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Top tips for a successful M&A

Research shows less than 5% of mergers and acquisitions succeed in achieving what they set out to do. Find out how to create a successful transformation with these tips

Graham Scrivener, European managing director at Kotter International, explains why so many M&As fail and what boards can do to ensure a smooth transition

Organisations enter into mergers with high expectations, but often the integration fails to deliver the economies of scale, cost savings, and increased shareholder value promised.

Dr John Kotter, Professor of Leadership at Harvard Business School, found that 70% of transformation efforts, whether M&As or other leadership changes, do not deliver what has been promised. Whilst only a few are total failures, less than five% succeed in achieving what they set out to do.

According to Kotter’s research, some of the key requirements for a successful transition are a clear and effectively communicated vision; a focus on people; and engaging a diverse group of many with the merger across the two organisations to be a driving force for change.

A clear vision

Successful transformations begin with senior leadership crafting a clear vision which spells out the unique opportunity created by the merger and excites the organisation into action.

The single biggest issue is a lack of post-merger vision or one that has been created without full engagement from the two merging firms. Too often, leaders focus on briefing the markets, the logistics of integration and merging operations and organisational structures without asking the fundamental question, “What more could we become together?”

Answering this question is the first step to building a collective sense of urgency, excitement and alignment around a shared goal, which will produce a multiplier effect.

It is the responsibility of the combined senior leadership team to articulate a compelling, tangible and understandable vision that encourages people to engage with the new organisation and help drive it forward.

The vision should also be specific, enabling the organisation to determine if and when it has been achieved. It also needs to be communicated clearly to all employees across both companies to achieve buy-in.

Retaining top talent

The entire merger process needs to be subject to due diligence with regards to employees, as well as financial capital. Too often, the leadership team fails to develop an understanding of the people, unique processes and organisational cultures that need to be addressed during integration.

It is important to engage as many people as possible who will be impacted by the merger and involve them in defining how the goals are to be met.

Leaders will need to use messaging that engages both heads and hearts to drive the transformation forward, harnessing latent organisational energy and creating a culture where people want to get involved, rather than one dictated from the top.

For executives who may have lived through many mergers, the process may not feel threatening. However, to employees, even the smallest change can feel like a threat to their livelihood. Openness, transparency and empathy can go a long way to making people feel secure and inspiring action.

The more that empathy is visible, the faster the organisation can realise the value of the merger, and the more likely it is to retain its top talent.

Engaging the diverse many

M&As are usually treated as a financial deal done in closed rooms. The people within the organisations involved are not engaged, asked or encouraged to identify and solve key challenges.

Success requires engaging the diverse many – more than half of the organisation – rather than just a ‘select few’ usual suspects. This means galvanising the core of the organisation to be part of the transformation in ways that are relevant to them, and where their insight into the impact on the business is valued.

An informal organisation structure is crucial. Hierarchical structures are critical to driving efficiency, but are not designed to deliver transformational changes. Even worse is re-designing the new organisation structure in a vacuum as part of negotiations.

Without understanding how both organisations work and enabling people to engage with their counterparts to build something new together, the organisation chart is an irrelevance at best.

Instead, newly combined organisations need more informal networked groups to run alongside the hierarchy – a kind of dual operating system – composed of volunteers at all organisational levels.

This should infuse the company with more agility, adaptability and innovation, which become critical as the two businesses work together to become one. These informal networks can quickly adapt to new ways of working and innovate processes, and also disseminate new cultural norms much faster than a hierarchical structure.

Two key tips

 There’s no magic bullet that guarantees merger success. But paying attention to not just stratgey, but to an aspirational vision that engages people throughout the whole organization, will give businesses the best chance of being one of the five% that succeed wildly.

To do this, first, craft and communicate a vision that clearly spells out the opportunity inherent in the change and engage all employees with that vision.

Second, involve a diverse cross-section of the workforce, building a sense of urgency, gathering volunteers and removing barriers to create a natural networks to run alongside the traditional organisational hierarchy.

These measures will help to accelerate the transference of ideas, cultivate the energy and culture you want to foster within the new entity and enable the transition to continue at a speed that a traditional organisational structure simply can’t achieve.


Graham Scrivener is European managing director at Kotter International.

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