M&A Top Team Integration

The deal is done and the integration phase begins in earnest. Talk centres around speed, rapid decisions and execution, capturing synergies, preventing a loss of talent, clear communication, avoiding the inevitable cultural barriers and so on. Two top teams arrive at the meeting place ahead of first introductions; the tension is palpable. After random pleasantries they find their seats, predictably coalescing into two distinct and familiar groups. Several polite greetings are strained; some, but not all, smiles are fake. Everyone’s internal dialogue is raging; anxiety is high and threat levels are naturally raised. The context is one of great uncertainty; while the rationale for the deal will have been analysed thoroughly and understood by most, and the structural changes somewhat figured out, a significant amount of ambiguity still exists. Many questions are unanswered, and most are in some way tied to themes of power, security, designated rank, decision-making authority, scope of influence, career progression, and so on. It is during this initial integration process that the dust only begins to settle, and that happens only if it goes well. If it doesn’t go well, the consequences can be nothing short of catastrophic because of the speed at which they manifest.  

70% of all mergers and acquisitions fail to produce any shareholder benefit and over half actually destroy value (McKinsey: Perspectives on Merger Integration, June 2010). The biggest attributable cause: “People and organization issues” such as a lack of leadership alignment, unresolved conflict, cultural incompatibility, no shared vision, power struggles, and a lack of cohesion in the steering committee/coalition. Yet Boards remain undeterred. At those odds, I think an argument can be made to sell up and hit the casino’s instead.

The question not often asked is: “Which of those people and organisational issues are the single greatest risk to successful M&A?”. My attempt at finding danger-factor numero uno in the academic world in order to support or disprove my experience-laden hypothesis did not yield much, so I will share it with you in the hope that you might revert with some enlightening data. 

The greatest risk: a failure to achieve strategic alignment, and for clarity I will define that as the failure of the top leadership teams to come together as one, efficient decision-making unit, all pulling in the same direction, and capable of executing with speed. The impact is decisive and a downward spiral follows quickly, causing major problems, all of which corrode the deal value and intended synergies. In no time at all, disjointed communication and mixed messages signal alarm bells, strategy and tactical execution failure leads to disengagement and declining morale, and top talent takes flight. 

What else can be said about strategic alignment? In our consulting practice we consider several measures, of which I will list only 7 below:

Warning: They will all might seem a tad obvious, but to achieve them all in tandem is rarer that a purple unicorn.

1.  Shared Ownership - joint accountability and collective uptake of the leadership mantle
2. Tactical Readiness – a co-authored tactical plan of action that supports the execution of the organisational strategy.
3. Leadership Endorsement – the vital state of the teams being behind the Chief Executive and the de facto number 2.
4. Cohesion - united and showing all the signs of a cohesive, ‘well-oiled’ unit as opposed to a bunch of individuals pulling in different directions.
5. Trust – full confidence in each other (capability and character) without suspicion and second-guessing.
6. Total Engagement – dedication to a shared cause and vision, full participation of everyone, going the extra mile, if, and when necessary.
7. Forward Momentum – a move from static alignment to dynamic, coordinated, and forward-moving delivery of the KPI’s.

So, how does one align leaders post M&A and facilitate the coming together of big ego’s in a climate of uncertainty, fear and competitive threat? Alignment occurs in conversations. Have the hard ones. You know, the ones requiring that you step a mile out of your comfort zone, lay it all out on the line, show your cards, open up, perhaps draw on (until that moment) unfamiliar levels of emotional courage? And those conversations do not flow until trust is in place, or in the absence of trust, a competent facilitator can be allowed to steer the group. Once trust is built dialogue can flow, agendas can be unmasked, and common ground can emerge. I have listed 10 of the tougher questions that are likely to sit under the surface in the early stages of integration. In the naming of these issues, relief has a way of washing over the group. After they are named, they need to be teased out, processed and completed/cleared. Left unattended, they cause havoc. Rarely can they all be explored on one offsite, unless the investment is for 3 very long and full days. The questions:

1. What have the pre-merger diagnostics/due diligence revealed about our respective weaknesses, and what is the plan to clean up the mess these have created?
2. Who in the room either does not understand the business case for the deal, or thinks it was a bad idea?
3. Which of the people in our teams won’t make it, are not needed, or should be managed out?
4. Which are the parts of our respective business that we find undesirable or dysfunctional, or are inferior to the other, or that are now essentially redundant?
5. What is the truth about the impact of this change and on our careers, status, and quality of life?
6. How do we preserve what we value most?
7. How do we distribute or share power and influence fairly?
8. When we strongly disagree, who gets to prevail over the other?
9. How do we collaborate when we don’t know or trust each other?
10. What can we do collectively to accelerate the execution of the strategy and how will we hold each other accountable?

Now, some readers might be reacting with disbelief or outrage at this point. After all, these are some really tricky, uncomfortable, questions and most teams flat-out avoid them. In fact, people would rather have root canal treatment that sit in a group process having open conversations about these issues. That is why we refer to them as ‘undiscussables’. Yet, consider the alternative: they remain under the surface, festering, spoken about in hushed whispers and private rendezvous. Because they are not openly resolved, they permeate every meeting, every conversation. They drain the energy out of collective efforts and undermine both leadership and followership. This is the reason why 70% of all mergers fail and one out of every two acquisitions actually destroy value.

In summary then, aligning leaders post-M&A begins with creating a forum immediately in which a very special kind of dialogue can transpire; I hear the term ‘courageous conversations’ bandied about a lot by people who have no clue what it really means to be bold, forthright, emotionally honest and vulnerable with others in a space that is corporate, and therefore, by virtue of its very nature, unsafe. Am I advocating total transparency and vulnerability for all? No, I always tell groups to manage their own boundaries. I am however saying that unless groups put down the armour and get real with each other, they never fully align. And creating a space and a process that makes it ok for people to ‘go there’, well that takes a facilitated process of a very special kind. It is not an investment you can shirk if you really want the very best out of the group, and the greatest chance of success. I am in no way suggesting that the integration and alignment imperative comes anywhere close to guaranteeing success, but I am saying unequivocally that failure to achieve integration and alignment guarantees failure.