Wed 22 May 2013
As we recover from the down turn in the economy, some of our customers that are in industry leading positions are discussing merging or acquiring companies in less strong positions. We know through our experience that when these happen, it would make sense that the strengths of each would add to the other, we know, and research shows that more often than not one plus one is less than two.According to Bain and Company, the three primary reasons that mergers and acquisitions continue to fail are:
- Missed targets. Many times this is because the targets are not clearly or are not at all defined. Others it is because of a less clear vision of reality and the difficulty of putting two together.
- Loss of key people. Many companies wait too long to put new organizational structures and leadership in place; in the meantime, talented executives leave for greener pastures.
- Poor performance in the base business The mergers often take up more time and energy than at first understood. This often leads to poor performance in the key business areas. Other times, competing ideas/managers undermine each other’s and the competitors take advantage.
Bain and company also list their top ten ways to improve the likelihood of success. These include:
- Resolve the power and people issues quickly-the longer they go on the longer they distract from the business of doing business.
- Start integration when you announce the deal-it always takes longer than you assume and people and culture get in the way.
- Win hearts and minds-it is in the end all about the people. You will never convince them with logic. Ultimately emotion will rule the day.
- Commit to one culture-this is very difficult when the cultures are
- opposites. The fact that the culture change will cause some to leave should be considered. In fact, those who cause disruption in this area should be invited to leave. It is that important.
From our perspective, these are all related in one way or another to the people and specifically the leadership in the organization. Leaders need to be clear, concise and decisive to make a merger successful.