Why so many M&A transactions fail to create value during integration and what does this have to do with people leadership and executive coaching?
Research of McKinsey , Bain&Company and Harvard University show that between 70-80% of synergies in M&A transactions are not achieved.
Engaging in acquisition is a lot like courtship between two humans
At first one gets interested in what is obvious (good looks, witty comments, charm and immediate “chemistry”), in terms of corporate courtship this often comes as investment bankers “pitch” with great numbers, profits, growth and “SYNERGIES”. The buyer starts pitching to stakeholders growth and value creation, seller brags to shareholders about tens of years of profits/EBITDA lending immediately to their accounts. Both parties are excited and interested. If it is a competitive process “SYNERGIES” are found deep and wide, in growth and efficiency, sky is the limit to opportunities. In real life wows and rings are exchanged, in acquisitions money and shares.
And after big celebrations wedding arrangers (investment bankers, lawyers and accountants) bring symbolic gifts in form of plastic plaques with engraved $ sums and a date. They also take away their hefty fees and tell you “good luck in your marriage” and then you don’t see them again.
After the couple of months you figure out that a person you are waking up is not so special without make-up/high heels, that funny guy can be depressive and that sharing down to earth things like walking the dog and taking out trash require certain amount of work as well as loosing comfort, some of changes even include taking new risks.
In our corporate acquisition this is the time when questions start on delivery on great promises which fueled high valuations. As in marriage this is the moment that you find out things are not so simple as they looked at first glance. Realization of integration is often done by different people than those who contributed to pre-acquisition business case… And, as people often do, they have fears, feelings and questions which are often misaligned with “the cause”. They wonder whether they will keep their jobs, whether their status will remain same, whether they will have to do more work or take more risk for the same money. Will they have to learn another language? Is the long August holiday with relatives still an option?
In preparation of acquisition it is all numbers, analysis, hard facts and exact legal wording. In integration it is all about people. Issues of aligning corporate cultures, change management and communication are vital. This is where leadership skills of reading people, aligning interests and powerful communication with diplomatic touch make the difference between creating or destroying huge value. Executive coaching and mentoring can significantly shorten the time your managers need to acquire such skills.
Don’t forget that Drucker said “Culture eats strategy (and presentations, excel, advisors and lawyers) for breakfast.
Keep on searching for your perfect partner, just think twice before signing the papers…
More on executive coaching in Expertive d.o.o. on Coaching u Expertivu – Expertive
More on leadership mentoring on (1) Miroslav Klepac | LinkedIn
