How to Merge Two Organizations and Live to Tell the Tale?

On paper, merging two organizations seems promising, but in practice, the reality is quite different. Nili Goldfein, EVP at NGG and expert on organizational management, shares 5 invaluable tips for before you make an acquisition or merger

In recent weeks, the economic news media have been abuzz with stories about merging processes or the latest acquisitions of various companies. Organizations that have set their sights on merging must grapple with difficult transitional periods as well as organizational challenges in order to fulfill the promised goals underlying the business’ decision to merge.

Acquisitions and mergers are borne from a wide range of profitability considerations. Companies must weigh factors such as market share growth and product/service synergy against identical customer markets; the need for making quantum leaps against the stability of constant market movement; splurging on cutting-edge technology against cutting costs. One key element is the purpose of the merger or acquisition, which proves to be a complex, difficult and confusing process for both the buyer and the target firms. The world’s leading universities have demonstrated the high failure rate of these types of processes as well as of serial purchasers (Intel, Cisco, Microsoft and the like). Extensive guides have been written detailing exactly how to execute the process and what pitfalls to avoid.

It goes without saying that these processes are extremely complex. What is quite simple, however, are the principles behind them. They rely on common sense, keeping your ego in check and teamwork. Here are five tips for buyer and target firms that you can use to carve out a smarter action plan:

1. Reality: Thoroughly examine the current situation and try to avoid banal assumptions

Many mergers and acquisitions are decided based on economic or technological reasons. They are determined based on facts and figures relating to market shares, customer characterizations, completing a technological platform and other such factors. The organizational and personal merger is almost entirely absent during the closing stages of the transaction, and during the next stage in which the plan is executed in practice, it is done hastily, without proper planning and without a real understanding of the “territory”.

We recommend adopting the following tactic, even as early as during the decision-making stage of the merger’s strategic plan: merging the operational aspects of the organization. This includes organizational structures, technological infrastructures used by the merging firms, organizational culture, work habits, personnel combinations and management styles. All of these factors can prove to be a tremendous competitive advantage for merging companies, but they can also become obstacles that can lead to suffering. They may even become deal breakers.

2. Talent: Prioritize true talent instead of getting bogged down in the politics of appointments

Companies on the brink of a merger are faced with redundancies of positions. As an essential part of the process, employees must be let go. Of course, this is a reasonable step to take, considering that making operational costs more efficient and cutting expenses are desirable and inseparable parts of a process that will ultimately yield growth and greater efficiency for your company. However, oftentimes, the “stronger” party in the merger (mainly the purchasing party) will end up keeping their personnel, either for sentimental or political reasons.

We cannot encourage you enough to approach the “due diligence” process with an open mind. Genuinely try to understand what would best benefit the merged company. A talented employee at the current company may not necessarily be the right fit for the future company, and someone in a senior position usually holds that position for a reason. It is key to deeply understand the company’s needs and appoint or fire personnel based on professional and practical considerations, rather than on politics or reluctance to deal with new players. No matter what you choose, it’s always important to remember that when you must let a talented employee go, do so respectfully. The world is small.

3. Transition period: Remember that before you reach the ideal stage where 1+1=3, you have to endure a transition period that needs to be managed separately

On paper, a merger is clear and straightforward. Even operational and personnel structures look good when printed out as a polished chart. For better or for worse, though, real life is messy. When transitioning from a current reality (two separate companies) to the desired reality (one company that is functional, happy and profitable), you must contend with an interim period in which people leave, different technological platforms have trouble connecting with each other, customers are unhappy because of the declining level of organizational functionality and customer service, and technology that was supposed to be helpful ends up frustrating you even more. But as the saying goes, man plans and God laughs. We recommend that you give some thought to planning the transition period. It is helpful to appoint a team—or, at least a very senior employee—to manage the transition process during this time. Keep in mind that you can never predict what the day will bring. Anything can happen. Adopting this outlook and having a management plan for the interim period has saved numerous managers from devastating pitfalls.

4. Transparency: When it comes to your successes and failures, keep everything transparent—with the market, your customers, the press, employees and shareholders

During any time of crisis or change, rumors fly about the market—some real and some utterly nonsensical. The problem is when people—whether clients, shareholders or employees—respond emotionally rather than rationally during these difficult times.

We recommend keeping your employees “in the loop” and updating them about any difficult developments, such as layoffs, relocation, organizational restructuring or new appointments. Keeping them in the know helps maintain a calm atmosphere and promotes more efficient work. Admitting mistakes, as opposed to concealing information or making excuses, fosters a sense of trust between employees and the new management or new company, which creates new interfaces in a somewhat volatile environment. Overcoming your ego and admitting your mistakes takes courage, but in the long run, saying, “We made a mistake, this was the consequence, and now let’s fix it” will go a long way toward creating a culture of trust for everyone involved in the merger, both in immediate and extended circles.

5. Perseverance: Even when it’s hard to remember (and to remind others) why you embarked on this merger in the first place

Most businesspeople are intelligent and we all know the harrowing statistics about mergers and acquisitions that ended in astronomical failure, or collapsed even though they had excellent economic and business reasons, due to the inability to translate the desired success on paper to actualization on the ground. Why, then, do we push forward anyway? Because it’s worth it. Keep reminding yourself of the maximum potential goal of 1+1=3, and repeat it as a mantra when company managers face difficult challenges and when shareholders and investors are dealing with headaches.

Always have in mind the reason why you entered into this complex process in the first place. Remind yourself of the above suggestions and use them to your advantage. And remember that the transitional phase is just a phase. Most of all, remind yourself that difficult roads often lead to beautiful destinations. Embrace the journey.

watch this video that sums up all 5 tips>>

By |2019-03-04T10:09:55+03:0021 August , 2018 |

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