4 deadly mistakes to avoid before undertaking a Merger

The prospect of increasing profitability and market share by acquisition or merger is something that has been driving our economy for years. And although they are becoming the norm, each individual merger or acquisition is anything but straight-forward – regardless of how many times you’ve been through the process.   

The human aspects of an organisational merger impacts so much more than your bottom line. With clear knock-on effects on the welfare of your workforce and company morale, it’s critical that you think through the process and how that affects your entire organisation ecosystem.

We have listed 4 critical mistakes to avoid when undertaking a Merger.

 

  1. Thinking that All Mergers are Equal – and that some are more equal than others.

Thinking that previous merger-experience gives you the upper-hand, is probably one of the single-most common mistakes business leaders make.  Yes, the cogs may be the same, and the motion may have distinct similarities, but falling prey to the assumption that all effect and result will be similar risks unnecessary complications and more so, the very result of a successful merger process. Where experience may add value, research has shown that a company is more than likely to do worse on its second acquisition than its first. Sydney Finkelstein, a Professor of Management and Faculty Director at the Tuck Centre for Leadership, puts it down to our innate tendency to over-generalise from small sample sizes – meaning, that if we’ve done it once and it went well, we assume we know how to do it again.

 

  1. A lack of succession planning

All too often, problems start long before the deal has even hit the table. Very often, business leaders find it difficult to step away from the business and unbiasedly think about 2 critical things:

  1. What do I want to achieve?
  2. What will happen after I retire?

The answer to these is a succession plan. As an organisation, you may be worried about what happens next, and more importantly, what happens to your business and your team after a big organisational move like a merger or an acquisition. Succession planning enables your business to clearly align your talent management strategy to your core 3-year and 5-year plan. This is not something that is left to the HR team to sort out, but should always be supported heavily by the senior leadership of your business in order to establish clarity, and calmness, in the midst of big change.

 

  1. Letting your Ego get in the way of Progress

We know that to any business leader, especially if they are founders of an organisation, their business is personal. And as much as they protest, the reality is that so often many a business decision is driven by the heart, as opposed to the head. So, when two companies merge, the battle of wills becomes the underlying modus operandi which risks complicating what could have been a smooth transitional process.  Added to this is that, in the case of acquisition and negotiation, in high-profile cases, business leaders are under scrutiny by the media – and we’ve seen it before where business negotiations become deadlocked purely due to negotiating parties refusing to appear that they’re backing down.  The results of unnecessary gridlock means soaring legal costs, shareholder dissention and frustration, unnecessary employee stress. Added to that, the focus of what should be a successful transition becomes aligned to the individuals, and not on reaching a mutual agreement.

 

  1. The Great Overshare

Beware of the rumour mill. When undergoing any huge organisational change, especially a merger or acquisition, developing trust becomes the most critical part of ensuring a smooth transition. And when the merger or acquisition starts to gain momentum, especially with the spotlight from the media and business commentary community, inadvertently sharing confidential information is more than enough to set tongues and idle minds, wagging. This may be something as simple as hinting at a successful deal that’s about to be agreed, before the ink has dried. Any inadvertent information sharing risks breaking down trust of shareholders and negotiating parties – prolonging the entire process even more until mutual agreement has been reached.

 

We have been involved in Mergers and Acquisitions for many years, and we know that no two are the same. We understand the importance of detail and finding resolutions that deliver opportunity and successful conclusion. If you’re looking for business support in the face of huge change, then give us a call today.

 

 

 

 

2017-10-16T12:37:35+00:00 October 16th, 2017|News|Comments Off on 4 deadly mistakes to avoid before undertaking a Merger