M&A's: More Than Legal and Finance
It’s been quite the year for re-evaluation and assessment of where current business stands. Whether it is a part of a growth or exit strategy, many entrepreneurs, CEOs and executives have had the conversation "what do we do next" and the concept of a merger or acquisition most certainly crosses the minds of most. But, are you ready for it?
It is common knowledge to recognize the importance of the legal and financial aspects of a merger or acquisition but few consider the third piece of this puzzle, the people. If your business value is based on the output of the knowledge, talent and skills of your people for its success then this third leg of the M&A stool has to be not only considered but needs to be a major focus of your efforts.
People and Culture. This is the third leg of the M&A stool that wasn't factored into industrial age acquisition plans for M&A advisory firms. The result is the 70-90% M&A failure rate of the 21st century. The reality is, the knowledge economy is a very different beast and requires a savvy and wise approach to the entire M&A process, a fundamental shift in how mergers and acquisitions have been done in the past.
Here are five things to consider assuming the finance and legal aspects have been addressed:
Vision & Traction
If you've been articulating a clear organizational vision throughout your organization, and that vision has traction, meaning everyone in the organization understands and can articulate your vision, it should be no surprise to anyone that a merger or acquisition may be in your organization's future. One of the best ways to retain your top talent is not springing the idea of M&As on your staff. Be clear about the vision of the organization and share it willingly with the entire employee base to gain solid traction for your vision. This builds trust between the leaders and employees and creates a solid foundation for successful M&A efforts.Get Real
Question everything. Every piece of information, piece of advice, strategy. Question it all. As a CEO you are told and given a lot of information, usually in good faith, but in the M&A process question and fact check. Make sure you have a perspective that is grounded in reality, not someone's spin on what is going on. In addition, make sure you involve women (meaning more than one) in your inner circle when evaluating your M&A process. Read this HBR article to understand why. HBR: Boards with More Women Pay Less for Acquisitions.Communication & Transparency
If you don't have #1 above down, then know that people are smart, employees are smart. They hear things, share things and have a whole network to communicate what they see and hear. So while you think your M&A plans are hush hush, most likely they are pretty well known and the rumor mill is probably at work. Get clear about the vision of the organization and communicate it openly. This kills the rumor mill and builds trust and transparency. Even if you can't share the details, communicate and share what you can with key staff. This is going to help build a great foundation for integration.Leadership, Culture & Integration
In a 2012 Forbes article, Robert Sher talks about why M&A deals fail, and I couldn't agree more. Integration is one of the biggest reasons yet it's rarely considered prior to the deal being made. This is perplexing to me yet it happens all the time, again the focus is on legal and finance but rarely if ever on people/culture/integration. If the initial due diligence looks good then start mapping these three things, leadership, culture and the integration plan - and get real about all three.Right Seats, Right People, Right People in the Right Seats
As you start your M&A process you need to make sure you have the right seats in your organization, meaning your current org chart has the right positions to take your company through the M&A process successfully. Some positions may need to be eliminated and new ones created. Do this first. Second, you want to make sure the people you have really do fit the culture you want to have in the future. This is the time to weed out those who cannot take your company successfully through the M&A process and do not match with the culture you want to grow. Third, you need to ensure the right people (culture fit) are sitting in the right seats. This is a purposeful activity that can't be overlooked or else your M&A process will become unsuccessful very quickly.
In the end, successful mergers and acquisitions need solid legal and financial advice but they ALSO need a strong (and real) evaluation of your people and culture to be a part of the 30%. Best of luck!