Beginners Guide: What Can Go Wrong in a Merger or Acquisition?
What can go wrong in a merger or acquisition? Enough to be costly.
Did you know that mergers and acquisitions are vital to the growth of many businesses, yet roughly half of all M&As fail to create shareholder value? Integrating merging companies required an extreme amount of effort and coordination from the combined organizations.
About two years ago, my firm went through an acquisition, and let me tell you; it was quite the journey. As a marketing department of one, I was concerned about whether I would still have a job at the end of this acquisition. You always hear the marketing department is the first to go when situations like this arise. I will say, I learned quite a bit of what could go wrong. Here are a few best practices when going through something like this:
Best practices to avoid M&A pitfalls
Bring Your Marketing Department into the Fold Early On!
I had a feeling our firm was being acquired months before I was notified. You see, I had access to everybody’s calendars, and it didn’t take that much effort to put two and two together. I had this huge secret, and I couldn’t share or confide to any of my colleagues. I drove myself crazy, asking questions like: is my job safe? Who will be my new boss? Am I going to like this new firm? Are my colleagues, who have become my friends, going to be affected?
A few weeks before the announcement, there was quite a bit of chatter from the office. Partners were taking a lot of off-site meetings and being pretty secretive. We were all on edge. When the time came, management took us into the large conference room to make the announcement. There were a lot of confused and scared faces in the board room.
Following that meeting, I was called in to meet with the other firms Managing Partner (MP). I was told that I had a month to work with their marketing person and have a communications plan in place. She and I scrambled to get everything done and packaged as best as we could with such a limited time frame. How were we going to let our clients know we were being acquired? There were letterheads we had to think about, the messaging, the branding, speaking points for our staff to answer questions … the list went on and on.
Finalize Job Descriptions from the Very Beginning!
My firm had a strong business development culture, and the other firm didn’t. That caused a miscommunication breakdown between my departments. My partners had the same expectations as to what I should be working on, and my “new boss” did not.
What made it more challenging is the lack of guidance as to where I should be focused and where she was focused. We were constantly stepping on each other’s toes and duplicating work. Partners would ask both of us for the same project, and we’d later find out we’d delivered two different products. There was no clear direction as to what each of us should be working on.
I had a solid BD background, and she was more a behind-the-scenes marketer, working on digital and strategic strategies. It would have been wise to break out our roles to play on our strengths. It eventually happened months into the acquisition. At this point, there was a lot of resentment from our department. Within nine months, both marketing people left the firm, and they were left with no marketing department for six months.
Culture, Culture, Culture!
When the firm was notified about the acquisition, they assured us the transition would be smooth. They kept saying how similar our firms were. Our firms were in identical in size and close to each other (a few miles away), but we were worlds apart. Having a similar mission and vision, which on the surface can often appear very similar, doesn’t translate to a comparable culture.
Both firms focused on very different industries, but it went beyond that. In the ten months that I was there, we had two events where both offices had the opportunity to mingle with one another. Even so, it felt very much like us versus them. Our team building events or perks were also different. We’d find out their office had a fun event and vice versa.
The essence of culture is reflected in a company’s management practice, the day-to-day working norms of how it gets work done. If not adequately addressed, challenges in cultural integration can and often do lead to frustrated employees. It then leads to less productivity and key talent departing, unfortunately. It has a substantial impact on your firm.
Integration is Key!
Integrating was very challenging. Our firm was using different software as they were. We were told to use one component of their software and continue to use some of our software for the first year of integration.
Software was on different networks, so we were always going back and forth. There was minimal training in the beginning. Providing proven processes and tools to break down a complex activity into defined steps and deliverables to maximize efficiency would have been a step in the right direction.
The best course is to bring in the top level operations personnel on both sides of the transaction for planning the strategic and tactical choices necessary before the deal is complete. Ultimately, this critical due diligence piece will determine whether the integration of two firms will succeed or fail.
Even though you’ve identified what can go wrong in a merger or acquisition, they are never easy. There will always be growing pains during the process. It’s how you handle the process that makes all the difference.
AAM Minute: Beginners Guide – What can go wrong in a merger or acquisition?
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