- October 26, 2019
- Posted by: Ramkumar
- Category: Mergers And Acquisitions
M&A integration is crucial
M&A integration is a critical to the success of the deal. When an acquisition closes after it is approved by the anti trust commission, the acquirer has a gargantuan task of bringing together employees of the target organization into the acquirer organization.This is one of the difficult aspects of M&A and unless this step is executed correctly, the M&A deal may well join the ranks of 70% to 90% of M&A’s that fail.Hence effective integration is the most important factor for achieving a successful M&A and even ranks ahead of Target Identification, sound Due Diligence process and a stable regulatory/legislative environment.
If the integration needs to be a success, then leaders must focus on the human factor to avoid failure.This is because equipments and processes can be changed without any issues, but at the same time human beings are difficult to change.The employees of the target organization are pivotal to the success of the acquisition.
M&A Integration strategies
For a deal to be successful, the leadership team need to follow these three strategies for uniting employees following a M&A.
Focus on Cultural integration
- Clash of cultures is the top reason why M&A deals fail to achieve the expected value.Hence Culture matters.So when the integration team looks to transform the workforce for the future of a newly formed organisation, culture plays a very important role.
- When companies with loose cultures that give importance to fluidity and ideation is integrated with companies that have tight cultures and value rules and processes, then most often it ends up in a disaster.This is because cultures between organizations are so different that neither of them can adapt to other culture.Hence when negotiating for price and other financial terms, organizations discussing a M&A need to also negotiate culture.The leaders from the acquirer organization should start by conducting a cultural assessment to understand how people, practices and management reflect tightness or looseness in both the companies.
- The integration team should look to have a culture that reflect the best elements of both cultures and operating approaches.Rather than discarding the target organization’s identity completely, the acquirer can allow the target organization to operate as an independent subsidiary for the first year to assure employees that they need not fear any immediate disruption. Once things get normalized, the integration team then should start combining the cultures and employees of the target organization.
Provide seamless employee onboarding
- Onboarding new employees of the Target organization is often overlooked in the integration process.A successful onboarding program can make a complicated process feel simple and effortless.To have a successful onboarding, the integration team needs to acknowledge that there is no such thing as ‘business as usual’.
- The onboarding process should provide answers to the employees on 1)Do employees have a job? 2)Whom do the employees report to? 3)How will the employees get paid?
- The employees needs to be provided clear answers to the above questions so that they can start focusing on their job.The onboarding process needs to be similar to that for a new hire.This will make the rebadged employees feel integrated and welcomed by the acquirer.
Build the right teams
- Any Merger or acquisition will create uncertainty and anxiety within the employees. Hence following a merger and acquisition, employees will invariably fight to prove their value. This might lead to employees positioning themselves to gain an upper hand.In order to avoid selfishness creeping up, the leadership should focus on team dynamics.The integration team needs to create opportunities for the team to collaborate and remind them that they are a part of a whole.
- Apart from regular team building activities like travelling offsite, it is important to engage individuals in their workplace. The team building program should involve individuals from both the organizations.The teams created should develop a charter that outlines their goals and processes.The charter will not only address why the acquisition took place but also foster trust among the employees.
- When an acquisition is done to access the skills and capabilities of the target employees, then the newly acquired employees should be spread into different parts of the acquirer organization so that their skills can be utilized and they can be integrated seamlessly into the new organization.
M&A Integration should focus on human resources
MA& integration should pay as much attention to their human resource as the financial resources by integrating employees through cautiously negotiating culture and introducing an onboarding program.In M&A integration, focusing on pure mathematics guarantees failure because at the end of the day, it is the people that make the M&A successful.