In a recent workshop we had the managers from two very different companies, from different continents and language areas, spending two days together to work on common identity and future vision, as have become part of one company with ambitious plans for the future.
Worldwide merger and acquisition (M&A) activity is constantly increasing. In 2015 it had a total value of more than 4.5 trillion USD with over 44.000 transactions. According to collated research the failure rate for M&As sits between 70 percent and 90 percent.
Robert Sher, author and CEO advisor specialised in M&As suggests five core reasons why M&A deals fail. According to him, CEOs considering a deal need to have honest answers to following questions:
Do you have sufficient management capacity to take on the integration process, or are you already stretching to run your business?
Have you thoroughly assessed the culture of your target acquisition, and is it compatible with your company’s culture?
Is the deal in line with your corporate strategy?
Is the deal priced so that you can afford to pour adequate resource into the integration – and still have a return on investment that passes the hurdle rate?
Is the acquisition, along with all the costs and risks associated with it, a better choice than all other alternatives?
Sher claims that if the situation looks weak in ANY of these five areas, the integration will likely fail.
We support companies that are planning or implementing a merger or acquisition in the culture assessment and culture integration.
J. Keith Dunbar did an extensive research on 94 mergers over a period of five years. One of the conclusions of his study is that the senior leadership capability in the acquiring firm, together with the middle management leadership in the target company, have the greatest effect on success. My own experience is aligned with this finding. M&As are major change events for both the acquiring and the target organizations. In order to succeed they require strong and visionary leadership from the acquiring company. At the same time in the target company the middle managers have a strong impact on the employees both on emotional and practical level. If they succeed in showing direction and transmitting positive attitude, the others are much more likely follow.