Last Wednesday Warren Buffett and private-equity firm 3G Capital announced they’re merging H.J. Heinz with Kraft Foods. Business Insider boiled the deal down to that scary word “synergies” – specifically “from the increased scale of the new organization, the sharing of best practices and cost reductions.” News coverage is pouring in. Analysts are parsing the deal sheet. Meanwhile, every Heinz and Kraft employee is worried about how those synergies will impact them personally – yet they’re lost amid the swirl of news and rumor.How will Buffett and 3G manage the balancing act ahead? They’ll need to avoid organizational paralysis, keep employees and leaders focused on the work to be done to serve customers – all while achieving those synergies and retaining key talent during a time of tremendous change and uncertainty. Once again, the “soft stuff” (people) is actually the hardest part of any M&A.The stakes couldn’t be higher. This massive deal is valued at $36 billion and required a $10 billion capital injection from Buffett and 3G. But the Heinz-Kraft merger is also happening in a high-stakes context. Mergers are on the rise: experts estimate 5,844 M&A deals this year alone, valued collectively at $1.04 trillion. Despite the potential smart M&A can unlock, most deals disappoint. Between 50 – 70% of deals fail to achieve anticipated results. A KPMG study found over half of M&A deals actually destroy shareholder value.Why? It’s usually a “people thing.” According to Bain & Company, 60 – 70% of synergy realization in M&As come directly from “soft factors”: strategic alignment of the merging businesses, smooth organizational integration and low employee resistance.
Celebrate incremental wins. Encourage the troops when temporary setbacks occur. Highlight visible actions towards the "big picture" the company is driving towards.
So how can the Heinz-Kraft team tackle the “people factor?” Here are three recommendations to get this merger on the path to success:
- Plan for the complexity of the challenge.
- A PwC survey found early communication strategy drives favorable outcomes in profitability(59%), gross margin and cash flow (64% each).
- It’s worth noting that M&A deals with longer planning cycles (12-18 months from announcement to integration) are 150% more likely to succeed than faster-moving deals.

- Communicate with employees fast.
- Create the compelling story for change.
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/ Mar 25, 2015