In the past year we have witnessed the consolidation of many top legal firms, with Dentons, Irwin Mitchell and DWF rapidly expanding their global coverage. The theory behind any merger or acquisition is that by combining forces your business will be stronger and more successful than it could be alone. Nine Feet Tall have recently been involved in a number of projects relating to either a planned merger/acquisition, or dealing with the complexities of post-merger integration, so we know first-hand that whilst on paper it may make sense to merge, bringing two or more companies together is not always as easy as it seems.
Here are our top tips to merge your way to success:
Understand the type of deal
If you are buying an organisation with similar products and services, your main driver may be around creating a national or global footprint, the ability to qualify and pitch for larger contracts, achieving economies of scale and stripping out back office costs. Whereas a merger consisting of complementary businesses will entail focus on upselling, cross-selling, and leveraging best practice. An acquisition of a key competitor may just result in minimising direct competition and therefore improving market share.
It is important that at the outset of the deal it is clear what this super power will achieve as this will determine who will lead the business, how the businesses are integrated and what the key success factors are.
There is no such thing as an equal merger
Yes, there are many similar sized organisations with similar employee numbers and turnover that come together – take the legal sector – buoyant with a number of recent mergers all in a drive to become bigger and not be left behind. Most of these deals seem equal, but when it comes to setting up the new organisation and combined management team, someone is calling the shots. This is very rarely democratic. Work out who this is and align the key people and teams around this individual.
Sort out the top team quickly
It is important to set an aggressive time line to determine who will be sat around the leadership team table. If leaders are uncertain of their personal future, chaos will rule! In uncertain times different characteristics will come in to play – and there will be management by ego, fear, threat, avoidance and second guessing. The sooner the leadership team is in place, the sooner the rest of the organisation can be defined, and a level of clarity, direction and calm can return.
What’s in it for me?
Identify the key stakeholder groups, both internally (shareholders, managers, teams) and external (customers, suppliers, partners, etc.) end define how the merger will affect them. People don’t usually resist change; they resist the unknown. Paint a picture of how their lives will change and what the key benefits and opportunities are. This needs to be communicated in a simple, clear and unambiguous way so you are able to take people on the journey. Celebrate and promote any early success stories and get people excited about the new prospects.
Open, honest communication
Merger and acquisition information tends to be sensitive and can often not be shared at the early stages. It is important to define what information can be shared and when and where possible keep people and stakeholders up to date. Encourage a two-way communication. People are not daft and will know something is going on. If no information is shared, they will draw their own conclusions, gossip, speculate and create a negative force which can be difficult to stop. Treat people like adults, keep them informed and be honest and open throughout the merger and merger integration.
Resource up
Post-merger integration activities require a significant amount of effort and once the deal has been signed, the integration requires momentum, speed and drive to realise the benefits of the merger. Where this is not the case the two entities often end up operating under one company name, but in complete silos, so no extra value is gained from the deal. An integration team needs to be established to drive through the hard change (structure, roles, process, and systems) as well as the soft change (culture, behaviours, and identity). The most effective integration teams are led by an external change expert, who will bring the expertise, skills and most importantly independence and objectivity to ensure the right decisions are taken quickly. Also, don’t forget that whilst the integration activity is underway, the business still needs to perform and many resources will be focused on business as usual. Don’t underestimate the amount of resource you need to make this happen.
