Post-Merger integration

Post-Merger Integration: What Works & What Doesn’t Work?

I follow a company that just experienced a merger of equals. Some would say it was an acquisition but the larger company leaders wanted the transaction to be viewed as a merger in an effort to extend their good faith efforts to the leaders and employees of the acquired company.

Because of the myriad of issues involved in the integration of two companies, the leaders of both companies were thrown into a state of chaos. Of course, their lives had not been a walk in the park prior to the merger with their international travel, intense pace and growth mindsets. But their worlds today make them look back on those days as if they were in a simpler, easier time.

Immediately after the transaction closed, these leaders relied on advice from a large, international management-consulting firm that resulted in tremendous chaos and confusion. On the surface, there was nothing wrong with the advice since it is the standard recommendations made by all large management-consulting firms dealing with complex, post merger integrations. However, in this case their confidence in this consulting firm and their reliance on this advice, in hindsight, proved to beyond problematic.

Not only were they faced with the standard legal, financial, marketing, and sales integration challenges and standard communication issues they were advised to conduct a massive layoff to “remove the redundancy.”

Certainly there was redundancy at every level, starting at the CEO level. However, even at the CEO level these leaders had been able to design a 3-year plan that would provide a smooth transition in the CEO and President roles.

Each of these mature, experienced leaders let themselves be lulled into a false sense of accomplishment at the consummation of the ‘deal’ and were overly- confident their decisions.  They believed the recommendations of their consultants were sound and would drive the results that had been forecasted during due diligence.

Unfortunately, their situation did not evolve as they has hoped and planned.

The integration was disrupted by the chaos and confusion generated by any layoff. Both companies had demonstrated long-term commitments to their employees and built productive cultures of inclusiveness and trust. All of the benefits of that decades of hard work to build these kind of trusting work environments flew out the window the day after the transaction closed with the leaders announced the layoff.

Instead of employees digging in and working on both their regular responsibilities from their ‘day job’ and demonstrating the initiative and effort to solve the problems that arose in this critical integration phase, employees were disheartened and disillusioned.

Instead of working harder they started to languish by the water cooler and compare notes, gossip and spread rumors. Everyone was traumatized by the reduction in force and was waiting for the next announcement of further post-merger integration layoffs.

People one could focus. No one could relax. No one could maintain a balanced perspective. Every employee was obsessing over the rumors and focused on the worst possible scenarios for the company, themselves and their families. This included line staff, management and executives alike.

Instead of replicating their successes building cultures of trust, inclusion and initiative, the new entity descended rapidly into a blaming, dysfunctional culture where no one took ownership. The worst part of this situation is that it will take a decade to rebuild a productive, trusting workplace culture. This will impact the forecasted goals and limit the potential growth of this new entity for a long time.

Albert Einstein said, “We cannot solve our problems with the same thinking we used when we created them”.

David A. Fields says, “When we thought the sun revolved around the earth, our vision was limited to a tiny planet. Then, a startling reversal of perspective opened up a universe of possibilities.”

We simply cannot work longer hours and more evenings and weekends and yet expect our perspective to remain balanced. Fatigue causes our judgment to be impaired.

We can’t imagine the possibilitiy of using new and different approaches that are aligned with our personal and corporate values when we are in a state of frenzy from the intense pace.

We cannot bring out best selves nor create an environment for others to bring their best during a slash and burn layoff.

In order to move powerfully through all the challenges during a post-merger integration, we must be open to thinking differently and not repeating long-standing beliefs and approaches. We must have the courage to create new approaches and drive towards greater potential. We must use different thinking than we’ve used before.

Even if leaders have been through post-merger integration a number of times, the world is different today. Millenials, Gen X and Gen Y have expectations in the workplace that are different from baby boomers’ expectations.

Technology has provided everyone with 24/7 communication and social media has given each one of your customers, employees and vendors a voice and a platform to express their thoughts instantaneously and broadly.

We need to answer these questions early and often:

  1. What is the Purpose of this new entity?
  2. Why do we exist?
    1. What is our product or service?
    2. Who are our customers?
    3. For what reason do we exist?
  3. What steps are required to build a high performing organization quickly?
  4. How are we communicating this Purpose to each and every employee at every level?
  5. Do we have a refreshed, joint Strategic Plan that outlines goals by:
    1. Mandates
    2. Growth & Strategic Goals
    3. Operational Goals
  6. How are decisions being communicated in a clear, concise and consistent manner?
  7. How will we get the right people in the right roles, focused on the right projects right away?
  8. How will we prioritize?
  9. What method will we use to make decisions, especially around allocating resources?
  10. What data will be important to monitor daily, weekly and monthly?
  11. Can we obtain an executive dashboard affordably, quickly and easily?
  12. How will we fund this growth?
  13. Who will own our project plans?
  14. What is everyone’s new role?
  15. Are these roles delineated by direct accountability as well as oversight accountability?
  16. Do we have a complete, comprehensive, well-documented set of expectations that specify our desired outcomes, available resources, responsible party, due dates and a reporting mechanism to keep our C-level leaders briefed?

