March 24, 2023
Like never before, 2021 saw record-breaking levels of mergers and acquisitions (M&A) activity globally, a trend that continued into 2022 until a challenging macroeconomic landscape resulted in a sharp decline in activity. This was mainly because businesses waited to see what the coming months would bring. Whilst experts believe that M&A activity won’t return to levels seen in 2021, they do expect an increase as markets adapt, recover, and look for ways to increase profit. And that has major consequences for company culture, which is so important to get right in the mergers and acquisition process.
Mergers and acquisitions are a key growth strategy for many organisations: entering new marketplaces, acquiring new technologies, leveraging scale and size; but are known to be complex and challenging. With the focus often on the economic and operational aspects of these deals, there are other challenges that are central to whether a deal succeeds or not; this could range from culture and leadership to your people and communications. In my experience, these are often an afterthought, and yet there are some simple steps business leaders can take to navigate them.
Company culture is a concept that is notoriously difficult to define but is unquestionably felt by everyone in the organisation. Crucially, it’s unique to every business. By their nature, mergers and acquisitions will challenge and impact the existing companies’ culture, be that positively or negatively. When two organisations are brought together it is doubtful the two cultures will remain exactly the same.
Of course, M&As vary in their impact on a business, with some seeing significant cultural shifts while others only noticing moderate changes. While smaller changes might be seen as inconsequential by leadership teams who are focused on number and profits, these “inconsequential” changes can build up and have the biggest impact on employee experience. If unaddressed, employees can be left feeling disgruntled and less likely to engage.
When working with merging companies, we encourage them to identify the similarities and differences in their cultures. The next step is to understand the kind of company culture they want, and then working with both parties to integrate the best elements of their culture to create something new.
If leaders ignore this, then it’s likely the company culture will evolve on its own over time and the dominant culture will assimilate or reject members from the other culture, creating a lack of engagement, poor productivity, and at its worst a toxic working environment impacting business performance.
As you would expect, leadership is fundamental to the success of any integration, but the role of leaders can often be subsumed into the culture conversation. However, it is of equal importance.
Leaders need to make decisions in a high-pressured environment, and while there is a need for technical skills, the ‘softer’ leadership skills are just as important, if not more so. The leaders that I’ve seen excel in these situations have the ability to lead change, communicate effectively, foster team-work, and role-model the right behaviours.
An area of real focus for me is the role of line managers in the workplace. Successful companies focus more of their energies on engaging with line managers, and this is also true during mergers and acquisitions. Line managers or ‘middle managers’ are not typically involved in the discussions around integration, but it’s actually important they are included in these discussions. Bringing these teams together from both the target company and the acquired company to build direction, alignment, and commitment is one of the most effective things you can do.
Taking your people on the journey
Anyone who has endured an M&A knows how stressful it can be for everyone and that employees are not forgotten about or left behind. Your people are central to the success of an M&A but they often have significant concerns – confusion and frustration, lack of confidence in management, fear of the unknown, and lack of support – that are overlooked.
It’s important to take your people with you on your M&A journey by engaging and empowering them, listening to them, and communicating regularly.
Giving employees active roles in the integration is an effective way of engaging and empowering them whether that be as change champions, employee advocates, co-creating the integrated culture, or asking them to come up with solutions to logistical challenges.
Most importantly, leaders need to listen to and understand their employees’ thoughts and concerns, as well as provide opportunities for regular feedback. When companies neglect to listen to their employees’ views and address their concerns, there can be a drop in productivity: some employees may become less engaged, most will be resistant to the changes being made, and some may even leave.
It’s also important to provide opportunities within the newly integrated teams for people to get to know each other and create new social and emotional bonds.
Communication also becomes even more important, and a lack of effective dialogue has the potential to threaten the entire endeavour. While this might seem obvious in hindsight, good communication strategies are rarely considered as critical to the success of the deal. The reality, however, is that transparent communications can create a smooth transition and are vital to avoid misinformation, business disruption, confusion, and insecurity.
All too often, I see organisations hiding behind the “confidentiality” of the merger or acquisition, but its normal for employees to have concerns and questions about what the future holds for them. Additionally, frequent, consistent, honest, and transparent communications are essential to control rumours, retain talent, and boost employee morale.
Where I’ve seen this done well, leaders have clearly communicated the reasons for the merger or acquisition, shared their vision for the company, have been open about any resulting changes, and provided regular updates along the way.
Business leaders already know this — it’s not over when the deal closes, it is just the beginning.