80% of corporate acquisitions fail: How can you beat the odds?

When a firm decides to undergo a merger or an acquisition it may seem black and white – you project the financials, preach the synergies, develop a build down schedule and share the vision for the future. However, in reality when it comes to mergers and acquisitions, there is much more grey area than one may think. In fact, it is estimated that roughly 80% of all mergers and acquisitions fail (https://hbr.org/2011/03/the-big-idea-the-new-ma-playbook). This is not due to poor financial projections or legal implications, rather it usually comes down to one single factor: people. 

In most situations, organizations do a great job of figuring out the “obvious” risks of mergers, but do a poor job of calculating the “hidden” risks associated with the change. A merger or acquisition is like a marriage; you cannot force two people together and assume it will work. When acquisitions work, they are like a great marriage maintaining the best of both worlds. A successful integration is almost tangible and can be felt in the environment. Walking through the Facebook offices only to see all the employees taking selfies in Jessie the Instagram car, or Equinox employees never missing a SoulCycle class and wearing their “Soul Gear” around town are examples of how two cultures can successfully mesh together. These integrations of culture are key – they are where the value is captured or the transaction dies a slow expensive death. 

Cultural integration is not easy, but a disciplined approach will pave the way. Here is a seven-point checklist to successfully integrate cultures: 

 

1. Take your time

* Understanding another culture takes time, make sure you fully understand the company: their client base, their management, their systems, and their people before committing to the M&A. Always review their employee survey results. 

2. Never assume the acquired company staff is happy about joining your team

·* No matter what they tell you, they are nervous and most people don’t like change. Instead of assuming you are doing them a favor, be curious and start a dialogue to encourage openness. For example “Ask what they are looking forward to with the new organization and what they are concerned about”. 

3. Create a “burning platform”/sense of urgency

* Psychologist Connie Gersick argues that there are two things that need to happen for change to occur in an organization – a sense of urgency, or a “burning platform” as she calls it, and a clear vision for the future. The more people the better. The more people you can get on the bus, the better. Research finds that a lack of “emotional buy-in” is often a big reason M&A’s fail, so make sure you get people committed to the change and start that process as soon as possible! People are naturally change averse, so start building a team of people who are willing to get on board as soon as the change is confirmed. 

4. Mesh the cultures

* When Carol Vallone bought WebCT, her venture-backed U.S. Company was acquiring a Canadian nonprofit. The cultures were oppositional, and the geographies (Boston and Vancouver) didn't help. So Vallone highlighted it, scheduling hockey games between the two sites. What could have derailed the two businesses was used instead to fuse them with together. (http://www.inc.com/margaret-heffernan/why-your-merger-failed.html 

5. Don’t let the larger company’s culture force itself on the smaller company

· Regardless of the size difference between the two organizations, cultural integration must be handled like a partnership keeping the best, or at least a little, from both sides. 

6. Prepare to lose talent

* Be ready to accept not everyone is going to like the change or agree with it, so be prepared for people to leave. Losing talent is never easy, but being adaptable is key. Always have a plan B for management positions, and focus on trying to foster the success of the people who DO stay (and are committed to the change), rather than the people who leave. Identify the individuals you want to stay and make sure they feel part of the future vision, do what it takes to keep them. 

7. Continuously check in with staff

·* Listen to the team. Do not assume once the integration is complete that your work is done. It is vital to make sure your staff is adjusting well to the change and that any questions or concerns are addressed immediately. 

Following this road map, being curious and listening well is the key to M&A value capture and beating the 20% success rate.