Mergers & Acquisitions: Building Transformative Leadership Capabilities

Mergers & Acquisitions (M&A) can be extremely challenging for the entire organisation and more so for leadership teams charged with successfully integrating two companies. They are high-risk events with high stakes. Such events can create a pressure-cooker environment for leaders, and often define their entire careers.?

For a successful M&A, boosting integration readiness among leadership is a critical success factor to ensure maximum synergies. This can be achieved by building capabilities among senior leaders to guide teams for navigating the intricate aspects of M&A.?

It is essential for leaders to learn how to communicate the right expectations and ensure that they are interpreted correctly. As a leader, it is your role to motivate, inspire, and challenge your teams to take charge amid such a massive transition.?

So, how can leaders embrace change and keep engagement high at the same time? Let’s understand this in detail.

Understanding the crucial leadership cohorts necessary for acquisitions

Creating a program for three main groups of senior integration leaders can help streamline the M&A process significantly:

• The top team: This includes the CEO and direct reports. This team must be able to communicate the rationale for the M&A, define the integration approach and roles, and ensure that maximum synergies are attained, while limiting business risks. For instance, the acquisition of ETrade by Morgan Stanley was intended to capture value by leveraging ETrades’s digital capabilities for Morgan Stanley's client base. Defining cultural themes, given the differences in ways of working and operating practices, is also essential. This team would also need to define metrics to evaluate performance on all fronts, which are clearly communicated to the rest of the organisation.?
• The integration leaders: This group must know how to derive maximum value from the integration. They must learn how to quickly mobilise employees from the two companies that are coming together, across functions and departments. This can be particularly tricky in case of cross-border mergers like the acquisition of Abbey National in the UK by Santander in Spain, where there were large cultural mismatches. However, the bank’s turnaround bore fruit during the credit crunch in the UK. The bank was deemed as a safe haven for people’s savings during this challenging phase. ?After multiple rounds of rebranding, Santander UK has transformed to a full-service retail and commercial bank.
• The communicators: This cohort must learn to champion communication across the board. The group must shoulder the responsibility of clearly conveying the overall purpose and end goal of the merger to each and every stakeholder involved. They must also strive to ensure that employees have a complete understanding of the scenario and work towards reducing uncertainties.?

Strategies and capabilities to build upon

Change is inevitable during M&A. However, leaders at all levels can choose to build certain strategies and capabilities to ease the integration process.

• Outline Priorities: Leaders must strive to reach a combined vision that incorporates various inputs while articulating the desired outcomes. Leaders must then translate this vision to performance metrics. In addition, leaders must prioritise people and culture over all other factors to help them smoothly navigate the merger.?
• Culture: During M&As, it is natural for employees to feel nervous, which can lead to pessimism in the environment. Leaders must strive towards creating a more optimistic culture. For this, leaders need to be transparent in their communication and lead by example in terms of adaptability.?
• Communication: It is imperative for leaders to communicate a mindset that ensures adaptability to survive in such circumstances. Every employee of the organisation must clearly understand the impact of the merger. The communication must be clear and consistent. HSBC Life’s acquisition of AXA Singapore, for instance, was aimed to serve Singapore customers better, with the former having strong savings and investments capabilities and the latter having a mature health and employee benefits business. This rationale of deriving value from complementary businesses was well-communicated internally and in the media.

Taking action in transformation

Integration leaders are constantly visualising how their organisations will become post-merger and anticipate how employees and customers will react to the change. It is important to acknowledge that transformations are not always initiated by the leadership, but sometimes by the employees.?

Transformational leaders must take the effort to reach out to customers, partners, and employees to better understand their needs, frustrations, and problems and address them. Even if this means over-communication, leaders would need to ensure that every stakeholder is on the same page with respect to the deal.?

During integration, organisational culture is the most important aspect that must be managed. Getting teams and departments together to discuss the upcoming changes and encouraging a growth mindset can prepare employees for the integration. A cultural shift starts by changing the hearts, minds, and skills of the workforce.

M&A leadership capabilities can be challenging for management teams, but they are also opportunities for leaders to prove their mettle. As long as leaders address the right priorities, they can achieve sustained high-performance results and capture the maximum value from M&As.?

Transformational leaders must build capabilities to guide teams throughout the integration phase. In addition, leaders must properly communicate the purpose of the deal and the anticipated changes. They must encourage employees to adapt to the changing environment by promoting a culture that drives optimism.??