Platt Perspective on Business and Technology

Transitioning into senior management – Part 16: M&A leadership – 2

Posted in book recommendations, job search and career development by Timothy Platt on July 13, 2011

This is my 16th installment in a series on joining and working on an executive team (see my Guide to Effective Job Search and Career Development, postings 158-172 for parts 1-15) and it is my second installment to focus on the challenges that arise specific to working in a mergers and acquisitions context. There is an extensive literature on mergers and acquisitions, or M&A as this is called, and to cite a specific reference I would recommend a classic in the field:

• Reed, S.F., A.R Lajoux and H.P Nesvold (2007) The Art of M&A – a merger and acquisition buyout guide, 4th edition. McGraw Hill.

To clarify where this posting would fit in this larger framework, my focus here is on after-the-merger or acquisition, and after the executive team has been selected for moving forward with the newly combined business. My focus is on making this newly formed larger entity work, and thrive, and I start that from the basic questions and issues I raised in Part 15: M&A leadership – 1.

I start this posting by adding some basic questions:

• Presumably, each of the businesses entering into this M&A combining would have both strengths that would make them beneficial for the other to join in with them, and weaknesses and gaps that the other could (hopefully) help to correct. What are the specific strengths and weaknesses that each bring to the table, that upon this combining might yield just strengths?

Any real attempt to answer this question in practice actually turns into a long series of questions and due diligence and that series of processes should have been covered before the agreements to combine were developed as a proposal for the two executive suites and the boards they reported to. I dig a bit deeper with my second basic question, and this is one that is often only partly addressed in advance.

• What was it in the businesses entering this combining that made their strengths and positives what they were, and what did they do or systematically fail to do that led to their weaknesses and gaps?

A failure to address this adequately and in advance of an acquisition can easily, and rapidly lead to a loss of precisely the value that a smaller company acquisition was brought in to provide. A wrong-fit business model and operational and strategic processes when pushed onto and forced into a more nimble, younger, high-value acquisition can serve only to crush it.

• Has anyone really looked at or considered corporate culture differences and similarities, and finding ways to protect the differences where they each work in their parts of the new combined organization?

Just consider the following little scenario. A large and somewhat stultified publishing company acquires a cutting edge, creative young business that has really started to make a name for itself in Web 2.0 and interactive media. And the larger partner in this, which I will call BigCo is a suit and tie, and white shirt oriented business with a rigid table of organization and a lot of formality in everything. The business they acquire to help them address a vital gap that they know is endangering them, which I will all AgileCo is a much more collegial organization and a much more casual one. The people there are explicitly responsible to get their primary work done but they are just as explicitly encouraged and supported in trying out special projects – their own projects that might turn into new products or services or develop into break-away improvements to existing offerings. And every day is casual Friday, and people can in most cases set their own schedules – as long as they are productive and stay that way. And yes, they are allowed to fail and learn, and to move on from that, with that process called learning. BigCo steps in and puts seasoned members of its middle management in charge of its new AgileCo acquisition to help it fit in, and suddenly everything AgileCo has to be exactly like it is over at BigCo.

I did not make up this example at all, except for changing the names. I saw it play out and the board at BigCo ended up asking their CEO how it is they made this very expensive acquisition, and nothing positive came of it. AgileCo as a division lost its edge; after joining BigCo it could not keep its old clients let alone bring in new markets as anticipated – from combining BigCo and AgileCo’s evident pre-acquisition strengths. This was a disaster for everyone concerned and it need not have been. This could have been a real success story – if AgileCo had been supported in being itself, and if it had simply been allowed to add its successes as it developed and nurtured them, into a combined pool of products and services, and capabilities to create new ones that the promise of this acquisition offered.

And in a real sense that story and understanding the need to avoid replicating it, and thinking through how to do that – that is what this series installment and Part 15 are about.

• And the less examined a source of difference between the businesses entering into an M&A, the more likely that failure to take it into account will come back as a source of problems – where identifying and building to address or accommodate differences could be a greatest source of strengths.

Listen, listen, listen – and think. Meet with people from both sides of this new arrangement and look out for anything that may strike you as different, and especially if it means your feeling uncomfortable – think dress code differences here as an example. “Different” is not necessarily bad and neither is “uncomfortable”, and particularly where understand the Why for those differences can help you see the real sources of strength you have access to, as well as identifying areas where change would actually be of benefit. Perhaps AgileCo people should dress up in the suits when over at BigCo meeting with some types of shared clients there, and BigCo people should go casual when meeting with clients over at AgileCo – and with ground rules laid out and mutually understood and differences accepted where possible and effective. This is where leadership has to come from the top and this is where being a member of the executive team of that now combined business works or does not, on top of simply carrying out the basic functional skills of that CXO or CEO position.

Then, as the newly combined larger business settles in, look to the real values of the various approaches taken, each in their part of that larger business. And look for ways to benefit from the diversity, and look for situations where adapting some feature more widely would really make sense and offer value. But the key here in either case is that changes and their consequences be understood and that they be based on genuine buy-in, and of a type that comes from trust.

I am going to turn to the challenges and issues of startups and working in an executive team there, in my next series installment.

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