Post Merger Integration Not Going As Planned?
Post merger integration not going as planned? You are not alone.
The majority of the mergers and acquisitions (M&A’s) consummated each year experience unanticipated problems. The M&A proposal put together to justify “doing the deal” usually includes a relatively straightforward plan/projection on what the deal will accomplish for the buying organization. Most plans anticipate a period of downturn in productivity and results for some short period followed by a gain intended to exceed what the companies would have accomplished had they remained independent.
This graph is fairly typical of what most of these plans project:
However, multiple studies tracking post merger performance show that over half the time actual post acquisition results do not match the benefits forecast prior to doing the deal. Some studies indicate as many as 77% do not produce intended results. The most common results look like some variation of the following graph:
The downturn goes deeper and the timeline to “full implementation” grows steadily longer. The most common response to these failures is round after round of cost cutting, reorganizations, and changes in personnel. But all too often the eventual performance levels are still lower than what would have been expected if the merger had never occurred.
The hard reality of most M&A’s is “doing the deal” is the easy part, making it work is far more difficult. And the longer the timeline to full integration drags out the lower the probability of ever achieving the intended results. A number of studies indicate that over half are eventually deemed failures, ending in divestiture or shut down. Today the majority of M&A’s fail to ever achieve their originally intended goals. The expected synergies - lowered costs and/or increased sales and productivity - prove far more difficult to achieve than anticipated.
The reasons deals are usually based on straightforward business logic. Success requires ending up with an integrated business plan executed in a uniform and focused manner across the new organization. Though simple on one level, this usually proves to be an elusive goal.
An ongoing series of independent follow-on studies about M&A failures are consistent in finding people issues as the most common block to achieving successful integration.
Disagreements as to purpose, intent, manner, methods, and tactics used to achieve goals runs rampant. Decisions can’t get made, timeframes are extended, people lose faith, customers get ignored, deadlines are not met, and the situation in general seems gets lost in a malaise of misunderstandings coupled with finger-pointing and blame laying. These are classic indicators of “culture clash” -- where more and more management and staff time is focused internally attempting to get results. This means less time focused on customers, product delivery, and the competition.
Many groups that attempt to deal with “culture problems” deliver little to no immediate resolutions and often prescribe years of effort to get solutions – years most organizations can ill-afford in the global competitive environment of most industries today.
Key elements necessary for successful integration include:
Strong functional leadership. Being over managed and under lead is a common complaint in integration situations. Management and leadership are both necessary, but the behaviours attached to each are different. Success requires an intelligent balance based upon an understanding of the differences and functions of both.
Absolute clarity throughout the organization on intent and direction (including Vision, Mission, Strategy, and Behavioural Values) Achieving high clarity and understanding is the first tasks in successful integration. Beginning with senior teams on down throughout the organization.
Effective integration planning & execution with robust operational feedback. Issues like pay & benefit plans and IT systems are usually planned, while management patterns, social norms and underlying assumptions of daily operations are often simply assumed. Additionally, two critical success elements often missing.
Short, demanding, integration timescales – longer timescales reduce probability of success – regardless of the size of the task. Measurable results should be obvious in months and completed within a year. Long or extended time frames are a recipe for failure.
Excellent two-way communication with the whole organisation. No plan survives full implementation without “in situ” adjustments. The unknown and unforeseeable always occur. Robust two way communication deep into the organization is the principle tool to keep things on track as the inevitable surprises occur.
Organizational alignment is assuring that strategic goals and objectives are not in conflict, function to function and level to level. Tools, methods, and procedures support rather than impede priority organizational activities and management/supervision throughout the organization is perceived as supportive, allowing people to pursue the value drivers of the deal, rather then fighting internal battles.
Our experience resolving post merger culture clash tells us that measurable results can and must be seen within 6 months or less. This has been done in a variety of organizations and industries, even when activities were initiated after serious problems emerged. Including instances organizations were composed of multiple national or ethnic cultures as well as organizational and departmental cultures.
Based upon our own experience we believe there are no two organizations that cannot be successfully integrated relatively quickly with the right focus and attention. It has been done with organizations of 100 people to over 100,000 people, single location operations and globally spread organizations.
If you have post merger problems that are proving difficult to resolve, or if you want to prevent them from occurring in the first place there are two major steps:
First an organizational analysis to ascertain the nature and character of your particular situation. This should enable development of a comprehensive plan custom designed for your unique situation, including options and priority actions
Second, utilize your managers for as much of the visible activity as possible. Necessary consulting expertise should be utilized to help management actively intervene in the situation and resolve the issues.
Every organization is different. Successful patterns and processes used to achieve integration will need to be amended to incorporate the unique aspects of each situation. Success is about utilizing proven processes while incorporating the uniqueness of situation.
Make the deals that look good for your business, and then make sure it works as intended by dealing effectively with the integration process.
Post Merger Integration Not Going As Planned?
By J. Robert (Bob) Carleton and Alan Stevens
A Due Diligence, Inc. Business Partner
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