The World of M&A: Getting The "People & Cultural" Parts of The Integration Right
Lee Blackstone
From Analytics to AI - Guiding Companies to Responsible Innovation Grounded in Ethics and Data Science - Keynote Speaker
Why Do We Bother With Acquisitions?
Acquisitions come with a lot of advantages, including (1) getting more customers; (2) delivering more services; (3) enhancing a businesses’ capacity and expanding its capabilities; (4) penetrating a new territory; (5) reducing costs; and (6) increasing a financial stronghold.
Other reasons underlying acquisitions are more subtle and complex, such as:
- keeping someone else from securing a target;
- forcing a target to sell (the infamous “hostile takeover” scenario); and
- rescuing a target who is in financial trouble.
The Failure Rate
While acquisitions are nice in theory, their failure rate is alarmingly high. According to Harvard Business Review, between 70 and 90 percent of mergers and acquisitions fail.
According to The Economist Intelligence Unit – which provides forecasting and advisory services through research and analysis– the following issues are the most pervasive and detrimental to acquisitions:
- Differences in organizational culture 50%
- Issues in human capital integration 35%
- Challenges integrating financial reporting systems 23%
- IT / systems compatibility 21%
- Lack of employee engagement 16%
- Leadership/management retention 16%
Fixing The People Issues
Notice that four of the six issues outlined above are “people issues.” While people are always part of the problem, they are also critical to any long-term solution.
After all, people are the living, breathing ecosystem that fills a business with life – who think, worry, and sometimes resort to survival behavior. Every acquisition comes with “characters, culture, and caveats.” Navigating the politics and getting beyond the common refrain of “this is how we do things here” can be a brutal process.
Conclusion
The bookending is that if you can get the people part and cultural integration right, you can have breakthroughs in customer growth, services, capacity, cost reductions, expansion, and even secure a financial stronghold.
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