‘Hoby’ Hanna looks for core values when Howard Hanna pursues M&As

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Find a similar culture

It’s easy to get locked in on the financial benefits you expect to realize through the acquisition of or merger with another company. But if you ignore the cultural implications and the ability of the two sides to mesh into one organization, you’re asking for trouble.

“We’ve been pretty lucky in terms of merging and acquiring companies that had, at their core roots, a very similar philosophy and culture to ours,” Hanna says. “Most of the companies we’ve acquired have been consumer-centric in their focus, like us.”

An overriding principle of Howard Hanna is that throughout the whole operation, the most important aspect is how consumers would be affected by a merger or acquisition and does it make their experience better.

“You try to identify the companies that, at least at their core, have that,” Hanna says. “They may have grown up with other focuses, in terms of where their marketing is, in terms of how they listen or don’t listen to their salespeople or their customer base, but there should be something at the core that you can resonate and build upon.”

So much of due diligence is tied to numbers, but you can’t skimp on talking to the ownership group to determine what its new role will be.

When Howard Hanna purchased the Smythe Cramer Co. in 2003, owner L.B. McKelvey had had a relationship with the Hanna family for 20 years.

“And so with that relationship — outside of ever thinking about doing something together — we were able to get an inside look at what their company did do well, and we could share a lot of best practices,” Hanna says. “But I found that when I shared an idea with some brokers, they’d look at me as if, ‘I would never do that.’ You start to see that your culture doesn’t fit because they would not accept your concepts or say that it wouldn’t work in their organization.”

The relationship between the two families over the years made for a nearly seamless transition.

“There were changes, there were subtle differences that people would see, but at the core value level — even post-closing, we agreed so much on the direction of where we were going,” Hanna says.

While some private equity companies may take over to trim the fat right away, Hanna doesn’t believe in that.

“We’re pricing it as a valuation: ‘Here’s what it’s worth based on how it operates,’” he says. “But you can’t change the culture by laying people off and reducing the workforce just because of the numbers. Those people have a role in the full structure and organization. It’s more knowing that the leadership group will buy into your plan and agrees with it philosophically, and has no problem after that transaction moving forward, with everybody and the focus to achieve sustained success.”

 

One mouth, but two ears

When companies are acquired or merge with another, people are often afraid of what might happen. Management’s best shot to ease those fears is to over-communicate its core values and drive home how they relate to what the workforce already believes in.

“But also spend a lot of time just to listen; you can talk all you want, but there’s a reason you have one mouth and two ears,” Hanna says. “It’s because sometimes if you listen to what the concerns are, they’ll start answering themselves.

“Let them ask the questions and by the way you give the answer, they’ll see that those values are a commonplace that, ‘Hey, I can — this resonates with me; it’s not that much different than what I believe in, so now I can support the leadership and support the team.’”

The listening process may be difficult at times because you are in the position of hearing people share their deep concerns as they discuss solutions.

“It’s hard because you’ve got to listen, and you want people to be positive about the situation, and you’re positive and proud of your own organization, but sometimes you have to go through the growing pains of allowing people to challenge what’s been more status quo just to get a greater understanding,” Hanna says.

If your workforce believes you are willing to listen, that opens a line of communication. Another key is for the leadership team to have an open door atmosphere, Hanna says.

“Every employee and sales associate in our organization has my home phone number,” he says. “The way you build culture is that people follow great leaders, so you have to be out in the front, and you have to really resonate with a relationship.”

Fundamental to a relationship is a high level of trust.

“In our organization, our employees and sales associates have to trust us just as much as we have to trust them,” Hanna says. “It’s a two-way street. And it’s not management versus the sales force or employee base — it’s together we’re really achieving great stuff. It’s just communication over and over, and listening at the same time. If you say you’re going to do something, actually fulfill and finish it.”