Why M&As Fail and How to Fix This

According to several studies, including a 2019 report from Harvard Business Review, the failure rate for mergers and acquisitions (M&As) is between 70% and 90%. This is an appalling statistic, given the importance of an M&A growth strategy to many of today’s organizations. Any merger or acquisition represents a massive change for both sides of the transaction. In my podcast episode with guest Jennifer Fondrevay, we explore potential activities and approaches for increasing the odds of success. Jennifer is the founder and Chief Humanity Officer of Day1 Ready, a consultancy that advises forward-thinking business leaders, owners and C-suite executives on how to prepare for and manage the people challenges of business transitions, particularly mergers and acquisitions. As a Fortune 500 C suite marketing executive, Jennifer shares her M&A expertise as a contributor to Harvard Business Review, Fast Company, Forbes Thrive global and many other publications. Key factors for increasing potential for M&A success:
      1. 1) Cultural Alignment
        2) Change Management
        3) Retaining Critical Talent
        4) Focus on the Customer
        5) Leadership by Example
Cultural Fit between Organizations One of the primary reasons that a merger may fail is less about strategic concerns, operational issues, or finances. Rather, it may be that the two companies’ embedded cultures cannot be easily aligned. Some issues may surface during the due diligence phase but identifying how the cultures are going to work together is paramount. Members of both organizations need to learn each other’s corporate culture, employing humility, respect and understanding, and an acknowledgment that both sides need each other to succeed. After the merger, the more agile company may begin to be absorbed into the larger corporate culture. Once that happens, you may have stagnation, reductions in productivity, and you may lose key talent. Helping Employees Deal with Change The number one lesson you learn during the merger and acquisition process is that the workforce must move towards acceptance of the change. There’s always a very high level of resistance, which is challenging to fight. The metrics of success change almost overnight, so leaders and their teams need to be agile. Once the change is accepted, employees’ energy can shift towards their contribution to the future and identification of new personal and corporate opportunities. Retaining “Rock Star” Talent Jennifer often advises top executives to assess their talent carefully, with a view to how they can contribute to the future organization. While part of the M&A process brings a focus on finding efficiencies and removing redundancies, it’s short-sighted to define resources simply by the box they’re in or by their job description. Instead, through upskilling and retraining, these employees can still be valuable, bringing their in-depth organizational knowledge and experiences to a different role or department. It’s essential to help top performers to pivot and focus on their new opportunities to contribute. “For me, job rotation is by far one of the most under-rated strategies.” Put the Customer First Sometimes, both companies have a high level of mutual respect but may not be able to find common ground easily. The best way to move past this type of issue is to put the client front and center by asking, “how do we serve them best?” Perhaps there are elements taken from both organizations, but maintaining a client-centric focus will shift the energy from “What’s the best practice?” to “What serves the client best?” The most important aspect is to ensure that the thinking revolves around the client of the future, because he/she may require different thinking from the successful approaches of the past. Behavioural Changes for Leadership Leaders have the responsibility to set the tone in a way that makes sure that change happens in the best way possible. It’s essential that top executives have a high level of awareness of their teams’ feelings and establish advance plans that can move their people along the journey to acceptance. Leaders must set the vision and tone at the beginning of the process, with clear and consistent communications. However, top leadership may seem to step back once the integration is moving along, because they are delegating to the leadership and management team. “If it doesn’t start with the leaders with a good practice for communicating internally, then I think it’s just going to be a disaster across the organization.” Senior leaders need to remain present throughout the entire process, and they must be consistent also in their behaviour and in their body language. The top executives need to continuously model the behaviour of embracing and acknowledging the changes. Both executive and frontline resources must focus on building relationships and collaborative trust between the two organizations. The more that the top leaders can share transparently about what is known, unknown, or in progress, the fewer opportunity people will have to ‘read between the lines’ or imagine worst-case scenarios. In closing, I asked Jennifer to share with me her answers to my standard final questions. What is the number one lesson that you learned throughout your whole career? I think that it comes down to knowing your value. The more you know your value, what your worth is and how you contribute, the better you’re able to navigate uncertainty. When you had your best performance as an individual as a professional, what was in place at that time that allowed you to be a super high achiever? In this instance, I was in a challenging new position, and there were quite low expectations. My team was a bit suspicious of me, but we had nothing to lose, and we focused on proving the value we could bring to the company. Each of us brought our talent, our effort and attitude. We focused on what we could control, and we said, “We’re just going to go all in.” We pulled off an amazing trade show, and I will never forget it. What would you have done differently in your career? I think people often say that it’s important to acknowledge your failure; failures make you better. I would say, “Don’t live with regrets.” I’ve learned from my failures – it took me a while to pivot during all those M&As I was part of. That’s why I decided to write a book. I’ve gone on to share my knowledge, to help others be better executives. Who is the best business leader in your experience, or in your opinion? I sincerely admire Angela Merkel. She’s been in the world of politics for a long time, but you know, she’s a science teacher. She’s got lessons that we could all respect and learn from, as business leaders. What is your favourite business or leadership book? I tend to like the old favourites, such as “Leading Change” by John Kotter. I also recently read and loved Dorie Clark’s book, “The Long Game: How to be a Long-Term Thinker in a Short-Term World.” Jennifer shared with us some amazing tips and strategies that we can all implement during challenging mergers or acquisition projects. Remember, culture is the number one reason why most mergers don’t work as expected, or they don’t produce the desired return on investment. If you are in a position of leadership, make sure that you embrace some of the ideas and insights presented during this amazing episode. To connect with Jennifer Fondrevay, you can reach out via LinkedIn or through her website: https://jenniferjfondrevay.com/ Listen to the full episode here: https://www.andreapetrone.com/009-why-mas-fail-and-how-to-fix-this-with-jennifer-j-fondrevay/ If you want to receive our weekly insights via email, subscribe today at: https://www.andreapetrone.com/insight/
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