M&A success is all about talent


A successful merger is all about cost savings, right? Wrong. The most important thing is making sure that the valuable talent from both companies doesn't simply march out the door.

Managers behind the most successful mergers and acquisitions spend as much time addressing "people" issues such as integrating cultures, managing talent, sharing knowledge and retaining key people as they do on cost savings, merging processes, technologies and divisions.

Yet a study of more than 300 executives from North America, Europe and Asia-Pacific by consultancy The Forum Corporation found two thirds of those involved in leading change felt that they had been insufficiently prepared for these tasks by senior management.

The study echoes research by the Conference Board earlier this month that suggested too few management teams spend the time to learn what works and what doesn't when it comes to integrating new businesses, with the result that too many M&As fail to deliver their promised value.

And it closely mimics a European poll published in March by consultancy Hay Group which suggested that more than nine out of 10 corporate mergers and acquisitions fall short of their objectives because business leaders too often got bogged down with finance and technology issues and fail to spend enough time integrating corporate cultures and management styles.

Senior management who had been involved in M&As identified talent retention as their biggest challenge in leading a successful merger or acquisition, followed by making the deal generate long term value, said The Forum Corporation.

Their third greatest challenge was quickly demonstrating to investors the value of the new company.

Top organisations were 54 per cent more likely or able to establish a climate in which employees felt "like owners" and were twice as likely to exercise responsibility by "engaging staff rather than relying on hierarchical power".

The best performers were also better at taking time to listen to and coach staff (half) and bridge differences in the two organisations' styles and values (more than eight out of 10).

Andrew Shapiro, executive consultant at The Forum Corporation (Europe), said: "The sticking point for less successful firms is their inability to create a culture and sense of continuity within the newly combined organisation.

"It is a tall order, which is why organic growth is so often the less glamorous, 'unsung hero' for organisations looking to achieve long-term growth. Isolated attempts to develop or enthuse staff fail to demonstrate the command of management, or create the necessary momentum for change within an organisation.

"This is crucial for growth, particularly for M&A when the challenges to existing cultures are so great," he added.

Less skilled firms in the art of M&A also focused on talent management but failed to create the fundamental climate of ownership that recognised the value of staff.

They were three times more likely to spend their time "managing conflicts" rather than exploring issues facing the newly formed business.

These less successful organisations also spent much greater time trying to communicate "success stories" (86 per cent), the research added.

Forum's research also identified the importance of individual department heads (or "business units") in executing growth projects such as M&A, strategic alliances, or leading organic growth.

More than three quarters of senior managers described the role of departmental heads as "highly responsible" in the process, yet nearly two thirds of those involved in leading change claim they have not been given enough preparation by their organisation's senior management.

Key problems identified by those involved included a lack of training, followed by a lack of management direction and support. By contrast, just four per cent desired greater decision-making authority.

"It is clear that organisations cannot bank on past achievements to translate into sure-fire successes the second time around, however able their staff. Leaders no longer require greater autonomy, but rather the guidance and support to continually succeed.

"Managing and developing talent will prove instrumental for organisations to retain their competitive position and deal with the twin challenges of leadership and growth," said Shapiro.