In this brave, new world, leaders must demonstrate courage and innovation, especially in post-merger integration.

To achieve the forecasted goals and leverage the synergies of the former entities, we must adopt a new way of thinking and use new and different approaches to removing redundancy and excess costs. These new approaches must be very different from the slash and burn approach of layoffs. We must expand our perspectives beyond ‘how we’ve always done integration before”. We must bring new thinking, a new mindset, and a commitment to inclusiveness, thoughtfulness and transparency.

Do you have the courage to use these new and different approaches?

 

Katharine Halpin has been advising Founders and C-level executives about M&A transitions since 1997.  Follow Katharine on Twitter or LinkedIn or at The Halpin Companies

 

Business Growth Strategies

Business Growth Strategies For Companies of All Sizes & Levels of Complexity

Since 1995 we at The Halpin Companies have been able to facilitate business growth strategies for a variety of companies in a variety or industries. Our clients historically brought us in to facilitate a CEO or key leader transition or to help the founders be strategic about making their exit. Regardless of the original purpose of the engagement, across the board, we’ve been able to help our clients accelerate the growth of their companies by using our proprietary business growth strategies.

Our proprietary methods are based on simple, practical, but not always easy approaches. Business growth strategies are not complicated. However, they do require leaders to be open to using new and different approaches. What got you hear won’t get you there” according to Marshall Goldsmith, the noted leadership guru.

In order to be strategic about growing a business, a few key things must occur.

First and foremost, we must have a clear assessment of the current reality. What are the motivations of the shareholders? What roles are people currently playing? What expectations do the shareholders have about the continuation of the company beyond their own leadership? Who aspires to assume more leadership within the company and are they positioned properly? What is the current level of leadership and management effectiveness of each key executive and manager? What specific strengths does each key player possess? Do these key players demonstrate behaviors on a daily basis that indicate they are ‘walking their talk’ with the purpose and mission of the organization and their own strengths and values?

Once this information can be gathered, leaders can start to formulate next steps. These next steps must include developing a Vision for any transition or transaction. Do the shareholders want to focus intentionally on the growth? How much growth? How will this growth be measured? Revenues, Profits, Shareholder Value?   Business growth strategies require clarity. Without clarity of vision, you have chaos.

Erika Andersen eloquently shares in her book, Leading So People Will Follow, Steve Jobs ‘ high degree of skill in providing this clarity of vision, or what she calls farsightedness.

‘One stunning example of this kind of farsightedness is how Steve Jobs operated at the start of Apple. When Jobs and Wozniak founded Apple Computers in 1976, the personal computer was still new and untested. Moreover, the idea that almost everyone would one day have a computer and that computers would be as accessible and easy-to-use as televisions or telephones seemed like craziness.

But then along came these two young men with exactly these ideas. And Jobs, especially, continued to articulate this possible future in a way that brought together capital, a workforce, and a marketing plan that ultimately led to the achievement of the future he envisioned thirty-five years ago.

The essence of farsightedness is not only envisioning a possible successful future but also articulate it in a way that’s both compelling and inclusive. Compelling means that it’s meaningful to those who hear it, that it’s attractive to them. Inclusive means they want to help make it happen and feel they can have an important part to play in moving toward it.

Clearly Steve Jobs was able to express his vision for the future in this way. In January 1984, when Jobs introduced the first Macintosh computer at Apple’s annual shareholders’ meeting, an attendee described the level of enthusiasm as “pandemonium.” As the first commercially successful small computer with a graphical user interface, the Macintosh represented, and still represents, the realization of a vision that was both compelling and inclusive.

Will this shareholder value occur through acquisitions, mergers or organically within the company? Often, we recommend initially experimenting with two approaches simultaneously to ‘test the waters’. Different leaders will be inclined to be successful within different models and it’s important to assess each key leaders ability to move productively through change and even chaos.

