How the Best CEOs Help Ensure a Successful Merger

Mergers require CEOs to balance many stakeholders' needs.Mergers require CEOs to balance many stakeholders' needs.

In the first post of this two part series I wrote about:

  • the current and ongoing high numbers and value of mergers and acquisitions worldwide
  • the well-established pattern of a high level – at least 50% – of risk of failure
  • reasons for mergers
  • the need for adaptive leadership

In this post, looking at a range of challenges in any merger, I’ve identified seven discrete but interrelated skills the CEO and leadership team will need to have and employ, so as to handle those challenges effectively.

  1. Negotiate the deal. There is a lot more to the merger challenge than getting to the signing stage, but getting the pre-signing phase right is essential for success in the longer term. Before any merger agreement is inked, the representatives of the merging entities will need to have comprehensive, open conversations about the potential of the merger, with scenarios that go beyond picturing a glorious upside for the new entity and look closely at what can go wrong and why, and what strategies will be implemented to avoid or mitigate risk – for instance the risk for a consulting company if key thought leaders in one of the companies don’t like the merger and decide to decamp.
  2. Communicate the rationale. A well articulated strategy for communication about the merger will also be necessary, especially for communication with employees of both companies, and with other stakeholders, including customers and suppliers. The CEO needs to be fully engaged in the development of that strategy and willing and able to be the lead spokesperson at every step along the way. There also need to be regular discussions with key people in the newly merged firm to ensure that they do understand the rationale for the merger and that they have bought into and still subscribe to the implementation strategy.
  3. Oversee the logistics of change. Obvious? Maybe. Details to be delegated? No doubt. But it does belong in the list. The CEO who wants to make sure the implementation process does not lag unreasonably, or worse, start to go off the rails, must ensure that he or she is briefed regularly on progress against agreed benchmarks and timetable.
  4. Manage the cultural adjustment and keep key staff engaged. The CEO must take particular responsibility for ensuring that the process of bringing together people from two different cultures works effectively, with problems being identified early on and dealt with effectively. This is especially important for retaining the services and commitment of key people.
  5. Manage the evolving perception of differences. When two companies merge, difference is one of the attractions for the merger – for example different strengths, different customer bases. But as time goes by some differences can start to be seen as a liability, for example the different remuneration and reward systems in different companies, different management cultures that seem now to be too challenging to blend. The CEO will have a “helicopter view” of all this and be able to explain to the leadership team what is happening, why people are not happy and what needs to be done to get the implementation process back on track.
  6. Be alert to changes in the external environment. Not every risk to a merger is from the internal dynamics of the merging and now merged company. External factors can play a big role, such as a downturn in the economy, or the incursion of a new, well-resourced player in a market space where the merged company had well-founded hopes of building new market share. Again, those leading the merger implementation will need to have current, open lines of communication with employees and other stakeholders, to explain how the changed external environment is affecting progress and what action is being taken to mitigate any negative impact.
  7.  Negotiate adjustments to goals and timetables for success. The world of business moves fast these days, with rapid changes in technology, modes of working, and society. Plans need to be adaptable. There could even be a situation where the original framing of the reasons for merging need to be reassessed and reframed. The CEO and other leaders will be challenged to make the necessary adjustment and then, once again, communicate the new picture to the various interested parties.

So what can help you hold all this together? What’s the linchpin leadership skill needed here?

My vote would be for the skill of managing the cultural adjustment.  That’s so much harder to pin down than some other, more tangible aspects of a merger, such as location of offices, titles, remuneration deals and so on, but it is crucial.

It need not take long for initial enthusiasm about the merger to dissipate under the effect of some cultural dissonance or clash of personalities or professional styles. Then those key people who represent so much of the value of the merger are going to be much more inclined to think about moving on.

There is admittedly something of an intangible aspect to managing cultural adjustment, but a systematic approach to managing that adjustment is not only possible but necessary. As a coach, I love helping business leaders manage that challenge and seeing positive outcomes.

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