According to a 2015 Harvard Business Review report, the failure rate for mergers and acquisitions rests between 70 and 90 percent. When evaluating post-merger consulting firms, leadership teams must know precisely what the process entails. A merger or acquisition entails more than just a press release, more than a new logo slapped on and more than just herding employees into a new office — rather, it’s a top-to-bottom integration.
Evaluation Process For Assessing Post-Merger Consulting Firms
Finding Synergy In M&A: 1 + 1 = 1
When a company gets acquired, there are several routes leadership teams can take. One is called “bolt-on,” which means some standard procedures will happen but most of the deeper work will be left alone. On the other end of the continuum, leaders may choose to take the best of the best of both or all businesses involved, and decide to redesign a company that they don’t currently have.
In our experience at ON THE MARK, most companies lean toward the bolt-on strategy when it comes to acquisition. However, while that may herald smooth operations when the business is good, when the times grow tough, all of that unresolved variation and subsequent difficulty in getting things done creates a massive burden to organizations.
The “bolt-on” method leaves organizations never fully leveraged or integrated, because they have perhaps only paid attention to the simple, surface-level pieces to the equation. That’s where ON THE MARK excels: ensuring businesses have successfully and thoroughly integrated following a merger or acquisition.
Instead of emerging from such a business transformation with two or three separate companies, leaders must see the math as 1 + 1 = 1 — resulting in a holistic, synergized organization.
It takes deeper work.
A prime example? The airline industry. When they acquire someone, the first thing they do is paint the planes. The most difficult, and the last thing most businesses do, is integrate the people. Our philosophy is that both the social and technical elements of a merger should take place simultaneously.
When we first begin working with a company that has recently acquired another business, we often quickly recognize two prominent issues: complication and legacy — holding onto what was, power plays, and rejecting changes that come with the merger. An amalgam of merged businesses that has never seen a full redesign is sure to encounter fault lines breaking the company apart.
The issue is that these companies never fully and deeply integrate, causing most mergers to fail. In some post-merger companies, people behave differently right across the aisle from each other because they’re from the “old” company (or from a legacy company) and they still identify themselves through that lens.
The whole idea of, “If you don’t change your behavior, nothing changes” often rings true, no matter how “pretty” all other parts of the change may be.
When would be the ideal time for a company to redesign?
When searching for post-merger consulting firms, most of the companies we work with approach us because they want to be better than they are, and are already in good shape. There’s no better time to evaluate a company for a redesign.
However, when companies facing desperate times seek our expertise, time is of the essence, and they have typically waited too long. So, here’s the sweet spot to contact us:
- When you have not conducted a real, holistic look at your business in anything less than three to five years.
- From a performance perspective, are you reaching the crest where things aren’t getting any better or getting any worse? If the roller coaster is reaching the top of the plateau, that’s the time to seek our expertise.
The challenge when business leaders come to us hurting is that things are very urgent and everyone involved must be careful of knee-jerking and acting out of immediacy. When facing a merger or acquisition, companies must employ integration strategies from day one.
How Do Merging Or Acquired Organizations Evaluate Their Readiness?
At OTM, we utilize something called the Fit Predictor Tool. Essentially, when a company acquires another company, those early decisions are mostly dominated by two areas: legal and finance. It’s our point of view that there should be a third piece in there around the organization design.
There must be some due diligence around the fit and alignment of the two integrating companies. What’s the degree of synergy that is real, versus made up by just finances? Finance is important, but it serves as a lagging indicator of how it’s all going to work. When entering an acquisition, companies worry about who the leadership team is, and they also worry about what their salary will amount to. But what they don’t worry about is, how simple or difficult will the integration be?
Leadership teams should sign on the dotted line, eyes wide open about how easy or how hard achieving the right synergy will be. Based on your acquisition strategy, based on your integration strategy, what are you aiming toward? Will you take the best of both companies and create a third? Or will you just bolt them on and leave them alone? The more you invest in truly leveraging and bringing both companies together, the more likely it is that you will avoid choppy waters down the road.
Practical Example: Gone To The Dogs
One of our OTM team members once worked for a privately held pet food company. All of their offices around the world were quite plush: dog-friendly, fancy offices, and everyone had their own offices. It was a fantastic working environment. A much larger, multinational product manufacturer bought the pet food company and brought the entire company into their headquarters. No more private offices, and no dogs were welcome. Twenty-five percent of these people left within one year, due to the shock of the culture change. It had nothing to do with finance, but they had completely overlooked the soft side of the integration.
Another Practical Example: Recipe For Disaster
Our team conducted a fit assessment for a large, fast-moving, consumer goods company looking to acquire a particular regional bakery. They wanted to clean house, and only keep the guts of where they thought the value was in the bakery. One of our assessments was that the bakery operated completely verbally; the way they got things done rested in the know-how of the people who had been there for years, and not much of it was documented. That included their baking techniques, protocols and procedures, and so forth. So, when you clean house and get rid of people, you will lose all of that expertise. Our recommendation? If they wished to acquire this bakery, they would need two to three years to truly document their processes. Otherwise, they would lose the complete value in the bakery.
Leaders must pay attention to these things when it comes to fit. What is the fit of the acquirer? What’s the fit of the acquiree? What does the intended integration strategy look like? Then, analyze the Fit Predictor — how difficult will an integration be, and what nuances could wreak havoc? Know those things before you sign on the dotted line.
Leaders cannot simply take a small-scale company and toss it into a massive corporate culture. Likewise, the bolt-on strategy may not be sustainable long-term. Organizations have to be deliberate when it comes to M&A. And, when utilizing post-merger consulting firms such as ON THE MARK, companies must be prepared to embrace a top-to-bottom integration.
If your business is facing a merger or acquisition, contact the experts at ON THE MARK to learn how to successfully approach this change with one of the top post-merger consulting firms.
On The Mark’s experience and passion for collaborative business transformation that’s supported by pragmatism, systems thinking, and a belief in people is unparalleled. OTM has been in business for 27 years and is a global leader in organization design solutions.
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