Culture makes the difference Featured

9:07am EDT May 1, 2006

Acquisitions are in fashion. The pressure for companies to grow by acquiring other businesses shows every sign of continuing at an ever more rapid pace. One of the hopes of acquisition activity is a new corporate organization with a new culture. But by all accounts, business acquisitions continue to fail to meet management’s strategic and financial expatiations. As a result, not all acquisitions are successful.

Two conditions must be met if companies are to achieve better returns than the current norms from increasingly complex deals:

  • Acquisitions should be treated as part of a planned strategic activity (and not as an exciting chase, culminating in a frantically consummated deal).
  • The outcome of acquiring a company should meet clear and measurable business objectives, whether this is the full integration of a new business or the establishment of another managerial structure.

The question is why. Buyers have steadily improved their approach to acquisition planning in recent years. They have learned from scores of books, articles, conferences and seminars that provide ample best-practices guidance on making acquisitions work. Still, we continue to see acquisition mishaps despite the growing base of time-tested tutelage on the do’s and don’ts of M&A planning.

Again the question: Why do acquisitions continue to fail? The answer: Too often, there is a serious lack of leadership during the post-merger integration process. Following are five critical success factors that buyers must attain in order to lead their new acquisitions to success.

1. What are the values, beliefs, traits, and qualities that the new organization will hold most dear? With any new business venture must come a new vision — a picture of the desirable future that can or will be for the company’s employees and stakeholders. Articulating that vision is the first leadership task. Underlying the new vision are new values. Values shape people’s behaviors based on the ideas the company holds to be important. When employees embrace the firm’s values, they embrace its goals.

2. What is the knowledge base and the process for information-sharing with the new venture? The post-acquisition integration process is inherently based on data transfer and knowledge-sharing. Unfortunately, integration is a time when communicative cooperation is often nonexistent. Company leadership must break the communication logjam and actively promote the benefits and necessity of information sharing.

3. Is the leadership actively involved in the integration initiative? Too often, the management team will remain holed up in offices without ever venturing out to meet the employees. These management types feel that — just because internal memos and other documents carry their byline — they are adequately communicating with people. They are not.

While written communications are essential, nothing replaces the power of face-to-face interaction. Simply put, leadership should not muddle through. Employees at the purchased entity will be watching every move made. Communications and even body language must be consistent, on message and clear. To this end, it is best to have one person in charge of integrating the processes. That allows employees of the acquired company to bring issues quickly to a point person, and get them resolved. Without this point person, employees often do not know who to contact and process issues can impair the business and become emotional issues of right and wrong.

4. How do successful new acquisitions rely on the principal of “leading the leaders?” Leadership does not mean doing the job all alone. Cultivating and deploying multiple leaders is another urgent task for successful integration. Careful selection of leadership lieutenants is imperative. The leadership skills required in a post-acquisition context are quite precise and somewhat different than those required in a typical organizational setting.

Leaders must endeavor to end the “them-versus-us” mentality. When businesses are acquired, employees on each side of the acquisition think their processes and people are superior. By getting the process-people talking quickly, and often, after the acquisition, names become people. Face-to-face meetings are always best; terse or misunderstood communications that can occur in e-mails are less likely in person.

5. What is the new corporate culture? The most important factor, by far, is actively forging a new corporate culture. When new organizations are formed, so too must their cultures. Initially, integration requires that dissimilar cultures be aligned. It is only over time that a new culture can be proactively developed. Everything done in supporting the integration process must be taken with an eye toward developing a new high-performance culture.

The enormous challenges of integrating new acquisitions are well known. What is not as well documented are the specific leadership skills which must be demonstrated. Clearly, every acquisition is different. Thus, each one poses unique integration challenges. Invariably, the integration milieu is characterized by turbulence.

It is the role of senior executives to be leadership beacons to help the new organization navigate the choppy waters and reach its strategic destination.

STEWART L. CLOER, JD, LLM, MFP, CBC, ATA, CM&AA, is senior manager - transactions for IPA Advisory & Intermediary Services LLC. Reach him at (800) 531-7100 or stewart.cloer@ipa-iba.com.