Mergers & Acquisitions

In my experience, mergers or acquisitions happen in different ways. Some acquired companies become indistinguishable within the acquiring firm. This can happen gradually, or more rapidly. For example, systems are integrated only after several years and multiple acquisitions. In other cases, the acquired firm is allowed to operate as a separate entity, with its own leadership, practices, and governing policies. Each model has its advantages based on the firms involved, the people, and the market conditions

This week, I asked a large language model about the critical factors which enable M&A success across project types. In this post, I significantly rewrote and summarized the chatbot's response. Do you agree? If so, where are you feeling the strongest agreement and why? If you disagree, explain where you differ, why and which factors should be addressed. Provide an example from your project experience. Did AI get it right?

Background: McKinsey and Deloitte report that up to 70% of deals fail to meet targets when leaders underestimate the human side. Their research suggests that successful M&A outcomes hinge far more on people than leaders acknowledge.  As change managers know, people issues are often the single biggest determinant of whether value is realized or lost. Here are the top ten action items to drive success:

1. Set the tone with leadership alignment to minimize employee confusion.

2. Assess cultural differences and address where values clash.

3. Focus talent retention to keep the most valuable employees, often the first to leave.

4. Validate the org design and operating model to establish how the combined org will function.

5. Manage change fatigue and anxiety to reduce uncertainty for employees.

6. Build the post-merger capabilities to execute on the combined strategy.

7. Align the HR policies and employee experience across all entities.

8. Help employees understand the why, and what it means for them, with a consistent narrative.

9. Create a strategy for brand identity that resolves employees and external customers association with the prior entities.

10. Make sure executives understand the complexity and scope of factors that enable success.

I thought about this for a while.  I do not believe that anyone can argue with this list.  If an acquisition is allowed to essentially continue to operate unmolested, there is little or no measurable impact to the employees particularly if there is no significant branding change other than something to the effect of using the statement-   "A xxxx Company".  (Fill in the blank for the acquiring company.)  There are a million variations on this mostly  behind the scenes in HR, Finance and IT but largely not particularly visible or impactful to the outside world or even many employees.  The biggest issue that I see is Change Fatigue.  Once it is known that something is going to happen, the process seems to drag on forever to employees.  They just want it to be over but a year of longer is not unusual.  Fatigue impacts morale.  Morale impacts retention.

In my experience, mergers or acquisitions happen in different ways. Some acquired companies become indistinguishable within the acquiring firm. This can happen gradually, or more rapidly. For example, systems are integrated only after several years and multiple acquisitions. In other cases, the acquired firm is allowed to operate as a separate entity, with its own leadership, practices, and governing policies. Each model has its advantages based on the firms involved, the people, and the market conditions

This week, I asked a large language model about the critical factors which enable M&A success across project types. In this post, I significantly rewrote and summarized the chatbot's response. Do you agree? If so, where are you feeling the strongest agreement and why? If you disagree, explain where you differ, why and which factors should be addressed. Provide an example from your project experience. Did AI get it right?

Background: McKinsey and Deloitte report that up to 70% of deals fail to meet targets when leaders underestimate the human side. Their research suggests that successful M&A outcomes hinge far more on people than leaders acknowledge.  As change managers know, people issues are often the single biggest determinant of whether value is realized or lost. Here are the top ten action items to drive success:

1. Set the tone with leadership alignment to minimize employee confusion.

2. Assess cultural differences and address where values clash.

3. Focus talent retention to keep the most valuable employees, often the first to leave.

4. Validate the org design and operating model to establish how the combined org will function.

5. Manage change fatigue and anxiety to reduce uncertainty for employees.

6. Build the post-merger capabilities to execute on the combined strategy.

7. Align the HR policies and employee experience across all entities.

8. Help employees understand the why, and what it means for them, with a consistent narrative.

9. Create a strategy for brand identity that resolves employees and external customers association with the prior entities.

10. Make sure executives understand the complexity and scope of factors that enable success.

In my experience, mergers or acquisitions happen in different ways. Some acquired companies become indistinguishable within the acquiring firm. This can happen gradually, or more rapidly. For example, systems are integrated only after several years and multiple acquisitions. In other cases, the acquired firm is allowed to operate as a separate entity, with its own leadership, practices, and governing policies. Each model has its advantages based on the firms involved, the people, and the market conditions

This week, I asked a large language model about the critical factors which enable M&A success across project types. In this post, I significantly rewrote and summarized the chatbot's response. Do you agree? If so, where are you feeling the strongest agreement and why? If you disagree, explain where you differ, why and which factors should be addressed. Provide an example from your project experience. Did AI get it right?

