M&A: Strategies for Making a Transaction Work
The mergers and acquisitions market is on fire, presenting a myriad of opportunities for lucrative synergies. Yet not all mergers succeed. Indeed, most fail, due in large part to failure to plan and appropriately manage people. The following M&A strategies can help make the transaction work, and ensure that integration is successful.
Analyzing Company Structure
You must be prepared to control the structure of the merger from the very beginning. An HR transition team can help identify the most important HR functions. You should also look to which duties are key to the merger, and which can be outsourced or consolidated. In so doing, you can work to incentivize and retain key staff, while getting rid of dead weight.
If the deal involves a merger between two companies in different nations, plan for some cultural upheaval. Bringing them to a single location can help the teams get to know one another while plotting their global strategy. Be prepared to have culturally competent HR representatives on site to manage challenges as they arise.
An exceptional management team is one of the most important assets in any deal. Develop a talent profile for each executive. This can help you assess which managers are truly vital to the company, then assess what you can do to incentivize them to stay. You may also notice potent opportunities for restructuring to better capitalize on each manager’s strengths.
A comprehensive assessment of your team should help you identify the roles that are lacking. Once you do, you need to immediately build a recruitment team, especially for key executive roles. Design the process to carefully screen applicants, while avoiding needless slow-downs.
Mergers scare employees. So shortly after you announce the merger, you must communicate with your team about why you are merging and what the merger offers them. Be prepared to answer questions. Then develop a comprehensive communication plan to get ahead of rumors before they start. The more proactive you can be, the less likely you are to find yourself on the defensive, fighting to quell rumors.
Tackle Cultural Change
To successfully merge, you must be prepared to reconcile different managerial and cultural styles. Numerous studies have found that cultural mismatches are a leading cause of integration failure. Identify cultural differences, then work with HR to create a loose guide to the new company’s culture. Ideally, this should draw upon the best of each company’s cultures, and improve the lives of workers. Your staff, for example, are unlikely to be happy about transitioning from an independent working life to a micromanagement approach to getting things done. These sorts of unpleasant transitions can cause you to lose much of your team, so plan for how to manage these issues before they arise.
You are going to be under a microscope for a couple of years. Staff, clients, suppliers, and other stakeholders will watch for signs of failure. Be prepared to address any red flags and explain them to everyone’s satisfaction if you want the best possible shot at a successful merger.
You often need a couple of years to fully assess whether a merger has been successful. By then, you’ve already invested significant time and money. So it’s simply not enough to hope that a transaction works, or believe that it might. You must plan ahead to give each transaction the best possibility of success.
About Madison Street Capital
Madison Street Capital is an international investment banking firm committed to integrity, excellence, leadership and service in delivering corporate financial advisory services to publicly and privately held businesses. Over the years we have helped clients in hundreds of industry verticals reach their goal in a timely manner.
Our experience and understanding in areas of corporate finance and corporate governance is the reason we are a leading provider of financial advisory services, M&A, and valuations. With offices in North America, Asia and Africa, we have adopted a global view that gives equal emphasis to local business relationships and networks.