Executive Summary
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Negotiating a good deal is a dangerous act if management isn’t solidly prepared to make the deal work.
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Mergers are a fast-growth strategy—and they require fast management.
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The pre-close period is the staging platform for effective integration.
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A merger is always based on a financial proposition, but success invariably rests on the human proposition.
Introduction
Merger success—defined as value creation—depends heavily on how well conceived the deal was to begin with. But a good outcome is even more dependent on having a well-designed and carefully implemented integration strategy. To put it simply, no deal is a good deal if management can’t make it work. Studies over the past several decades prove, however, that far too often companies lack the ability to design and execute a viable integration plan. Over half of all mergers end up as disappointments or outright failures that destroy shareholder value.
Many things contribute to the high casualty rate, but the myriad risk factors can be greatly reduced and in some cases eliminated. The odds of success dramatically improve when management adheres to some fundamental rules for effective integration.
Nevertheless, merger and acquisition (M&A) remains a high stakes game that is undertaken in pursuit of uncommon growth. As such, it calls for uncommon management.
Transition Management Should Begin Early
The merger transition period starts long before the deal gets final approval and actually closes. Weeks and months can pass as negotiations, due diligence, and the regulatory approval process proceed. Problems, however, don’t wait around on management to close the deal. As soon as people pick up the scent that their company is in play, they begin to think and act differently. Their attitudinal shifts and behavior changes create leadership challenges that are unique to mergers. This explains why status quo management stops working.
The troublesome organizational dynamics that kick into gear need immediate attention, so transition management and integration planning should begin at least as soon as the deal becomes public knowledge. The pre-close period is a crucial phase. It’s the mobilization zone for merger success where you set the stage for an informed, well- executed integration.
Particularly during the pre-close period, there are far more questions than answers, so the major workforce issue that needs to be addressed is uncertainty. People in leadership roles will need the merger management skills necessary to:
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navigate uncertainty and prepare for change;
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deal with people’s negativity and resistance;
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keep employees engaged and retain talent;
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protect productivity and client relations.
A lot of damage can occur even before the deal papers are signed if managers at all levels don’t respond appropriately to the new organizational dynamics.
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