How to make M&A a true success
Written by Ed Cook
The amount of research on why Mergers & Acquisitions (M&A) succeed or fail is voluminous but not particularly clear. M&A is often not successful. Early research focused on strategy and structural factors, but the results were mixed. More recently cultural factors are the focus, but this opens up significant complexity onto the study of M&A. Still, the work is revealing.
Intriguingly, some scholars have found a positive effect between cultural differences and the success level of M&A.
This finding seems to be explained by the core strategic idea that merging two different sets of capabilities can produce a better performing combined company. With more skills and a broader knowledge base, the new combined company can more readily succeed. The key activity is capability transfer so that the abilities of the two organizations are combined into the new one. To get fantastic success means that the capabilities must be complimentary and not just additive to the existing capabilities of each organization. But the more different the organizations are the more difficult it is to bring them together culturally.
What is the path to success?
Success then lies in two factors. One, having two organizations with different capabilities that are complimentary. Two, managing the change that will come with the cultural integration of the two organizations.
For the capabilities portion taking a broad view is best. Capabilities can be the knowledge, skills, and experiences of the individuals in the organization and the mechanisms that are available to allow those individual capabilities to be brought together into a well-working whole. We see failures of this all the time. A sports team with superstars but an inability to win (no mechanism to bring them together); A family run business that both tolerates and does not take action to help a poor performing relative without the skills to do their job (lack of the needed capabilities). Both capabilities and a cooperation mechanism are needed to achieve success for a company. For M&A, this is true as well.
The first step is to map those capabilities. This begins before the deal is done in the “Data Room,” the mysterious place where information about the companies is shared confidentially. In their blog post: How To Prioritize Human Capital in M&A Due Diligence, Visual Workforce provides a step by step guide as to how to do this. The idea is straightforward, maybe so much so that it is often skipped: map out the skills of the two organizations by person and then recreate an organizational structure that can take advantage of the full set of skills. Too often M&A activity is about fitting one organization into another and engaging in a Procrustean looping off the parts that don’t fit. Some of this may be needed, but it is akin to adding great guitarists to your band and then telling them not to play the riffs which make them great.
The second step is to get in front of the change process especially as it related to culture. This is critical. The strategy may be perfection, the skill synergy magical, but failure looms because of inattention to the change. Having been through many variations of M&A activity from both the acquiring and acquired sides, I have seen the comedy movie moment too often where there is a pronouncement and the supporting actor/comedian in the movie turns and says “Wait...what?” Befuddled and surprised is the worst place for your employees. It is rarely funny as it happens.
To alleviate this sort of change surprise, we suggest the use of a simple tool called The Change Story. The Change Story walks a leader through the steps to help their team understand what is going on why, as well as help the leader to understand the impacts of the M&A work they are about to undertake. To be sure a large M&A effort would require more work and analysis, but this is a good start.
To be sure, M&A is a difficult and often fraught part of business. Although it fails often to deliver on its promises, it can succeed. It takes clarity of purpose and a willingness to understand the skillsets of each member of the team and the cultural impacts of coming together. Do that and you’ll be on the positive side of the hurdles to success!
What if achieving joy is truly the role of a leader?
Written by Ed Cook
While watching a symphony or orchestra or choir, I’ve often wondered what the value of a conductor is to the other musicians. Afterall other music groups seem to do fine without one. Rock bands, jazz groups, a cappella ensembles, all manage without a conductor. I got an interesting glimpse into just what a conductor does after viewing this smile-inducing clip. A professional ensemble sets up on a city street with a sign that invites passersby to “conduct us.” We are then treated to a series of would-be conductors who produce...what? Clearly, the ensemble does not need them to create music. Yet each of these conductors brings something special...joy!
As the first conductor steps forward, the glee on the faces of the musicians is striking. They are truly ready to take on whatever the conductor can provide. As each new conductor steps forward, we see some take on a persona of a conductor, some test the limits of their powers by spotlighting a particular musician, some add clearly nonstandard moves to see where it leads. Even a city cop steps up and gives it a try. It’s a wonderful scene. As a metaphor for leadership, it is powerful. The conductor is not bringing better technical music. The musicians clearly have that handled. The conductor is bringing joy. Their own unique and fully realized version of joy. None is better than another. They are all precious.
What if achieving joy is truly the role of a leader (conductor, team captain, CEO, foreman)? This does not negate the need for proficiency in the technical skills of the job, but those are inputs to the process. Perhaps joy should be the leader’s output. The rest of the team can create the outcome of the group (music, points, profits, quality).
Currently, the Richmond Symphony is in the process of finding a new conductor. With amazing candidates, the leaders of the symphony have constructed a significant program where each candidate will lead the symphony through several performances, but will also meet the public, talk with city leaders, and generally engage with the City of Richmond. Certainly, the skills of each candidate will be on display. Each will show their ability to conduct the musicians, select the energy of the performance, and even demonstrate their thinking on the future of the symphony, but I suspect there will be another important criterion as well. The musicians will imagine rehearsals and judge if they will be joyful. City leaders will consider if a prospective conductor will add to the joy of the city. Patrons of the symphony will imagine performances in the future and search to find the special joy that this conductor could bring.
A useful distinction between manager and leader is that managers focus on outcomes and leaders focus on teams. Think of the team that you look back upon as your favorite. Joy was likely at the center of that experience. Reflect on that experience and go find your place for conducting joy!