What’s at the Heart of a Successful M&A?
Mergers and acquisitions (M&As) are a part of business and happen in both flourishing and dismal markets. Some are wildly successful, some fail miserably, and some just leave us scratching our heads. Why do some M&As work and others fail?
In recent days Google announced their intention to acquire Motorola Mobility. It’s a case of new economy buying old economy. Motorola was once king of the cell phone market, but failed to keep up with advances in smartphone technology. Google has been in the smartphone business for a few years, so perhaps it makes sense that Google’s addition of Motorola will be another arrow in their quiver of Android-based phones.
But even as I write this, a caution flag has been raised: It was just announced that HP will likely exit the smartphone and tablet business. This is somewhat surprising given that HP’s acquisition of Palm was only finalized 13 months ago. Did they give it enough time and effort to be viable? Or with the Google/Motorola announcement, has HP decided to cut its losses now and avoid the inevitable steep(er) competition?
There are vast numbers of variables that contribute to the success of an M&A: The cost of the transaction; how the companies complement or supplement each other; the geographic footprint of their operations; raw resources, systems, and processes; and the company cultures and ultimately, their talent.
It’s the last part, the people dimension, that can often make or break the success of a deal. Many leaders will cavalierly assume that “that will work itself out,” as if employees are pawns in their greater game of life. Those leaders likely base their decisions on financial due diligence while neglecting to examine how well the company cultures and talent will mesh in the long run.
An example of a successful M&A that seemed to value the people part of the equation can be found in IBM’s acquisition of Lotus Development Corporation in the mid-‘90s. As the now-legend story goes, at the first meeting between execs from the two companies, they unknowingly each attempted to please the other side by wearing their traditional outfits: the IBM execs’ typical blue pinstriped suits were replaced by khakis and button-downs while the Lotus team would have made tailors on Savile Row proud in their best business suits.
This might seem cute or even staged, but the message was clear: we want to get along, we want the other side to appreciate us (and to know that we appreciate them) not just for our business, but for our people – our talent. It was a very humanizing element at the beginning of what would end up a successful journey.
5 People Considerations for a Successful M&A
If you’re about to go through a merger or acquisition, or want to make your company attractive to suitors, here are 5 talent considerations for a successful M&A:
- Know your people. Any M&A activity causes some personnel moves. An inevitable and unfortunate byproduct of M&As is layoffs. If the new company has redundant operations and positions, how do you know who are the best people to keep? And who are the best ones to fill new leadership roles? What if the other company didn’t use employee assessments? How will you measure and compare your pools of talent in order to make the right choice?
- Watch your top talent and leadership depth. Some people will leave on their own, not wanting to go through the process and effort it takes to make the new enterprise successful. Many of those people might be leaders or considered to be rising stars before the deal, but who are now less sure of their position as a result. Who will fill those leadership voids, and how will you retain your current and future stars?
- Be disciplined about job fit. Will new roles emerge as the result of the M&A? Who will be most qualified to fill those positions? How will you ensure proper job fit? As with any promotion, don’t just take good performers in their current roles and assume they’ll shine in a new one.
- Build cross-company teams. Companies usually find it a stretch to create their own cross-functional teams. After an M&A integration, how will you choose whom to place on cross-company teams? Getting employees together from both companies will help to create familiarity and opportunities to bond by working towards common goals. Make sure you pick the right people to be your early ambassadors – smart yet introverted employees won’t be the best liaisons and could make a poor first impression.
- Manage stress. From the time the rumors start until the dust finally settles post-integration, your employees will be wondering and worrying about what’s in store for them. Maintain an open flow of communication and dialogue to assuage fears and concerns. It’s a very stressful time; the more you can manage workplace stress, the more productive your workforce will be during the transition and integration.