According to Harvard Business Review, 70-90% of mergers and acquisitions fail, whether a complete failure or substantially falling short of financial and performance goals; short-falls that can easily cost hundreds of thousands, millions, or billions of dollars.

The Challenges of M&A

Working an M&A deal can be a resource-consuming, exhausting, and strategically critical event, so the project team (typically key leadership, plus an M&A consultant) is heavily focused on it:  identifying a target company, evaluating the pros and cons of a combined organization, determining company valuations, shoring up financial backing, etc., on top of continuing to lead their organizations through the normal course of business.  Therefore, it is often easy to convince themselves that they can trust their combined “talented staffs” to subsequently integrate the two company cultures and procedures naturally over time.

Unfortunately, shortly after the champagne glasses have been cleared, leadership starts to see the need to redirect/fire-fight integration efforts.  However, entering the game this late means opportunities have been missed and decisions made that hurt short- and long-term competitiveness, so leaders are always be playing catch up.

• Many actions should have been completed before the ink dried on the agreement.  Some should have even been included during due diligence (e.g., identifying major differences in the corporate cultures and developing plans to bridge them).
• Strategic employee communication should have been factored throughout the M&A process, including the very early stages.  As soon as word gets out about M&A discussions, the rumors start; as C. Northcote Parkinson noted, “The void created by the failure to communicate is soon filled with poison, drivel and misrepresentation.”
  • The M&A progression disrupts employees more than many realize:  impacting their focus and morale, therefore productivity and customer service.  Employees have come to expect that jobs will be cut following an M&A, so (among other distracting mental exercises) they continually try to determine who will be deemed “redundant.”  When their own future looks questionable, or they start to doubt the priorities and/or viability of the combined organization, employees look for employment elsewhere – and your best employees will find new jobs quickest…right when you need your strongest team to work through the transition.  The longer the M&A process takes, the longer the uncertainty persists, and the more time they have to dwell, and act, on their concerns.
• “Natural” integration typically takes one of two forms (imagine the two companies’ sales, marketing, accounting, etc. departments coming together):
  • Both adopt the polices and procedures of the larger department (or larger personality), regardless of the merits/nuances of the other’s processes, or the distinctive needs of the combined organization.
  • Each continue using their respective routines, occasionally adopting a practice of the other, as convenient.  Integration takes years, if ever, to complete.

Operational Integration Duration 

Many executives believe a year or more after the deal is appropriate, though most organizations cannot afford to operate that long at that level of disruption and inefficiency.  Rather, the speed of business necessitates 5 to 6 months, with the lion’s share completed within the first 3 months (i.e., those tasks that most quickly stabilize and best position the company to meet its strategic objectives).  Some might then argue, “that would require too much of my people’s time be dedicated to integration; I have a business to run so they need to be focused on their jobs.”  Absolutely!  The company’s employees should be focused on doing their jobs; but as noted earlier, they are not focused as long as the M&A process hangs over their heads.

Unique Requirement

But even more, integration leadership and the supporting activities are not business as usual; a professional integration consultant, like Visionary Growth Advisors, leads the transition strategy, so company leaders and employees can devote more of their time to day-to-day business.  Visionary Growth Advisors guides leaders and staff efficiently through integration decisions, following a customized, comprehensive strategy and outcome measures to meet the newly-combined company’s needs, while keeping the transition on schedule.  Timely, logical progress, coupled with frequent communication, reduces employee anxiety and builds trust in the new organization.

What Operational Integration is Not

Operational integration is not a panacea; a great integration strategy cannot fix a bad deal (e.g., 2005 Sears/Kmart merger).  Additionally, it cannot make up for under-resourcing, poor business decisions, disengaged or weak executive leadership/middle management, etc.

But operational integration does significantly increase the odds of success; the best M&A deal can still fail, or greatly underperform (“70-90% of mergers and acquisitions fail”), but a professionally-led operational integration strategy, applied throughout the entire M&A process, takes success out of the hands of hope and luck. *

* Not starting professionally-guided integration at the beginning of the M&A process reduces the odds of fully realizing M&A goals; however, introducing it mid-stream is still far better than directing the transition through reactive/crisis-driven management.