For as long as I’ve been working on mergers and acquisitions, the statistics have been dire. With some exceptions, commentators from the strategy houses to the big 4 to independent experts, have bemoaned the seeming inability of companies to consistently generate value from inorganic growth. I will leave the one piece of analysis which reports something different aside, see attached for some comments on that ‘interesting’ analysis! (https://bendehaldevang.com/2014/06/06/the-latest-ma-analysis-from-mckinsey-part-of-the-problem-or-part-of-the-solution/).
What’s extraordinary is that the reasons for this failure are almost as well-known as the fact that M&A destroys value. No CEO worth his / her salt would be surprised at the key reasons:
- Reduced productivity across the workforce and increased attrition from key employees
- Synergies not achieved, specifically revenue growth opportunities
- Costs of integration significantly greater than planned
- The distraction from business as usual leads to poorer performance in the unaffected business areas at the acquirer as well as the acquired business
- For customer centric businesses, a reduction in customer loyalty as a result of poorer customer experience
- Reduction in innovation (both incremental but particularly disruptive) leading to a reduced market offering with the obvious implications for future market share and share of wallet
- Transformation ‘constipation’ as the list of key projects becomes dominated by the integration, distracting project and programme management capacity from other critical areas.
- Management distraction as other matters are ignored in favour of the integration process.
So, what to do? How do we move away from this situation? How do we finally put an end to this poor track record?
You will no doubt argue that at the heart of failed M&A is a failed strategy / direction or implementation plan and you’d have a point. But I believe that there is potentially something more subtle which I’ve witnessed over the past 15 years of consulting in this arena.
That is ‘public perception’. Let me explain. For every positive story related to people in M&A, there are 10 negative ones…where the wrong person has been asked to leave, where the wrong decisions were made, where the active disengagement of the employee basis led to a sharp reduction in productivity, where incompetent leaders are exposed and competent / trustworthy and loyal employees are treated badly and leave. What’s more, as anyone who has had communication as part of his / her responsibility, those stories stay in people’s minds and become the unwritten, authentic truth behind deals.
I’m as guilty as the next consultant in the creation of this context. When I go and see clients, I delight in telling some of those stories, in talking in a rather high minded way about the ‘right to choose who you work for’ and the systematic removal of that choice without any consultation as a result of a deal. And so, we collectively create / or at least have a meaningful impact on the self-fulfilling prophecy of value destruction.
Let us therefore change the record. Let’s start to address the challenge not with the old classic response to a request for directions, “I wouldn’t start from here!” but rather with a positive attitude which focuses on the possible rather than the impossible, working with our clients and colleagues to bring innovation, personal engagement and a positive result. Deals are part of the corporate environment and King Canute is not a good role model.