M&A Integration:
Why People Are The Biggest Failure Reason!

When you join a new company, you quickly build new relations with your new close colleagues. Similarly, but a bit slower… you build relations with other more distant colleagues in the company. Until one day, you hit the maximum number of relations. (See Dunbar’s Number for inspiration).

At that point, you do not build relations anymore. You have reached the saturation point!

Relations are sticky!

To get a new relation e.g. to a new colleague you then have to replace relations. But relations are sticky! Most people like to be around the ones they know, so replacing relations is not an activity most people engage actively in.

The Acquisition Takes Place

Now enter an outsider acquiring your company.

In the perfect world, this is where you again start to build…

Build new relations with your new colleagues. Both close and distant colleagues. So the intended value creation from the merger can be realized.

But here is the breaking news to most Executives involved in M&A.

Breaking News: It Does Not Happen!

It does not happen. People are the biggest barrier when you after a merger are to move from two to one.

Why is that? It is because people tribe with their trusted colleagues against the “evil” outside force… It is an ‘us’ versus ‘them’ mentality!

People Tribe Against the “Evil” Outside Force

Stories start to flow at the water cooler. About those “on the other side” in the acquiring company, and what they might consider doing to you and your colleagues. People try to make sense of what is going on by sharing news, insights, perceptions, and fear. In absence of information, they even invent stories that after a while become the truth. Above all they seek out the peers they trust the most. What do they believe?

While this is taking place the group connectivity and coherence goes up. What previously might have been a disconnected group of people becomes a tribe! The opposite of what is really needed to ensure value creation. In fact, most companies act the most tribal, as of right after they have been acquired. We see that again and again in our diagnostics.

It is the hidden people factor that keeps mergers from becoming successful.

What Can You Do To Change This Dynamic?

The solution is to get accelerated access to the water cooler conversations, so you can start to engage in the stories being told.

You should also make sure you understand the collaborative structures in both the companies being merged and then discipline it. You need to be able to tell, who should collaborate, about what, when, and why! (See here “Nobody Told Me Who I Were to Connect to“)

Communications is the Secret Sauce

Relations are not easily replaced during a merger, so you have to be extremely precise in your communication. In fact, communication is the secret sauce here. (Secret! Most people think it is about getting the leaders to collaborate. It is not! Value creation happens, when you connect the right people outside the leadership team).

Lastly, you need to make sure you track the relations between the two companies. Are relations being replaced? – or are the legacy companies still acting tribal?



ORIGINALLY POSTED ON LINKEDIN: https://www.linkedin.com/pulse/ma-integration-why-people-biggest-failure-reason-hansgaard/

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