Saturday, March 19, 2011

The Five Facets of Merger and Acquisition (M&A) Management

Throughout our work, organizational psychologist Philip Mirvis and I address combination management from five distinct but overlapping perspectives:
            Strategy.  M&A is not a strategy.  It is a means for a company to achieve its strategy.  The second edition of our book “Joining Forces:  Making One Plus One Equal Three in Mergers, Acquisitions and Alliances” is not a primer on strategy; rather it examines how companies can best translate their growth strategies into the search for and selection of a combination target or partner.  We also show, based on some hard earned experience, how different strategies dictate different degrees and types of integration. 
            Organization.  Are you buying a product brand or a business?  Our book presents a hands-on case study showing how Unilever had problems trying to preserve the power of the Ben & Jerry’s brand following its heavy-handed integration of the acquired ice cream maker’s factories—a situation since improved as the two sides learned to work together.  By comparison, P&G expanded its male customer base with its well-designed integration of Gillette.  In the new volume, we build on our prior writings to show how to integrate businesses functions by function to capitalize on synergies without destroying the vital “organizational ability” of a partner. 
            People.  To paraphrase Gerry Levin, former CEO of Time Warner, there are a lot of psychological things going on in M&A.  As organizational psychologists, we’ve written about them crystallizing in the Merger Syndrome.  We’re updating that material in our new edition with the latest research on which emotional reactions are more prominent at different stages of a combination and what interventions are best suited to address them.  On the practice end, some interesting methods are being used to help people to surface and talk about the psychological aspects of M&A. 
One of us worked with a client that made innovative use of “toys” to surface feelings about culture in the merger of two large Midwestern firms.  In one exercise, employees from each of two merging companies were asked to choose from a variety of toys and objects the ones that represented their feelings about the combination.  One employee chose the “etch-a-sketch” to represent the future because “everything is a blank screen.”  Other items selected—a menacing pirate, a prowling lion, and a scrambled egg—evoked more harrowing images.     
            Culture.  In prior writings, we have identified the sources and symptoms of culture clash in M&A.  In our latest book, we pay special attention to the clash of multiple cultures in a combination—across companies and nations.  The scale of cross-border M&A continues to grow and the contours are changing:  Chinese companies, for instance, now spend far more on cross-border acquisitions than foreign investors spend acquiring companies in China.  How about doing a deal in Eastern Europe? “Slovenes do not appreciate the ‘American’ style,” reports our colleague Lidija Drobe┼ż, an M&A consultant based in Ljubljana.  When asked whether it was Americanism that bothered her countrymen, she said not at all, “We love Americans.  It is your aggressiveness in running our businesses that is the problem.”  Her studies indicate that the real aggravation for Slovenian acquirees is that the parent company executives rush in, change things, then move on and their replacements repeat the process. 
            Transition Management.  In this updated and revised volume, we focus on best practices to accelerate and improve transition management.  Studies find that the interval between the announcement and closing of deals has fallen dramatically, from roughly 130 days a decade ago to 60 days in the past year.  Why?  The internet and new software technology has led to the formation of “clean teams” that can consolidate information from two companies and prepare combined balance sheets and unit by unit comparisons for use in precombination planning.  FedEx’s acquisition of Kinkos highlights how you can speed up the combination period in a friendly deal with the right structure and processes. All 1,200 Kinkos stores were rebranded within four months of the close.  Employees involved in the combination, over 18,000, went through roughly forty hours of training on combined products, processes, systems, and corporate culture—some 700,000 hours in toto.
            At the same time, some innovative methods to “slow down” the acculturation process were pioneered by Tex Gunning, who led the combination of Unilever and BestFoods in Asia.  Executives from thirteen Asian countries were molded into a leadership community and embarked on journeys across the region to get “first hand” knowledge of their markets and their own cultural diversity.  The result was a transformation of their business that helped to reshape the parent company’s operating philosophy and product lines.
* * * * * * *
While no one knows when the impact of the global economic crisis will subside, one thing is clear:  once business and credit markets rebound, there will be a huge wave of M&A.  Some executives will make smart moves to fill product or service gaps, enter new markets or participate in industry transformations.  Others will be less strategic and more opportunistic as they go on a shopping spree for targets at bargain basement prices.  Joining Forces:  Making One Plus One Equal Three in Mergers, Acquisitions and Alliances” aims to help those who want to create lasting value with M&A.

2 comments:

  1. i’ve never heard of something like that before, thank you for sharing this information with us.

    Investment Banker

    ReplyDelete
  2. Merger and acquisition business offers are important to increase company amounts and advance. There are professionals who act as agents and professionals. They assist in providing about a sleek and stress-free deal. It is affordable to search for support of combination and purchase professionals, when thinking of a combination, planning new products, or selling company.

    Merger and Acquisition

    ReplyDelete