Seven steps to merger excellence

Ivey Business Journal Online, Sept-Oct, 2008 by Sandy Weiner, Roberta Hill

Mergers and acquisitions often create winners and losers at both the corporate and individual staff levels. One culture unseats another. One employee outweighs another. Power struggles prevail. And while policy and organizational decisions are made from above, the organization sits in limbo, slowly becoming disengaged from its focus. It is a hardly satisfactory state, since engaging across corporate cultures should be a near-fluid process in which a meaningful, value-driven focus and corporate loyalty are created from the onset.

M&As play a significant role in the survival and vitalization of corporations today. They continue to be a major strategy for improving innovation, profitability, market share and stock prices. Often, companies view the merger itself as the strategic end-game, rather than the main event. According to the consulting firm, Booz-Allen, which looked at what they classified as, "The Best Deals" since 1999, only one sixth of the M & As they studied increased shareholder value by 44 percent over industry peers. One sixth lost shareholder value by 44 percent relative to industry peers, and 51.3 percent underperformed industry peers. Today, years later, not much has changed. Even worse, little has been written on how to make the process work. (Viscio, Albert J., John R. Habison, Amy Asin, and Richard P. Vitaro, "Post-Merger Integration, What Makes Mergers Work?" Strategy Business, 4th Quarter, 1999. Reprint No. 99404.)

Our experience and nearly all industry research confirm that when mergers and acquisitions do work, the integration process seems to be holistic, fluid and well executed. In this article, we will highlight the five critical issues (Figure 1) that hinder M & A success and outline our 1-Focus 7- Step Model (Figure 4) to manage these issues. How the corporate leadership focuses its energy, as well as the timing and vision that drive employee engagement, impacts post-merger effectiveness. The single most important factor for post-merger success and long-term sustainability is the involvement and integration of employees from the start to create a common New Identity around a Shared Vision.

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Look at any successful change intervention and you will always find a discussion around creating identities Pand a common vision for the organization. However, these pieces of the process are often not handled as clearly and collaboratively as is needed for merger excellence to occur. In this article, we have highlighted the terms Culture of Engagement, New Identity and Shared Vision to stress that these are the components of the integration plan that require diligence and focus. While in theory the process should be led by the "C"-Level executive team, it is usually assigned to the next level down - which we refer to as the project implementation team. However, it is important to emphasize the requirement for the on-going and continued involvement of the "C"-Level executive role throughout the integration process.

Our 1-Focus 7-Step process has been adapted to address the specific and unique concerns of mergers and acquisitions. Training on specialized activities and various large scale interventions is offered across all levels and functions at various stages. We noticed a competency gap and designed unique identity simulations and team workshops to develop integration process skills at the front end of the process. Beginning at the pre-merger stage, the 1-Focus 7-Step process drives the integration from a Top Down Bottom Up approach in an organic, collaborative process. A New Identity out of a Shared Vision is created. (Table 1)

Lessons learned: Communications

The greatest loss that most M & A's suffer is not due to a poor match, but rather to poor post-merger implementation. This results in staff disengagement, and possibly, even disintegration of the company.

Most mergers focus on financial and business systems integration, which is operationally essential and key to creating a basis for success. At the outset, little attention is paid to the human factors, and communication is limited to "a need to know basis." By the time the "soft" factors are addressed and people are involved on a broader scale, many employees have either left the organization or become emotionally disengaged.

Employee disengagement is a key sign of post-merger dysfunction. The symptoms of disengagement -- alienation or loss of identity with a company/organization/group/team -- result in the following outcomes:

* Day-to-day decision-making grinds to a halt as overall decisions from the top are awaited.

* People don't know where they are going to end up or how they will contribute.

* Employees feel that their security and future are threatened.

* They no longer feel a vital part of the company.

* Worker morale plummets.

* Battle lines are drawn. An "us vs. them" stance emerges where cultural, corporate, country and continental differences are magnified and feared.

* Personal value is lost or at least undermined. The dominant question in most peoples' minds is: Where do I fit?