During the M&A process, the most critical factors to the financial community are the new markets, new revenue streams, and new services that may result from a company’s merger or acquisition. This places intense pressure on CEOs, business leaders, and the Integration Management Office (IMO) to focus their strategies primarily on the business elements of the deal.
However, based on 20 years of advising Fortune 500 companies on M&A integrations, our experience has shown us that companies who focus their strategies solely on these elements of the deal without taking corporate culture into consideration are facing an uphill battle and run the risk of never realizing the full transaction value. That means falling short on initial deal expectations and disappointing the analysts, investors, and shareholders to whom they are beholden.
Outside research confirms that it’s the human factors of change (aka, the “soft factors”) that are difficult to implement in a partnership. Cultural and organization fit/integration was cited as a top people issue—second to employee retention—in the 2016 Mercer research report People Risks in M&A Transactions. In addition to executing the business strategy of the deal, companies need to pay close attention to their people—the human side of change—and to the desired new culture in order to achieve the full potential of M&A.
M&A integrations offer many "people challenges," from articulating the transaction value to stakeholders to working with the IMO on organizational development to planning the Day One experience and combining the best cultural attributes of both organizations. Yet these challenges also serve as opportunities to influence the human factors and drive a positive change experience.
If you’ve lived through an M&A process, you know that the change can be daunting. Employees need to feel a strong connection to a shared vision of the future. They must be inspired to think, act, and behave within—and indeed to reflect—the desired new culture. Managing the challenges that influence the human struggle of change requires an all-encompassing approach.
To achieve this, Gagen serves as architects of change during the M&A process. Just as it is required for great architecture, we design, build, and execute powerful experiences that foster personal connections and align with the larger deal strategy.
The firm focuses on six key areas to address the human struggle of change during M&A transactions. These areas serve as our core framework and can make the difference between a merger realizing its full value or falling flat.
None of these areas can achieve their goals on their own. Similar to critical design elements in architecture, they need to be interwoven in order to support and influence the entire initiative.
Architecting a strategy that connects each of these six key areas allows companies not only to align strategy, structure, and culture, but enables them to put an integrated change strategy and communications plan in place, positioning them to overcome key challenges across all M&A integration phases.
In turn, businesses can embed the new culture more deeply into the organization at an early stage of the M&A process, resulting in greater success and sustainability of the new organization. In addition, starting early with a positive and compelling vision of the future helps employees overcome the anxiety and discomfort common in mergers and drives the momentum of change forward.
Things move fast during M&A integration. If companies can get out in front of it and successfully manage the human factors of change while working to achieve the financial and business benefits, they will have a greater success in meeting the long-term financial expectations of the transaction.