If M&A is a process fraught with challenges, then knowing the typical stress points can enable businesses to build in effective risk management when merging multiple organisations.

There seems to be an accepted general theory in mergers and acquisitions that when a merger and acquisition process becomes tangled or otherwise starts to fail that it because of the devil in the detail of the deal.

Implementation and post-merger integration are in fact the biggest factors that contribute to M&A failure. In other words, outside the original deal, the reason for the failure is usually down to operational issues, mismatch of cultures and the inability (and lack of capacity) to manage the acquisition and realise the planned synergies –  in particular the impacts on the people.

In the world of delivering projects this makes complete sense to us. Any major change or transformation in an organisation requires careful consideration of not just the tangible assets or systems. It also requires detailed understanding of the impact on the people; they are, after all, the vital ingredient that can make or break any change, alongside process and organisational structures.

More often than not, the review starts with the deal, and yet when you dig deep enough, it’s not so much what matters before the deal is signed as much as what happens afterward.

So, what are the typical stress points placed on a business during a merger and how can organisations address them appropriately to gain the benefit from the deal?

Key risks to your M & A Integration

In a CFO Magazine survey on M&A risk factors are identified more holistically as simply not really planning for the integration at all, with all the focus up front. “It can be devastating to put all of the work into the front end of a deal,” the report says, “only to poorly execute the ultimate integration and value capture.”

Similarly, the Vistage Research Centre highlights that underestimating the scale, scope and change implications of the “… integration and the level of assimilation required between the affected departments, divisions, subsidiaries and leadership teams in a merger or an acquisition, greatly enhances the risk of failure or delays and cost overruns.”

It is unsurprising that underestimating the scale of the task (i.e. scope) in front of you is no doubt a risk, but digging deeper what else stands out for these Integration projects? The Vistage Research Centre again identified the following 3 key risk areas that all have a people flavour:

  • Poor or inadequate communications – between the project team, staff and between new and old colleagues alike
  • Lack of transparency and inadequately preparing for the inclusion and retention of core competencies and staffing
  • Having two distinct cultures and service standards and not taking time to balance and merge the two, therefore, keeping the best of both and losing the worst of both

So how can project disciplines assist in the successful delivery of an M&A program of work – post deal?

Project disciplines and the successful M&A – Can they co-exist?

When the following elements are in place when planning an integration, our experience is that success usually follows. Few integrations are smooth, however these are critical elements to setting up M&A implementation for success:

Governance – Both Vistage and CFO Magazine emphasise the necessity of a clear vision and a clearly defined statement of success that translates through all levels of each organisation.

Having an empowered governance structure that can make effective and timely decisions is critical to maintaining momentum. When coupled with appropriate controls fit for purpose governance will accelerate delivery not hinder progress.

Capacity Planning –It is a common error to underestimate the effort required to deliver the integration of businesses.

It is easy to have over utilised resources that are stretched beyond capacity. Also, history of delivery is critical to factor in. How well have these organisations delivered significant change in the past? Factoring in a buffer for delivery DNA (good, bad or otherwise) is critical for accurate planning.

Capabilities – It is essential to have the experience of knowing what capabilities it will take to deliver is vital in ensuring the right capabilities exist or can be introduced.

Overconfidence and lack of rigour can result in the assumption that staff has the skills they need to get the job done and it’s only when things get tough and complex when it becomes evident that these capabilities are not in place.

Change – This discipline is often missed or drastically undervalued and its absence or underestimating its importance causes major problems with an M&A. As shown in the Vistage and the CFO surveys, ‘people impact’ is one of the greatest causes of failures. Aligning and gaining buy-in from both affected businesses is a critical success factor.

Change professionals should be there from the start, working closely with both businesses to:

  • Define what processes to keep
  • What the org structures will be; and
  • what the gap is between the current state and the future state.

Once the gap is defined then a skilled change manager will guide the businesses and work closely with leadership to ensure that the right communication, training, language, and behaviours are in place.

Culture – As with change management, misunderstand the cultural impacts of M&A and you will be challenged by friction and disgruntled employees. Building cultural bridges to align the cultural variances between the businesses is vital to success.

Controls – Building fit for purpose project management controls to plan, monitor and manage the integration and all the moving parts is vital.

This is NOT a one size fits all and takes extensive experience to build these controls that will work with the organisations in question and adapt to the new merged world.

Conclusion

There is an art and a science to ensure that businesses undertaking M&A activities deliver what the deal has promised. The science of getting the right disciplines in place is highly important. The art of aligning cultures, bringing people on the journey, and managing the project is just as critical to ultimate success. Underestimate or ignore any of the aboveproject disciplines and you will ultimately be introducing unwanted risk into your merger.

Struggling with the challenges of M&A?  Contact us here or call 02 9098 6300. We believe that quality thought leadership is worth investing in. Please share our content with your colleagues via any of the links below.

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Quay Consulting
Quay Consulting is a professional services business specialising in the project landscape, transforming strategy into fit-for-purpose delivery. Meet our team ...