I’ve always thought about transactions as being quite different complex transformations from the ‘business as usual’ activities. There’s been a train of thought for a number of years which looks to create separate governance, resources, processes and methodology in post-acquisition integration. This is based on the requirement for different skill sets and the potential for distraction from the ongoing business.
As we enter a period of increased M&A activity again, the serial acquirers are starting to emerge again for whom the method of delivering shareholder value is through successive acquisitions, rather than through organic growth.
But beyond this group, it seems that the challenges for many corporates in their BAU activities are not inherently different.
- Complex transformation is the challenge in the new regulatory regime where consistent processes across corporate silos are expected and audited.
- The globalisation and consequent agility required creates complexity in terms of decision making and corporate governance at central, regional, and local levels.
- The technology landscape is changing so rapidly that normal development cycles are no longer relevant.
What’s interesting in a couple of recent transactions is that whatever corporate weaknesses exist in a BAU frame of reference, are shown up in a very stark way in the deal environment.
It seems that the pressure of a transaction…
- compression of timelines
- complexity of decision making
- increased expectation of financial performance
- external visibility
…exposes weaknesses particularly around fast and effective decision making, clear leadership and personal accountability and the inadequate acceptance and reinforcement of autonomy which can be controlled or even disguised in the everyday activities of a business. These are core competencies that successful acquirers rely on, at the very heart of any transaction. The obvious consequence is that the possibilities of a successful transaction are drastically reduced.
If you go for a run with a stress fracture, the damage
you can do to yourself increases exponentially.
So, how to address this?
- Awareness: Reviewing the business area which is about to be integrated, using the above dimensions is a good start. Spend some time with middle management and new employees to understand the effectiveness of the leadership and competency more broadly around the organisation…and build up a picture of strengths and weaknesses.
- Dummy run: Where possible, expose the team responsible to a complex project of some nature…see how they manage scope, how they distribute decision making and accountability, who naturally falls into what role, how good a team they are.
- Preparation: Provide an opportunity for them to work out how they are going to run the integration, stress test the process and allow them to learn through trial and error. Give them lots of opportunity to get to know and trust each other.
More than anything else, if you can do the latter, you will have created an infrastructure
which has a chance of being successful.