According to Nelson Mandela, “Vision without action is just a dream, action without vision just passes the time, and vision with action can change the world.  Don’t let your company’s growth potential by stymied by incongruence of your visions, plans and business growth strategies.

For more information about our 100-Day Program and the six components that accelerate growth, using our proprietary business growth strategies, please contact Katharine Halpin at 602-266-1961 or via email at [email protected] Follow Katharine on Twitter at KatharineHalpin and LinkedIn.  For more information about how to build alignment at all levels of your organization, read Katharine’s book, Alignment for Success: Bringing Out the Best in Yourself, Your Teams and Your Company.

If you are preparing for a merger, acquisition or organic growth, contact us for a complimentary, confidential consultation!

 

 

Investment Banking

Investment Banking Drives Mergers and Acquisitions. Is their Approach the Best Approach?

The process of capital formation in the 19th century was markedly different between the British capital market and the American capital market. British industrialists were readily able to satisfy their need for capital by tapping a vast source of international capital through British banks such as Westminster’s, Lloyds and Barclays.

In contrast, the dramatic growth of the United States created capital requirements that far outstripped the limited capital resources of American bank after the Civil War.

Investment banking in the United States emerged to serve the expansion of railroads, mining companies, and heavy industry. Unlike commercial banks, investment banks were not authorized to issue notes or accept deposits. I

Instead, they served as brokers or intermediaries, bringing together investors with capital and the firms that needed that capital.

Even now, 150-years later, Investment Banking is a key driver and growth engine for the US economy because Investment Banking experts still serves as brokers and intermediaries.

While investment banking is a critical resource to grow our economy, to drive real innovation and sustainable transformation of business, we must expand the scope of the typical process, driven by investment banking, during a merger or acquisition.

The investment banking role is to facilitate the due diligence process to bring investors and companies together. The glitch occurs when their narrow focus is limited to the legal and financial aspects. Little effort or attention is given by the investment bankers to the people aspects.

For example, now one asks these questions:

  • How will we align our senior management team so they can speak with one voice?
  • How can we gain the buy-in and trust of all the employees?
  • How can we crystalize and communicate our purpose in a way that is meaningful to our employees?
  • How can we prioritize and make decisions in a way that is consistent with our purpose and our values yet narrows our focus?
  • How can we engage the hearts and the minds of our teams?
  • How can we grow this company so that everyone wins;
    • Our shareholders?
    • Our teams?
    • Our customers?

By maintaining a narrow, limited perspective, deals get closed every day. The question for these investors is; “are these deals that will grow a company?”

KPMG has reported since 1999 that 83% of mergers and acquisitions fail. These deals don’t blow up necessarily but they do fail to achieve the forecasted growth in revenue, profit and shareholder value.

If Investment Banking experts could simply expand the scope of their focus, so much more growth could occur in the US economy immediately.

In our e-book, we describe eight important steps to be considered during the standard approach to due diligence by investment banking experts. Here are three of those steps:

  1. We suggest strongly that newly acquired companies avoid layoffs at all costs. While this may be the ‘quick and dirty’ way to slash and burn overhead and redundant administrative costs, the fallout can last as long as a decade.

Do you want your front line people to feel safe to innovate, to ask questions and to express even their smallest concerns? Or would you prefer they stand around the proverbial water-cooler and gossip about the latest hint that another layoff is pending. Your employees will not be able to bring their best, most focused selves after a lay-off. It is simply too traumatic for those retained.

  1. Assess the current leadership and management teams of the acquiring company and the company to be acquired or merged. By understanding the strengths, values and motivations of each key player you can build alignment from the earliest discussions.

Without alignment, you will have key executives who put their own self-interest in front of the organization’s interest, simply because they have not aligned with their colleagues around a shared purpose.

  1. Use strategic approaches. When we allow ourselves to become reactive we turn over control of our destiny and the destiny of this new entity to others. Either:
  • Regulators,
  • Wall Street Analysts,
  • Activist shareholders or
  • Those we don’t see or share our vision.

When we are in reactive mode, we simply cannot remember to focus on the big picture and the long-term opportunity and possibility. We are too busy putting out fires and reacting to the issues that appear to be urgent but, in the long run, are not going to add value.

If you are racing from meeting to meeting with little time to think strategically or prepare for important decisions, you will not notice the red flags. When a company is losing it’s potential for growth, key indicators are everywhere. The question is this: Can you see the key indicators when they are slight, intuitive hunches or do you have to wait until the company faces a financial crisis to wake up? To you want to blame others are do you want to drive yours and the company’s future growth potential?