Background: McKinsey and Deloitte report that up to 70% of deals fail to meet targets when leaders underestimate the human side. Their research suggests that successful M&A outcomes hinge far more on people than leaders acknowledge.  As change managers know, people issues are often the single biggest determinant of whether value is realized or lost. Here are the top ten action items to drive success:

1. Set the tone with leadership alignment to minimize employee confusion.

2. Assess cultural differences and address where values clash.

3. Focus talent retention to keep the most valuable employees, often the first to leave.

4. Validate the org design and operating model to establish how the combined org will function.

5. Manage change fatigue and anxiety to reduce uncertainty for employees.

6. Build the post-merger capabilities to execute on the combined strategy.

7. Align the HR policies and employee experience across all entities.

8. Help employees understand the why, and what it means for them, with a consistent narrative.

9. Create a strategy for brand identity that resolves employees and external customers association with the prior entities.

10. Make sure executives understand the complexity and scope of factors that enable success.

Matt-

Before reading and being influenced by the key factors determined by AI, I came up with my own.  For reference, I work at a company that does about five deals a year.  We fully integrate them typically within six months of Close. 

1. Have a solid deal model against which success will be measured.  The deal model has been vetted by all of the acquiring company's functional leads to ensure alignment on headcount, sales targets, and expenses.  Acquired leadership demonstrates support of the deal model as well.

2.      Have strong integration personnel and playbook.  The acquiring company may not be able to 100% dedicate employees to M&A integration, but this should be the top priority of those asked to support integration efforts.  Without a solid playbook, acquired employees will pick up that their new parent company is "flying the plane as they are building it".  This will greatly amp up fear and anxiety in acquired employees.  This mirror's AI's #6 above.

3.      Create the org structure of the acquisition with involvement from acquired leadership.  We've learned the hard way that org charts and job descriptions provided during diligence are often thrown together for the sake of selling the company and may not reflect the reality of each acquired employee's responsibilities.  This mirrors AI's #4 above.

4.      Expectations for the integration process are clearly communicated to the acquired employees.  This includes how it will directly and indirectly affect them (system/process changes, reporting structures, responsibilities, etc.), timeline, and time commitment required to support integration efforts.  This mirrors AI's #5 and #8 above.

5.      As employees start to report to their functional managers, acquired leadership takes ownership of establishing clear lines of communication amongst their former direct reports so all are still aligned to meeting the targets in the deal model.

1. I bolded the "ed" above to emphasize that until acquired employees form an allegiance to their new managers, they are going to look to their former leadership for guidance on how to react to changes introduced by their new parent company.

6.      Evaluate the tenure of acquired employees with the acquired company.  Long-tenured employees are much more likely to remain with their new employer than acquired employees with less than one year with the acquired company.  If short-tenured employees are vital to making the acquisition a success, flight risk mitigation efforts are strongly suggested.

7.      If #4 above is done, I've found that employees can tolerate a degree of uncertainty and disruption.  It's also necessary to clearly understand how the integration process will cause disruption for acquired customers.  WIIFTC (What's in it for the customer) can hold more sway than WIIFM (What's in it for me (as the employee)).  If integration efforts impact customers in any way (e.g. new invoicing, changes to timing of software releases, new support processes, etc.), these must also be well explained to acquired employees so they feel comfortable with them.

Regarding AI's list, #1, #7, #8 and #10 resonate with me, but aren't at the top of my list as being the most critical for success.

In my experience, mergers or acquisitions happen in different ways. Some acquired companies become indistinguishable within the acquiring firm. This can happen gradually, or more rapidly. For example, systems are integrated only after several years and multiple acquisitions. In other cases, the acquired firm is allowed to operate as a separate entity, with its own leadership, practices, and governing policies. Each model has its advantages based on the firms involved, the people, and the market conditions

This week, I asked a large language model about the critical factors which enable M&A success across project types. In this post, I significantly rewrote and summarized the chatbot's response. Do you agree? If so, where are you feeling the strongest agreement and why? If you disagree, explain where you differ, why and which factors should be addressed. Provide an example from your project experience. Did AI get it right?

Background: McKinsey and Deloitte report that up to 70% of deals fail to meet targets when leaders underestimate the human side. Their research suggests that successful M&A outcomes hinge far more on people than leaders acknowledge.  As change managers know, people issues are often the single biggest determinant of whether value is realized or lost. Here are the top ten action items to drive success:

1. Set the tone with leadership alignment to minimize employee confusion.

2. Assess cultural differences and address where values clash.

3. Focus talent retention to keep the most valuable employees, often the first to leave.

4. Validate the org design and operating model to establish how the combined org will function.

5. Manage change fatigue and anxiety to reduce uncertainty for employees.

6. Build the post-merger capabilities to execute on the combined strategy.

7. Align the HR policies and employee experience across all entities.

8. Help employees understand the why, and what it means for them, with a consistent narrative.

9. Create a strategy for brand identity that resolves employees and external customers association with the prior entities.

10. Make sure executives understand the complexity and scope of factors that enable success.