Mergers & Acquisitions

While no M&A is the same, I was wondering what people's experiences have been in activating change management. When do you recommend involving change management and when do you typically see change management engaged? If there is a gap, what strategies have you deployed to mitigate that gap?

From my end, I advocate for change management being involved during the due diligence phase because this can aid in better understanding the deal thesis, building communications and messaging to support the case for change, and to begin to understand the change impacts. It also allows for a strong voice on culture and the people rather than an often more singular focus on perceived financial and operational impact. 

I too often see change management becoming more engaged once the deal is announced and preparations for integration begin. This is often due to keeping it a tight circle of people involved during the due diligence due to the sensitive nature of the M&A. We've addressed these challenges by creating more of a defined playbook around M&A activity and getting the key leaders involved together to build this playbook. While we advocated for change management earlier in the process, we've provided guiding questions, discussions topics, and activities during the due diligence phase that can be managed by someone participating in this phase (often HR) and who then can take the outputs and context to change managers once they are activated. 

While imperfect, this does enable change managers to get preliminary information that can be used to shape key deliverables in the post-merger integration. What are your thoughts and experiences?

My answer reflects that I lead M&A integration at a medium-sized company (~2000 employees) that acquires even smaller companies (between 2 – 350 employees).  And we acquire about four companies a year.  Our model is to fully absorb the acquisition into ours to make reporting and maintenance of systems and processes scalable. 

Because few at the target are aware of the potential sale of their company, there is generally little capacity during the due diligence phase to inject change management pre-Close.  Our focus is on "should we buy this company and if so, for how much" as well as on risk identification and mitigation.  To this end, I review all information in the data room and contribute to the risk assessment that is presented to the Board. 

Once a Close date has been established, I meet with the leader(s) of the target to give them an overview of the integration process.  I feel that expectation setting is an important first step in change management.  I also set up a date and time to kick off integration and change management efforts with the to-be acquired leader(s) and their designees post-Close.  Ideally, this is held in person the second week after Close, when the acquisition's excitement of selling the company has started to wane.  Leaders are in a better state to absorb the information I have to share and contribute meaningfully to integration planning.

Thank you @Jennifer Lipschultz for this context. It is particularly helpful understanding the size, scope, and strategy (fully absorb). I'm curious if others at different sized companies follow a similar approach. Oftentimes, I have seen larger companies manage the risk through HR and then bring in change management after close as part of preparation for integration. 

My experience is similar to Jennifer's.  When performing due diligence for a life science acquisition (my role as a precursor to CM), the number of people with knowledge of the pending acquisition is very small.  Therefore, effective planning is problematic for CM.  What you can do is emphasize to the principals with knowledge of the impending possible deal that CM will need to be active the day the deal is announced.  You can try to identify the readily identified issues for CM.  This typically includes employee benefits and stock issues.  Obviously, technology needs to be addressed quickly.  Labelling and marketing also are a priority.  The principals need to have a broad plan for these things and others in order to begin pulling the team together with priorities on Day 1.  The more you can identify and prioritize with the limited "in the know" principals, the more successful the merger or acquisition will be.   Acquisitions or divestitures present additional issues because to the employee impact is likely to be significant.

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Frank Gorman, Former ACMP Board Member, Transformation Consultant
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Hi Evan,

I completely agree with what Frank and Jennifer have shared. Both really capture the reality that during due diligence, so few people are "in the know," which makes it tough for change management to do much pre-Close. I think the key is making sure CM is ready to go the moment the deal is announced, with clear priorities and early input from the principals who do have the information. Their points about planning for people, technology, and operational issues really resonate with my experience.

For example, I was once part of an M&A leadership team looking at a reverse merger with a startup. The goal was to cross-sell the startup's products to our existing client base, and also use the merger as a way to start trading on OTC markets and set up for future acquisitions. In that case, we were able to map the product fit and spot gaps across people, process, and technology early, which let us start some of the desktop work before the Close. I think most organizations probably do this from a deal-making perspective anyway, but often without a specific change management lens, which made having that focus really valuable.