What CEOs Must Do To Avoid The 83% Of Mergers And Acquisitions That Fail

Mergers and Acquisitions are at an all-time high. A merger or acquisition is one of the most stressful transitions a board can go through especially?according to collated research and a recent Harvard Business Review report, the failure rate for mergers and acquisitions (M&A) sits between 70 percent and 90 percent.?With the future of their company up in the air, directors are thrown into uncertainty. This uncertainty leads to fear and anxiety which hampers decision making. Why does this happen, and how can we fix it?

Luckily, neuroscience researches can help them understand the effects of stress on their emotions. Based on these researches they can combat the fear and calm our brains to regain control of stressful or chaotic situations.

When we run into uncertainty, our brain goes into panic mode. This triggers one of our most basic instincts, fight or flight. We are tempted to run away and hide. Our brain basically shuts down. This is at its core, one of our most human tendencies.

The problem with this is that when you are on a board that is faced with a merger or acquisition, you cannot run and hide, you have a responsibility to your fellow directors and your stock holders to stay and fight. When faced with a fight, your brain begins experiencing stress which disconnects our emotions from our cognitive thoughts. This means that our reason and logic is put on hold to make room for our emotions. This is why you see so many board fall apart during hostile takeovers, mergers, and acquisitions.

When people are making decisions with their emotions, they are less likely to do what is best for the company. Another effect of stress is the release of cortisol. Cortisol is a hormone produced by your body that inhibits collaboration, reduces the efficacy of your immune system, and makes us feel paranoid. This is important – cortisol?inhibits?collaboration.

A director experiencing stress (which is impossible to avoid during a transition like a merger or acquisition) is less likely to be able to collaborate effectively with their fellow directors, CEO, or chair.

Stress is our enemy; so how do we fix it? How can a board work together to make rational and sound decisions in times of uncertainty and stress?

The answer goes back to the brain. If emotions are the problem, then we must use emotions as the solution.

Emotion drives behavior in the office, often much more than we're aware of. To be more effective leaders, even more during a M&A Transaction, we need to become more attuned to our own emotions as well of those the people around us. This may come as a surprise, but as leaders we're not rational as we think, and we're not leading rational beings so much as leading their emotions.

Emotions steer much of our behavior and daily decision making, often in unconscious ways. It's like an iceberg; the majority of the mass is hidden under the surface. And it's this unseen mass that determines what direction the iceberg floats. Similarly, in situations of stress and pressure, people typically act less rationally; because they are driven by emotions such as fears or anxiety.

One of our client - board director at fashion and?luxury firms highlighted:

"I have learned from your neuroleadership coaching that when conflicts or collaboration issues arise in our board meeting, it is often really not about the subject matter, but rather the emotional state of the people in the team. When we feel under pressure, we act with less mental clarity and problems arise."

Because the problem is not the subject matter, but the emotional state of people. To be clear, emotions are neither good nor bad. Emotions have a purpose and are essential for normal human functioning and socializing. And as leaders, it's imperative that they understand the role of emotions, so they can connect with our people, not just on strategy and tasks but also on a fundamental human level. It's only when we create emotional resonance between ourselves and our people that we enable true connectedness. Whether we're aware of it - whether we want to accept it or not - true engagement happens when people feel connected on an emotional level. WHY? Because emotions are both universal and contagious.

Keep in mind, as a Leader, your emotions during a M&A transactions or an organizational change, your emotions have a bigger impact on others than do the emotions of the people you lead.

For more information on how emotions work in the boardroom,?you can contact us. At?SUPERHUMAIN, our purpose is helping clients in corporate and private equity transactions mitigate people risks by integrating the latest neuroleadership insights from all types of transactions.