Jill Sweatman
Cultural Due Diligence Part One – The Secret To Success
For a truly successful merger to take place, each company must first devolve in order to evolve.
The problem:
Four out of every five mergers and acquisitions (M&As) fail to achieve their financial or strategic objectives.
The Solution:
Commit to ‘get it right’, the first time. And that means the people, not just the numbers.
The Facts
Global merger and acquisitions have already hit $US1 trillion this year, according to Citigroup, and in Australia mergers and acquisitions have resumed in a big way for the first time since 2011. Lynch 2014.
Final figures released by financial markets tracker Dealogic show the value of Australian M&A in 2013 came in at $101.1 billion, up 16 per cent from the year before. Johnson 2014.
Australia was the world’s 11th biggest market for merger and acquisition transactions in 1999. That was a total of A$56.6 billion deals.
While 80 per cent of M&As fail to deliver their objectives, M&A activity continues to increase.
The Question
Can we afford to keep failing?
Can we afford to keep risking? Risk is not just the exceptional dollar value cost, but the high cost of playing with the lives of our employees, the folks that will make it all work.
Smart companies acknowledge the critical need to engage a Cultural Due Diligence expert. They see that as an imperative.
The People Are Paramount
Managing change during M&As involves the same principles that apply during any change activity. It is the people that are paramount to any change process. The social capital, as well as the financial capital, will determine true success.
To be truly victorious, each company must devolve in order to evolve.
This may not be as unpalatable as it may first seem.
If we recognise that we can take some of the best elements of each party, modify those and develop them to a mastery level, we potentially have the very best solution.
Each company has a responsibility to set aside ego and devolve enough to be able to see and adopt the best of the new venture.
If we clutch onto what we know, cling to how we have always done it, forget success.
If you consider the notion that a culture change will happen six months down the track when everything is settled – forget success. In fact, erase the word from the vocabulary of the organisation.
Culture change begins long before the ink is dry.
A blending and merging of talent and business success must be designed, acknowledged and implemented in the very early stages. This will help to minimise anxiety, conflict, inefficiencies and loss of public perception.
Remember, that a personal commitment to support change is a voluntary act that management can and must inspire, not command.
Change takes time.
Successful change takes a little longer.
Effecting Successful Change
Let’s get serious about the ‘how’ for a moment. Here are some ground rules:
- The ‘Party Room’ must be completely in order. Strong and confident, ready to lead the change challenge. The senior management team must be well briefed and armed with practical strategies, insight and a deep understanding of what to expect and how to deal with the pain and the ecstasy. There will be both.
- An Internal Communication Strategy must be choreographed with the same level of detail as the public relations campaign to investors and the media. Your people must be fed and have access to information at all times. We must establish and maintain open dialogue with the Board and all Directors so that decisions can be made with full knowledge of what is occurring at the finger tip levels of the business.
- A Risk Minimisation Strategy will identify the challenges and tough decisions that must be addressed in order for the venture to move with the necessary pace.
This developing new culture can now have a chance to:
- Manifest in substantial bottom line outcomes for all stakeholders.
- Be unified and integrated in purpose and direction.
- Emanate quality, professionalism and service excellence commensurate with the various market positions.
- Be upheld (and indeed modelled), by every individual in each decision they make.
- Have a set of values that is lived by, not merely lived with, every person within the organisation.
Companies embarking upon a restructure must seek the creation of a strong, enduring and far reaching organisational culture.
A cultural change specialist can be your greatest ally.
Feel free to call me directly for a discussion.
References.
Lynch, J 2014, ‘Mergers and Acquisitions on the Rise’, Sydney Morning Herald, 7 June
Written by Jill Sweatman
+61 (0)411 11 55 99
