03 Nov US Elections and M&A Transformation Leadership
Today will be a historic Presidential election here in the US. Entering election day, the two parties are working hard to be the “winner” and to be voted into a position as the sole Presidential leader of the United States of America. I am struck by the parallels and learnings from the elections, campaigns and Presidency, with corporate M&A Transformation Leadership. This article features what M&A executives must know to transform their merging companies, versus just changing the hardwiring of the strategies, structures, staff and systems to capture “synergies”. The elected President faces great division, active resistance and the challenge of achieving unification. M&A leaders responsible for integrating two companies face similar uphill challenges, certainly not on the scale and consequence of a US President, but undoubtedly challenged to capture the hearts, minds and commitment of the employees of the combined companies.
For sake of brevity, I’m going to over simplify the political system and voting/voter emotions and complexities. The idea is to highlight the parallels and potential learnings from what is happening this week and the implications for M&A leadership from Day One through “integration” and “unification” of the two (or more) organizations. I believe, and am hopeful, that most Americans don’t prefer or desire division, conflict or impasse in our communities, and similarly business leaders and employees don’t seek to create an “US”/”THEM” culture in their workplace. Although a parallel, it is important to acknowledge that voting emotions (especially in our Covid 2020 environment) are exceptionally charged, and less pronounced and dramatic in M&A scenarios.
Let’s consider a merger of peers, the masses of the two organizations do not get to individually vote on a merger, and hence do not feel a sense of control, influence or commitment to even the most logical of business merger. In these US elections, consider the dramatic differences in the views of the two parties, and the significant uphill battle the elected President will face capturing and gaining the confidence and support from the “other” half of Americans to move forward after Day One. The winning candidate, or the acquiring (buyer) firm, will typically lead based on their core business strategy and cultural values, as will an elected party lead on their political ideals. The challenge in both scenarios is to create better outcomes for the majority of the respective communities/organizations.
Let me note my important distinction between Transformation and Change. In the case of elections, a new President would be a change. It will empower that leader to set a new agenda, establish a new cabinet, shift budgets and reallocate funds, and set policy – that is the change. The transformation in this case is the unification across parties, gaining the confidence and willingness of others to be supportive of a new direction, get voting across the isles in support of new policies and direction. Transformation leadership is absolutely essential and the single most important and difficult role of a President, whether sitting or elected. On a different scale, this needs to be the mindset and mission of M&A executives as they pursue building a stronger unified integrated company.
This is the challenge for the merging of peer corporations, frankly the challenge with any sized acquisition, the psychology is the same. The first step for the leaders of the merging firms, and in particular the executive(s) of the acquiring firm, is to understand and appreciate the unique differences and similarities of the respective companies, their history and journey, the values and culture, and their ultimate perspectives, concerns, fears and hopes for the merger. Yes, a lot will be changed in the integration – new business models, leadership, structure/roles, IT systems, HR policies and practices, etc. The hard work for leadership is defining and leading the transformation. The transformation mission will be to capture the hearts, minds and commitment of the masses, who will be saying, “I didn’t get asked to vote on this merger”, “I didn’t sign up for this”, “they don’t get how different we are”, “that’s not how we do things here”…
70-90% of M&A deals do not achieve their on-paper deal value, 60% of deals end up eroding TSR (Total Shareholder Return), 90% of organizations, post-merger, say they would have substantially benefited from greater cultural understanding prior to merger. Too much focus on driving the integration changes, providing lip service to employees, and discounting culture and individual perspectives of the respective leaders and employees is what will result in divided populations, quiet opposition and unproductive stealth coalitions…actively resisting becoming part of the new “union”, the new combined company.
The leadership of the USA comes with high stakes, in one of the most pronounced “us/them” environments I can remember in my lifetime. Transformational leadership will differentiate this country, IF there is a focus on transformational leadership toward unification. Our constitution was not intended to create “haves” and “have nots” base on parties, as acquisition deals don’t intend to create “us” versus “them” behaviors between buyers/sellers; but human values are deeply rooted, employee’s identity and pride strongly connected to their legacy employer, and corporate cultures deeply entrenched. This condition requires transformation leaders in parallel and in conjunction with the organizational integration changes.
Join me in this discussion about achieving transformational change in the M&A integration process. What are you doing to drive whole system change, gain the commitment and confidence of the members, achieve the full value of the deal, create a genuinely stronger combined new company? What have you seen as key success factors and what have you experienced as common derailleurs? Let’s get the conversation going, let’s defeat the 70-90% failure rates!