Platt Perspective on Business and Technology

Transitioning into senior management – Part 15: M&A leadership – 1

Posted in job search and career development by Timothy Platt on July 9, 2011

You are currently a member of the senior executive team at an ongoing business, which may in fact be successful, in holding market share and position, and which may be highly rated by market analysts. And then a decision is made to enter into a merger with another business, or an acquisition, where your business may or may not be doing the acquiring. For purposes of this part of this discussion, those precise details do not really matter all that much.

• When two businesses or other organizations combine into one, and regardless of which is larger or more dominant in this process, every key senior position suddenly has a redundant duplicate. And this duplication continues on for positions throughout the newly combined table of organization.
• And even if one of the businesses entering a merger or acquisition is clearly dominant in this, it is all but certain that both will be represented as reduction decisions are made to resolve unneeded duplications, where people on-staff and at all affected levels may be kept on in their current roles, transitioned into new positions or let go.
• And in any case this will be, in effect, a new business for everyone who stays on in it whether their position was duplicated from the combining or not, with merging and reconciling of corporate cultures, business models and operational processes, strategic plans and processes and everything else.
• And while all of this takes place at all levels throughout the new, enlarged organization that emerges, the entire process has to be led from the top and from the newly emerging combined executive suite.

So even if you have been a senior executive at one of this new organization’s formative precursors if you stay on you are taking on a new job. And a big early-stage responsibility in your new job will be in helping to manage the settling in as this new organization comes together.

This is my 15th installment in a series on transitioning into and working in senior management (see my Guide to Effective Job Search and Career Development, postings 158-171 for parts 1-14.) And as I often do in this guide, I begin it by asking questions.

• Are you facing what in many respects is a merger of equals, where equal or at least similar representation from the two founding companies may be mandated by the merger agreement?

There, the goal at least, would probably be that operational and strategic processes and priorities from both of the merging businesses be respected and followed, and certainly within their spheres of activity and where that would make sense for the combined entity. Corporate cultures and their differences can get overlooked in the rush to combine, with differences and potentials for misunderstands glossed over – until they cannot be. Mergers of equals-in-principle can turn out to be anything-but in practice so they can become a lot more complex than expected.

• Is a larger company simply acquiring smaller businesses to help it fill in gaps in its core strategic interest?

Under those conditions, senior management in the smaller strategic acquisition are probably going to be asked to stay on, managing it as a division or other organizational unit within the larger acquiring business. And this larger business runs the risk of overwhelming its perhaps very costly acquisition and crushing its real value by imposing operational frameworks on it that go against what made it a success and an attractive acquisition in the first place. And this potential for self-imposed harm is a lot greater where imposition of corporate culture on the new acquisition is concerned, where its creativity and ability to capture and hold market share may be lost.

• If this is a merger of equals, have either of the businesses entering this new arrangement ever gone through this process before?
• Have any of the senior executives in place personally gone through this, either in the merging business they enter this process with, or from an earlier job?
• If this is a situation where a larger business is acquiring a smaller, how would the acquisition fit in?
• Does this larger business have a track record of acquiring smaller businesses to address emerging strategic gaps, and if so does it have systematic processes in place for managing acquisitions or does it simply seek to do everything ad hoc?

And here are some very important questions.

• Is this merger or acquisition taking place because one (or more) of the businesses involved see it as a survival tactic?
• If this is an acquisition by a larger business of a capability it cannot match in-house, is this a situation where the larger business sees itself slipping into irrelevancy in its marketplaces, and where it sees bringing in some new technology or approach as crucial for its long term viability and survival?
• Is this taking place as a means of creating synergies and increased power of scale, or is this more a part of a change management initiative?

I am going to continue my discussion of leadership while going through a merger or acquisition process in the next posting to this series, but I wanted to set the stage for that by putting it into a framework of understanding. If you are going through a merger or acquisition process or facing one as a serious possibility it is vitally important that you understand the nature of this combining, and its rationale and from both sides involved.

Ultimately, you will need to understand the other business as well as your own, and with an awareness of both the more overt operational and strategic sides to both and how they would mesh or not, and of business resources that each would bring to the table. But you also have to be aware of corporate culture issues and of how they can fit and be mutually supportive, or conflict and create problems.

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