Inarticulate ramblings of a management consultant

the day to day experiences of a consultant operating in weird and wonderful client situations

How M&A destroys value – it’s all about the small things!

I’m working on a couple of transactions at the moment around the region and one of them in Indonesia led to a moment of insight which I wanted to share. As consultants, we are frequently accused of looking for the big impact change…the magic bullet which will dramatically transform the project / or open the stakeholders eyes to a new way of doing things.

In the mergers and acquisitions area though, I’m convinced that the destruction of value comes through lots of little things…death by a thousand cuts if you like. Let me give you some examples.

Internal

A reduction of productivity caused by the uncertainty of a deal for the employees of an acquired business. This materialises in the following potential ways:

  • The call to a client around a service issue takes place 48 hours after the incident as opposed to the normal 24 hour expectation
  • An important innovation initiative is delayed because two of the key attendees at a steer Co don’t turn up
  • A middle manager decides to delay going ahead with a disciplinary process for a non-performer
  • Someone in the IT function leaves. He’s not very senior but was instrumental in customising in a bit of software which everyone uses
  • A regular communication put out by the CEO is inexplicably delayed / doesn’t happen for a week or two. She doesn’t necessarily realise the value of it but it’s the one thing that everyone reads and trusts.
  • The same CEO is in closed door meetings for large parts of the week with no easy explanation around context

External

A number of things conspire to lead to a loss of a old, established and very loyal client:

  • In the excitement and pressure of the diligence process, a senior stakeholder has forgotten about the regular renewal of a contract until quite late in the response timeframe
  • At the same time, an aggressive competitor is making a serious effort around price, service offering, etc
  • A question is raised around service quality…an issue which should have been dealt with in 24 hours, has not been completed
  • The usual ‘love’ and attention from the CEO has been lacking in the distraction of the deal

And so a client who was part of the history of the acquired business makes a decision which is totally unexpected and catastrophic, not from the perspective of the financials but from the perspective of the message. The impact on the confidence of the workforce is considerable and because of the distraction of the CEO, this impact is left unchecked. Bear in mind that the nature of this particular client will not impact on any warranty, the relationship is not big enough for that, but the psychological impact is considerable.

I’d be interested in any experiences that relate to this…would like to hear from you.

Categories: Complex transformation, Consulting, Mergers & acquisitions, psychology, Selling, Transformation

Tags: , , , , , , ,

2 replies

  1. Ben, very well articulated in spades. Been there.

    Like

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