Does Your Business Fail To Act Boldly with Acquisitions?
Many
of us have been involved in someway with Mergers, Acquisitions and
Disposals (MA&D or sometimes know as M&A). We all know that
there is a low success rate with acquisitions, as more deals result in
destruction in value for the acquiring party than those which increase
value. Indeed, I often think of the vintage 60s film "It's a Mad, Mad, Mad, Mad World" as an allegory for a badly executed acquisition.
Historically
businesses have tended to treat acquisitions one-dimensionally, with
some just regarding them as legal deals and others as a financial
transaction. Only recently have management teams begun to take a
multi-disciplinary view to MA&D deals, but still they seem to have a
blind spot around managing change or the importance of IT integration.
Overcoming Obstacles To Change
There's
a critically important phase during the first 6 months or so of a
completed transaction where the conditions for success are established
or not. During this point it is essential to sow the seeds for
successful cultural integration. That is we need to establish the
emotional connection between the people within the acquired company and
the acquiring company (note even in mergers and join ventures there is
normally a dominant partner, so I am assuming acquisition in all
instances for simplicity). We also need to establish management control,
demonstrate to customers that we are integrating and going to offer
something more, and to ensure business continuity. I call these the Cs
(culture, continuity, customer interface and control).
IT
is essential to this in a number of distinct but important ways, but
often management teams fail to invest soon enough in all the Cs. Excuses
often proferred are "it's a people based business and we don't want to
scare talented people away and lose the value of the business" and "part
of the price is performance related over the next N years, so we must
not do anything which distorts the picture of performance". This tends
to build failure in from the start.
Human Reactions to Change
If you have been through an acquisition yourself, you will know that most employees fall into one of three camps:
The
Curious - who want to explore the new business and identify
opportunities. These are the natural change agents and entrepreneurs
within a business and usually the people you want to keep and encourage
as they will create new value in the future.
The
Troops - who although they may be wary of change are happy enough to
follow where they are led, if only someone would show them the way. They
are also the people you want to keep as they know how the business
operate and deliver its value.
The
Deniers - who want to defend how things used to be, defy change and
block progress. Often they will willfully act to preserve their
independence or even try to take over the acquirer from within. They may
be the people who have destroyed value in the past (which could be the
reason that the business was up for sale in the first instance). You may
actually need to lose these people to assure future success of the
merged new entity.
What IT Can Do To Encourage Cultural Change
Modern
change management practices have shifted from trying to convert Deniers
to encouraging the Curious and enabling the Troops. In this vein, then
IT should be at least doing the following during the first few months of
an acquisition:
(A) Ensuring that all essential service contracts and licences re reassigned or replaced;
(B) Re-branding against the new identity in all systems and outward facing Web sites;
(C) Putting everyone onto the same connectivity infrastructure: e-mail, intranet, collaboration tools, mobile working toolsets;
(D)
Ensuring that everyone belongs to the same security and access control
systems: e.g. integrated active directory, security passes which work at
each site where people work;
(E) Merging HR systems and payrolls, so that everyone is performance managed and paid in the same way;
(F) Establishing basic common controls for high level performance reporting;
(G) Then, launching a project (or programme) to integrate essential ERP processes.
This
will not only ensure continuity of the acquired business, but enable
the curious to explore and remove excuses for inaction which often
prevents successful integration. It will also remove many of the
subliminal "them and us" barriers which separate members of the previous
historical organisations. Once this happens, then it is possible to
pursue new opportunities where the combined capabilities of the 2 former
businesses can be multiplied to deliver new value.
