The Challenge: The advantages of an acquisition are numerous and area most often centered on growth and with acquired sources of growth. An acquisition accelerates the felt need for change, overcomes organizational inertia, can lead to rapid change in the market position, and may help reshape a business. Acquisitions can provide new strategic direction, take the corporation into new product lines, provide new capabilities, or open up new markets. But acquisitions are also extremely risky. A merger will inevitably require large amounts of time and money, and will require very close attention to integration.
Post-merger integration is among the most difficult of leadership business challenges managers face. Aside from the financial and legal minefields, the combination of two entirely different business cultures into a single company has many potential downsides. What makes successes different? In a word, Leadership.
The leaders of successful mergers do a few things quite well; they are skilled integrators, not just of assets, but of people and cultures; they are disciplined and agile, and fast executioners and accomplished talent managers. Successful integration leaders must anchor their activity in a clear and well-articulated vision. Accomplished leaders emphasize the importance of the planning process. This requires the leadership to communicate their vision from the beginning. Strong vision will ensure unity of action with the tactical decisions of line managers nested in the strategic vision of the leadership team. If you are an integration leader, you must make realistic assessments of possible outcomes, and set milestones for the integration. This exercise will aid the integration leader in achieving early alignment as well as assessing cultural differences and the divides they must bridge early in the integration. Whatever process is used, the leader’s objective should provide a compass for subordinates to execute.
The new corporate vision begins at the top with senior executives and their goals for the new company. It is NOT sufficient to simply identify the leadership, the leader has to ensure the new team is aligned, and that the members understand the characteristics desired for the new firm. As an integration leader, remaining consistent with the vision and intent of leadership is critical to keeping on track. A team leader should consistently ask himself if the task they are conducting forwards that vision. Crafting a narrative for the future company is critical to gaining employee buy-in and maintaining customer confidence. A holistic leadership strategy is required. Leaders need a place to themselves in their stakeholder’s shoes.
The importance of establishing a new performance-based culture is well defined. Understanding the cultural difference of the acquired company as compared to you, the acquirer, enables the integration to anticipate and deal with friction early in the process. The combination of the two cultures must be addressed purposefully and the desired cultural outcome must be planned.
Choosing the Right Leader: Post-merger integration is a time of great opportunity and great risk. Successful integration is the result of involved leadership and close attention to detail. The visionary leader who decides to take the company in a new direction needs to identify the right kind of leader to manage or oversee the integration. In fact, the characteristics of a great post-merger integration team leader are sometimes at odds with those of a great CEO. Leaders must master the fundamentals of task management and process development. Attention to detail will ensure that the integration timeline is not derailed by something a little extra care could have resolved.
The successful integration leader must be able to identify critical talent early in the integration process and find creative ways to achieve their buy-in and keep them in the new company. Leaders possess the conscious, dedicated focus towards others that is essential to today’s growing business. Successful integration leaders are adept at navigating cultures very different from their own. In order to build bridges between the two companies for organizational process and talent, leaders must first be experts at building rapport.
Success merger integrators make detailed cultural assessments and then develop plans for how to integrate the two different entities. Everyone in the organization must understand and promote the vision for the new company created by the merger. Most acquisitions wind up encountering unanticipated frictions. Navigating an unanticipated source of friction costs the company additional time and money. A good integration leader must anticipate the potential friction points of integration and have a plan to address them, before they happen.
The merger is not just the goal. It is just the beginning. Each acquisition is different and has its own challenges. A roadmap ensures that these challenges are identified and addressed. In the post-merger process, integration leaders should work diligently to identify and quantify valuable resources so that in purchasing a valuable brand and distribution channel, they do not dismiss and/or divest of perhaps more valuable marketing systems that produced it.
The achievement of synergies must be viewed as a continuous process rather than a one-time transaction. Synergy is the lifeblood of so many deals and depend on revenue enhancements, cross selling, bundling products, or creating a one-stop shop. Leaders must be maniacal on costs. After the transaction, the successful integration team leader completely reassesses the synergy targets. Mergers require various outlays and often call for additional, unanticipated, investment. Delivering on a promised synergy takes up on an inordinate amount of management time. Merger integration teams need to carefully assess and manage areas where costs were uncertain during the transaction phase and could run away with the integration. To act decisively, the integration team leader must be empowered, and the leader’s authority must be clearly established and supported by the CEO. The leader must be seen as speaking on behalf of the chief executive. Also, when leaders fail to communicate plans for the merger, they lose control of the narrative. For those who stay, resistance to the change will develop. Lack of communication also negatively effects the integration process itself.
Developing an Action Plan: Mindset change is the proactive creation of the new company’s culture; mapping it, defining it, communicating it, and reinforcing it. Finally, modification is the continuous process of using the tracking mechanisms, intuition, and involved leadership to resolve issues and constantly adjust. Each integration is unique, and the sequence is not straightforward.
Case Discussion Questions:
- Does an acquisition of another company effect the company’s original vision and mission, or not.
- What special skills do senior managers need to successfully complete an acquisition/integration of two companies.
- Define and discuss what ‘Synergy’ means within the context of this case.
- Discuss some of the problems that may arise during an acquisition and subsequent integration of another company.
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