of reorganizationwherein team members have unique roles and initiativesis more efficient than having a jumble of tasks and goals, characterized by confused, uneven execution. Loss of key people is always a risk during M&A; clumsy execution or failure to incorporate employees in the process can exacerbate this risk.

When team members find issues, enable and embolden them to seek recourse quickly. Let them report directly the CEO or other member of senior leadership when issues, questions, and problems arise, to expedite the resolution process.

Develop a profit and loss statement: Weighing the costs and benefits of a merger certainly seems like common sense, but less than 15% of executives do so. The costs of M&A can extend beyond those spent on consultants, lawyers, and the like. In the face of disruption and uncertainty, employee productivity may dip and key players may even be tempted to look for opportunities elsewhere. Understanding where you are at risk for losses can guide you as you draft priorities for the reorg. This may also help you pinpoint where delays could occur, allowing you to account for them in advance as you plan.

Define the deal’s source of value and its key risks. Go a step further and elucidate an exact “deal thesis,” or a cogent reason as to why you believe the deal will enhance the value of the company. Understanding how the M&A deal will benefit the company provides you with a framework when you begin establishing business targets for the newly merged company.

Explore “the three options” for organization approach: When two companies merge, you will ultimately have three very straightforward options available for the organization of the newfound company. These are:

  • Company A’s traditional methods
  • Company B’s traditional methods
  • A combination of the two

Framing it as such allows you to narrow your choices down quickly and inform discussions about internal structure design. Detailed descriptions of how each method would be employed in specific sectors of the company may be presented to the leadership team. This way, they may conceive an idea of what these methods would look like in practice and provide feedback along the lines of: “I would not be comfortable in that role,” “we would hit a logistical snag here,” “that process is too convoluted,” “the interests of these two roles are at odds with one another,” etc. This is an effective way to jettison the less attractive options and determine which of each company’s “traditional methods” would bode well when applied to the merged company at large.

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