Deals Should Provide Excitement and The Pride of Being Part of a Successful Larger Business
Mergers and acquisitions provide many, varied opportunities to companies, large and small, and the people of both companies whether on the buy or sell side of the transaction. These strategic business decisions can help improve the businesses growth as well as help provide access to new markets, expand a business’s overall footprint, and reduce competition. Mergers and acquisitions can also help harness new ideas, perspectives and experiences, especially in new markets.
An acquisition can be an exciting time for the business executives involved in making the deal, but even more so, it can be an uncertain and stressful time for the employees. One of the most common reasons why deals fail to achieve their strategic objective is due to cultural issues not being addressed or even acknowledged. This pitfall makes it essential to face this commonly overlooked factor head-on and often.
During M&A deals, it is common to focus on the deal processes, activities, due diligence, approvals, disclosures and negotiations amongst a limited confidential working group. Management teams often become immersed in a deal’s rationale focusing on the exterior benefits that shareholders and boards will see such as increased revenue, market growth, and profitability.
An equal amount of care needs to be given to the internal operations and community during the process. Many benefits and challenges need to be navigated.
A plan for the integration of both front office and back office functions needs to be formulated by people from both organizations. A buyer-only plan and process for competition between the legacy groups, trying to create winners and losers on which way the newly combined business goes to market will frustrate the deal’s fundamental rationale.
Remember, while undergoing a merger or acquisition, you are not just integrating processes and systems of either company, but you are also integrating completely different cultures and people. Not approaching the integration of these work cultures seriously and actively engaging employees can make or break a successful deal’s outcome.
Listen and Understand
The best place to start when looking at the integration of different workplace cultures is to take some time to truly understand both and the nuances of what makes them unique. It is not enough to choose one similarity in common and run with it – you need to be intentional about highlighting the differences and similarities they have as well as identifying potential pressure points. These factors can help you to develop a cohesive and integrated work environment for all of the employees.
It does not need to be all work, as culture is often better experienced and shared by building new interpersonal relationships, local flavor, sights, and sounds.
Sharing each respective cultural practices can bring mutual understanding, perspective and avoid unintended inferences. Bringing people to the acquirer’s headquarters for extended indoctrination and assigning key employees to a target’s business can accelerate integration. The identity of the newly combined business needs to be established.
No Need for One Size Fits All
The merger is a great time to acknowledge and confront any significant cultural differences that the two companies have and how you can work together to align them for a productive and successful integration. Recognize and celebrate what makes each company unique and how those factors will add positive change to the newly formed company. A target need not adopt all of its new organization’s approach; but also no integration plan and leaving an acquired business in a stand-alone entity may prevent deal synergies.
Be Transparent and Communicate Often to Your Key Assets — Employees
An acquisition is a critical time to communicate with your employees to the extent you are legally able. Beyond the cork popping at close, town hall employee meetings, question and answer sessions, and video conferencing to all locations for employee meetings, there are more ways than ever to communicate. Doing so frequently via multiple media can generate meaningful understanding and appreciation for the transaction.
Limit the time spent behind closed doors and expand functional groups from both organizations to engage in the deal process as opposed to only springing the existence of the deal upon employees after closing with no warning.
More ambassadors for the deal are needed to sell its rationale and the future excitement of the combined business to employees of both organizations. Engage with your employees and cultivate an atmosphere where the successes of the process are celebrated, and the failures are recognized and confronted.
It is crucial to provide these opportunities where the executives and employees can engage in productive and meaningful dialogue.
Nobody wants people to be distracted with fear that the deal means the loss of their job, that relocation may be required, that their commission compensation may decrease, or any other similar worries. People are often the best asset being acquired and acknowledging this can go a long way.
Hiding behind a veil of secrets is not only unhelpful during a deal, but it also creates an environment where employees do not feel comfortable or equipped to ask questions or voice their concerns and fears. Give the employees of both companies a chance to see the vision of the owners and executives carrying out the merger and enlist them to help support your effort. This initiative will give all of the employees, confidence in the process and help them trust the decision to merge in the first place.
The employees working together post-closing will be on the front line of any unanticipated consequences. Such issues are common, but an atmosphere of engagement and speaking up needs to be encouraged in an environment otherwise unfamiliar and uncertain. This type of environment can result in no communication or elevation of new challenges coming from the newly combined business.
There are multiple audiences in deals: employees, shareholders, the board of directors, investors, owners, regulators, vendors, suppliers, and customers. The frontline employees will be addressing questions on the newly combined business from vendors and customers. Employees, therefore, need to be at least capable of giving the elevator pitch of the deal and hopefully a deeper understanding of the benefits for the business’s suppliers and customers. These people also need to sell the newly combined business and to do so, they must be excited about the new opportunities it presents and not in quiet fear with only paranoid doubt.
Provide Success Measures
You have merged two companies and created a whole new one – congratulations! Chances are, both companies provided their employees with different measures of success and different ways of recognizing achievement. Now, it is essential that you continue to provide the employees with similar standards, but ones that meet their needs within the newly merged organizations. This is a great time to provide your employees with an understanding of their overall impact on the larger scale of the business.
Treating an acquisition as a time to celebrate change and not only merge two different work cultures, but strengthen them, will help your employees be more inclined to accept and appreciate the change. Understand that this process will take time, but with dedicated resources and functioning feedback mechanisms, you will be able to preserve a healthy work culture throughout the process of the merger and acquisition.
John Ellsworth has successfully facilitated domestic and foreign M&A transactions for 15 years and is highly skilled in business development and providing general counsel to many types of companies, including both Fortune 1000 public companies and privately-owned businesses.