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Table of Contents
The following research results were gained through CEO interviews representing over 1,100 M&A transactions. The results are in the form of suggestions from those CEOs as they unselfishly shared their experiences with M&A transactions. The participants understood that no direct reference to themselves, their organization, or a particular transaction would be mentioned in the results unless prior approval was received.
Since improving the post-deal performance of M&A transactions is the focus of MergerCoach’s business, we were particularly interested in the research results. Given the significant reduction in the number of M&A transactions, and to make sure we were closely aligned with our customers needs, I personally interviewed the CEOs in the research. The results of these exchanges were very informative and enlightening. These were real people with real opportunities and challenges taking action in an unforgiving market. The reasons for the transactions varied from a desire for greater market advantage to pure survival. Every one of these deals affected the employees, customers, suppliers and their families. Without exception, I got the sense that the CEOs genuinely cared about the welfare of these people and had a deep desire to do the right thing. It was not uncommon for them to say: “At the end of the day, it’s all about the people.”
The participants gave freely of their time and experiences to discuss the world of M&A transaction and to pass along lessons learned. I spoke with many of them as they were racing down the highway and/or chasing to the next critical meeting. In the spirit those CEO’s exhibited, our desire is to share this information more widely so that others can benefit from the latest thinking around post-deal actions.
Our promise is to continually build on this body of work. We will be updating this website regularly and will notify you when changes have occurred. If you would like to add to, comment on, or gain a better understanding of any of the following points, please contact me at:
Email: wcase@mergercoach.com
Direct: 972.964.3596
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General CEO Comments
Practical CEO suggestions in order of frequency (#1 is highest):
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Speed is your friend! Fast and safe attainment of the business (or M&A) objectives are the keys to success. Be sure you have a fully thought out business/exit plan and a good understanding of how to achieve it before you buy/sell. Justifying it later because of a “good deal” is dangerous and could be fatal.
Planning for speed is one thing and execution of the plan is another. The CEOs with many transactions under their belts indicated getting the deal done is a small, although tedious, part of the total transaction. Getting it to perform to the plan is the more difficult and longer term part of the proposition.
Our experience with implementing their M&A integration plans revealed that there are three critical, actions that when combined significantly enhance speed:
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Disciplined process – Choose a proven process, put someone in charge and stick to it. Be prepared for small adjustments along the way. Also, set aggressive deadlines and hit them or complete them early. For example, 90 days for integration and 6 months maximum for implementation. Celebrate the completion of each for firm closure.
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Proven tools – Choose the tools ahead of time. Don’t be creating or looking for new tools as you are trying to execute on the integration/implementation plans. Keep them simple and consistent (network based project management, common email, group conference calling provider…). Provide a briefing on the tools as teams are chartered.
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Predictability of people – Recognize and leverage that people will be affected by the changes, however minor, at different rates depending on experience and exposure level. This dynamic is very predictable and should drive timing, communications, training and special initiatives (sales promotions, relocations…). The benefits are speed, less confusion/cost and a kinder & gentler transition. People have long memories of a tough or “bad” M&A experience.
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Speed is almost certain if all of these are used together.
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| 2. |
The social and cultural issues will be the biggest enablers or challengers to business performance. Everyone needs a sense of community and the transaction integration planning processes often run counter to creating or sustaining that sense of community. Fractures in the community are why it gets so organizationally “noisy” and difficult to get everyone to buy-in. The noise is heard by the customer first and then suppliers.
You know you are being effected by social and cultural issues when it seems that everyone (employees, customers, suppliers…) want answers and they are very impatient or unsatisfied when they get them.
Experience has proven that there are three areas and associated rules that systematically address social and cultural issues:
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Communications - Communicate not only the "what and when" things are going to happen, but include "how" we will communicate with one another going forward. The rules for communications must be established both corporately and functionally because they could be different.
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Decision making - Establish rules within each function for how decisions are made and implemented. Often decision making and approval/organizational levels are confused. The steps required to make a decision should consider expenditure or budgetary plans, but not dictate how a decision is made. This is subtle at the surface, but is significant in practice. It also provides a high level of freedom to make decisions and take action while the organization is in flux.
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Political style - Map the interfaces between the overall political style of the organization and the key functions (sales, R&D, Operations). Issues appear political because of lack of clarity and newcomers don't understand the style of the changing political environment. The common outcomes are campaigning, defensiveness and polarization resulting in increasing costs and decreasing sales.
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Quickly fire them up to go kill it! Inspire the three key functional business units (Sales, R&D and Operations) to hit business objectives even before the integration is completed. Establishing a sense of community within these functional units will drive their performance against the business strategy to take hold immediately.
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Don’t take your eye off of the business (customers, quality, and margins) while structuring the deal and subsequently integrating it! The deal and follow-on activities can monopolize your time, causing all decisions to take longer and adding a high amount of risk to the existing business.
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Checklists, expert systems tools (best practices), project managed plans for pushing deals through to integration are handy! Every deal is different, so use them appropriately for your deal.
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You can always learn more! Use of an objective third party (attorneys, accountants, and consultants) can be a big help when value can be proven. Performance based guarantees tied to the deal success measures are best, but are often hard to find from big name suppliers.
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Be prepared for a certain amount of destruction. The tasks and activities required during integration and implementation involve a certain amount of destruction on both sides of the transaction in order to open the walls between them. The issue is how much of the wall should be opened up and how the resulting gap should be managed or rebuilt. It is somewhat like remodeling your kitchen; it’s often inconvenient, takes longer, and costs more than expected.
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High transaction volume CEO’s (5 or more per CEO) sub-group.
This group has performed many transactions on both the buying and selling side. Generally, the participants have had to live with problems from previous deals and have developed actions to improve predictability and performance in subsequent transactions. Their suggestions that follow tend to be counter-intuitive and require a higher level of organizational commitment, but produce richer results.
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Create a laboratory of learning within these three key functional areas (sales, R&D, and operations) to quickly understand and interpret the new business strategy. This provides a sense of early community that grows, is very engaging, and is highly contagious. This has an immediate savings impact on the retention budget.
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Implement a technology in the key functions where early performance is most desired that enables easy search and retrieval of knowledge from experts (on all sides of the transaction). This is a good opportunity to implement a knowledge management application and get the most value out of it. This tends to mitigate the IP blind spots often missed during due-diligence.
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