Organisational Mastery

 Mergers & Acquisitions

Optimise the Human Component

 

It is well documented that when dealing with mergers and acquisitions, we tend to underestimate the impact of the people component.  From a human-centric perspective, our experience has shown that the sentiment might be compared to that of adopting a new child or reconstituting a family.  When dealing with people, the reality is that we are all unique, dynamic, and filled with potential.  Unfortunately, we are also messy, moody and sometimes even a bit broken.  This is why according to the Harvard Business Review, between 70% to 90% of all mergers and acquisitions fail. Research by Forbes indicated that the one aspect they all share is the inability to effectively integrate the people component.  This does not have to be the reality of your next merger or acquisition. Selecting a proven human capital advisor is not only a wise course of action but helps to bring a sense of objectivity to the transition period.

Clarify your Approach

Generally speaking, a merger refers to the consolidation of two or more companies to form an all-new organisation.  Often, such a process will constitute a new name, structure and strategy.  Mergers assist companies to pool their capital, resources and strengths, while more effectively dealing with individual limitations and weaknesses.  There are four main types of mergers, though some variations exist:

  • Horizontal;

  • Vertical;

  • Congeneric;

  • Conglomerate.

 

Acquisitions on the other hand are where one organisation acquire another, either through handing it over or buying it out.  Ownership is acquiring through a more than 50% capital shareholding or taking over the asset base of the company.  For the most part, the acquiring organisation determines the new structure and strategy for the acquired company.  Common approaches to acquisitions include:

  • Hostile;

  • Friendly;

  • Buyout.

 

Within both mergers and acquisitions, the question of organisational culture is vital.  Peter Drucker made the famous observation that “culture will eat your strategy for breakfast,” implying that when a company strategy is updated or changed, an optimised culture must be considered.  In a sense, your culture must become the fuel to drive your new strategy.  Hofstede listed four different ways in which this can be done:

  • Assimilation – Refers to the situation where the acquired company let go of their original culture to embrace the acquiring company’s culture.

  • Integration – Occurs in situations where the acquiring company can incorporate much of the dominant culture without completely surrendering their original reference.

  • Separation – Is the process where the acquired company is not willing to adopt the new culture, thereby separating themselves from the dominant culture.

  • Marginalization – Is an acculturation phenomenon when the acquiring company rejects both their own, as well as the dominant culture.

A Phased Approach

The CCI Professional approach to human capital integration is staged in four-phased:

  1. Negotiation Phase – Ensure that you select a proven capital advisor while evaluating your business' growth potential and leaders' change-fit levels.

  2. Preparation Phase (100 days) – Complete your analysis, craft the transition strategy and build the required resilience and agility.

  3. Integration Phase (100 days) – Lead the transition, integrate the organisational culture and stimulate mindfulness in all management members.

  4. Optimisation Phase (100 days to 1 year) – Address the unintended consequences, optimise employee performance, while ensuring short term stability and long term sustainability.

As human capital investment specialists, CCI Professional will play a critical role in your next merger and acquisition.  Our 4-part approach can be tailored to suite any environment, ensuring that your people integration goes according to plan.  Experience has demonstrated that empowered leadership can navigate any transition.  As an organisational leader, alongside your team and a proven integration partner, you can do this!

Download: CCI Professional - Mergers & Acquisitions Infograph

Download: CCI Professional - Mergers & Acquisitions Overview (2021)

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