M&A, The Importance of Leadership
Mergers and acquisitions are increasingly popular strategies toward growth; however, 40% to 80% of mergers fail to meet objectives. M&A is complicated, and goes beyond simply “the process of buying a company.” At its heart it is a strategic selection of competencies that fill a void in a company’s offering, geography, technology, or industry area of focus. It’s wise to think about whether the time, money, and energy are ultimately going to pay off, literally and figuratively.
There are some critical things to consider before courting a merger or acquisition. Be a leader by asking the tougher questions internally rather than focusing your team on an outside “target”:
- Is there clarity around why a merger or acquisition is being considered? Will your organization reap strategic benefits or is this potential change only going to bring bonuses to the executives?
- Can your reorganization be better served by forming a strategic alliance instead? In this way, you get what you need without other non-strategic pieces that cloud merger and acquisition return on investment.
- Is there a licensing strategy that would work better than an acquisition strategy? Again, you can reach a beneficial goal without the expensive and time-consuming complications of a merger or acquisition.
- Are there other ways to access the marketplace, the capabilities, or the geography that you desire from the acquisition target?
After examining these questions, if the strategic decision points to a merger or acquisition, then strong leadership is critical. In the Deloitte report, The Leadership Premium, a survey of 400 stock market analysts ranked “senior leadership team effectiveness” as second only after “financial results” as the top criteria for judging company success. A detailed review of 94 different mergers revealed that leaders who oversaw a successful merger could:
- motivate others
- influence others
- build relationships
- develop others
- act with integrity
- show adaptability
- focus on customer needs
If acquiring leaders haven’t properly engaged with the target company before, during, and after an acquisition or merger, the likelihood of success declines. Confidence among employees of the acquiring and target companies can waiver throughout the acquisition process, and the same can happen during a merger. More than ever people will look to leadership for answers and guidance. Employees ask themselves: will I lose my job? Will I need to relocate? Will my position change? Will the workplace culture change? These answers will need to come, and for many employees, the earlier the better. A study found that “two of the top five most common reasons for M&A failure were down to management. These reasons were: poorly managed integration of people and culture (60%) and poorly managed integration of systems and processes (54%).”
From target identification to post-deal integration, leaders must become more involved with the steps necessary to make a merger or acquisition successful. Without such leaders, and their willingness to engage and guide, there could be no deal, or a very sour one.