Investment Banking is a critical piece to growing our economy. However, investment banking experts and shareholders everywhere must be open to taking a broader perspective.

 

About the Author:

Katharine Halpin, founder of The Halpin Companies, has been facilitating transitions and transactions since 1995. Her earlier career as a CPA taught her the importance of considering not just the financial and legal aspects of a transaction but also the people and cultural aspects.

If you’d like to receive a complimentary copy of our e-book, 8 Ways to Avoid Becoming a Statistic, email Katharine Halpin at [email protected]

If you are interested in a complimentary, confidential discussion about a pending, current or recent merger or acquisition, please call 602-266-1961 or click to schedule.

 

 

Business Reality

Current Business Reality: Do You Have the Courage to Confront It?

Courage to Confront the Current Business Reality

Martin Luther King eloquently shared his “I have a Dream” speech and inspired all of us to not just focus on what is possible but also the current harsh reality of racism in the 1960s in the United States.

Peter Senge, the noted management and leadership scholar coined the phrase, creative tension, to inspire all of us to focus simultaneously on both our vision and our current business reality. He said that if we only focus on vision, others could consider us to be too optimistic and naïve. Dr. Senge said if we, however, only focus on our current reality, we could become discouraged and doubtful of ever achieving our vision and goals. How does this affect our current business reality?

Dr. Senge encourages us to focus on both; our vision for what is possible for our teams and our organizations as well as simultaneously focusing on the current business reality so we are not in denial or delusional.

Jim Collins, in his book, Good to Great, writes about a conversation he had with US Navy Vice Admiral and aviator, James Bond “Jim” Stockdale who shot down over Vietnam in 1965 and was a prisoner of war for the next 7.5 years. In this discussion, Collins asked Stockdale about his coping strategy during this period of captivity. Stockdale reported, “I never lost faith in the end of this story, I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade.”

When Collins asked Stockdale who did not make it out of Vietnam, Stockdale replied, “Oh, that’s easy, the optimists. Oh, they were the ones who said, “We’re going to be out by Christmas.” And Christmas would come, and Christmas would go. They they’d say, “We’re going to be out by Easter.” And Easter would come, and Easter would go. And then Thanksgiving, and then it would be Christmas again. And they died of a broken heart.” Stockdale then added, “This is a very important lesson. You must never confuse faith that you will prevail in the end-which can never afford to lose-with the discipline to confront the brutal facts of your current reality, whatever they might be.

Witnessing this philosophy of duality, Jim Collins went on to describe it as the Stockdale Paradox.

I’ve seen leaders who lack the courage to confront the current business reality. Sometimes they don’t want to deal with the harsh facts or they remain naively optimistic about other people’s capacity to drive positive results regardless of the situation.

I worked for a leader early in my career that was absolutely delusional about the professionalism of his key leaders. He trusted but did he not verify. He let some of them bully him. He did refuse to acknowledge the high cost to the organization. The new leaders at all levels did not feel safe to share their concerns or even observations but he could not connect the dots to his key leaders and their styles. He hired change agents but then he allowed their peers to withhold information and resources so their success was limited or painfully prolonged. He never found his voice with his key colleagues, or at least he never demonstrated this when I worked for him.

When we remain in denial or even delusional, we tend to create a lot of chaos and confusion within our teams. When we have the courage to confront the brutal facts and take action based on those facts, we are able to create alignment at all levels. Then we find our business reality.

The key to having the courage is to focus on the facts and the data. Without the facts, it’s human nature to make up stories and put our own spin on these stories. “I know next quarter will be more robust”. “I know Bob and I know Bob didn’t mean to blow up that way in front of the team.” “I know everyone is committed to the same things.”

In order to build alignment, grow organizations and exponentially increase shareholder value, we must:

  • Get the facts backed up by data
  • Articulate to ourselves our values, our vision and our commitment to this organization
  • Find our voice so we can articulate all of this to others clearly, concisely and consistently
  • Demonstrate the courage to install consequences for bad behavior.

If you are interested in an executive dashboard in a cloud-based platform that supports everyone in staying focused on the facts in a positive, productive way let me know. We’ve analyzed them all and can give you a balanced perspective on the best ones.

Katharine Halpin has been facilitating transitions and M&A transactions since 1995. Long before that, however, she was able to identify leadership and management gaps and became a change agent leading efforts to close all those gaps.
The clients of The Halpin Companies consistently report they make more money and work fewer hours as a result of using our proprietary, proven methods to build alignment at all levels and grow shareholder value by a factor of 2-3 consistently and quickly.