The REAL Value Creators in Mergers and Acquisitions

In the most recent issue of Fortune Magazine is an article titled “Don’t Look Now, but M & A Is Back.” The brief article by Stanley Bing laments that very seldom do companies or their employees really benefit from mergers and acquisitions. The winners are the bankers, lawyers, consultants, maybe senior leadership, and of course Wall Street.

Why do companies and their employees seldom benefit from M&A? In a word- people. In the midst of product expansion, distribution efficiencies, vertical integration, economies of scale, and a host of other buzz words that are used to describe the virtues of a proposed deal, the one thing that is most often overlooked are people. Of course, the impact of the deal on certain individuals or departments is a consideration because if the acquiring company (always remember that even when it is called a merger there is always and acquirer and an acquiree no matter how many ways it is said differently) doesn’t eliminate a certain amount of jobs then they have failed to realize the “synergies” of the acquisition. It is said that about half of all mergers fail to deliver on the pre-merger promises of increased revenue and profit. The reasons that are given a majority of the time are human resource issues. Culture shock, poor people integration, lack of employee engagement, poor decisions, and of course ego clashes, are among the list of common reasons.         

As a veteran of several acquisitions during my HR career, this continued lack of focus on the human resource aspects of mergers still baffles me. Now, I am not saying that the human resource aspects of an acquisition are easy, but there are a few simple steps that can go a long way in stacking the odds in your favor.

                Conduct a Baseline Climate Assessment – Most companies (and particularly HR leaders) want to wait until the dust settles to start to get feedback from employees. If you wait until the dust settles then you may be waiting a long time and you most certainly have missed a golden opportunity. The perfect time to give employees a strong voice is in the midst of the chaos. Front-line employees understand their companies a lot better than we give them credit for and they are most often the ones that can guide leadership in the quest for real synergies and real value creation. All you have to do is ask. If you can pull it off, conducting a climate assessment with both the acquirer and acquiree organizations before the merger is finalized will give you an even better foundation to work from. Then pulse employees frequently throughout the integration to determine where issues are arising and where there are opportunities to celebrate.

                Communication is Crucial – I know you have heard this one before but there is a twist. You see, most companies feel that the key to effective communication during an acquisition is to put out information from senior leaders, hold town hall meetings, and create an “integration” update newsletter. These are necessary, but the person that employees know and trust the most is their immediate supervisor. That is who they want to hear from. So as you are obtaining feedback from employees and making decisions about integration, you have to arm front-line supervisors with the information that must be shared with employees.

                Exploit Instability – As much as I would like to take credit for this one, I have to give credit for this to author and merger consultant Price Pritchett. In his handbook, Mergers – Growth in the Fast Lane, Mr. Pritchett discusses the benefits offered during this crucial but chaotic time period. He says that “with things in such a state of flux, you have a window of opportunity during which you can do dramatic things. It’s like having a license to make wholesale changes… ” so go for it. Don’t shy away from the big decisions and take the opportunity to create a truly great company. 

Last year I co-authored the book The Why Factor: Winning with Workforce Intelligence. In the book we identified five things that can be learned from employees about employee engagement. At the end of the day, employee engagement is indeed THE key factor in creating a successful merger and acquisition. So here is a slightly modified version of those five things to consider during a merger/acquisition.

  1. Employees know what you expect from the merger/acquisition.
  2. Employees know how they want to be treated and they also know the hard truths of mergers/acquisitions.
  3. Employees know how to create a better workplace and therefore KNOW what it takes to create value in the new organization.
  4. If you really take the time to create a better workplace from the combined organizations then employees will stay longer, be more productive, be more innovative, and will help create the value that is expected from the merger/acquisition.
  5. Employee attitude and satisfaction drives customer/patient satisfaction and this drives organizational effectiveness, growth, and profitability.  And this is never as true as during a merger/acquisition.

So if a merger or acquisition is on your radar in the coming months, remember that the number one creator of value in the combined organization will not come from the bankers, lawyers, and consultants, but from your EMPLOYEES.  You just have to give them a voice and act. 

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