How to Create Value from a Merger in 4 Steps M&A can be more successful when acquiring companies know what to look for and involve the right people to give them the right information.
By Victoria Maitland Edited by Micah Zimmerman
Opinions expressed by Entrepreneur contributors are their own.
Not all mergers and acquisitions (M&A) end well. In fact, 70-90% fail, primarily because of an inability to identify appropriate fits for acquisition or the best ways to integrate them.
Maybe this is why we hear such horror stories: A corporate takeover where people from the acquired company wait for the other shoe to drop. I understand that perspective. One company takes over another and holds its employees' livelihoods in its hands — their careers, culture and security— with a high risk of failure.
But I also know how being acquired by another company can result in amazing outcomes for professional growth. I am a living example of that.
Over the last couple of years, my company acquired a series of companies in different regions to accelerate our growth, each with its client portfolio, industry expertise and merger timelines. Integrations have many moving parts but are rich with learning opportunities for the next integration. My experience on both sides of M&A has taught me that each company must deeply understand the other company's values, culture and decision hierarchy. Just as important are the people who are part of the integration team. Those "in the kitchen" need to be open to building trust as soon as possible to ensure the integration goes as smoothly as possible.
Related: Why Prioritizing Company Culture Is the Key to a Successful Acquisition
1. Align values
I joined CI&T six years ago when they acquired my company. I was the HR Director for a small ad agency with many clients in financial services. We had been courted over the years by companies interested in acquiring us, but they were not the right fit as they were more interested in our client relationships than our people. Our CEO believed in putting our people first, and it was important to him that I be close to those conversations.
When we met CI&T, they were intriguing — even though they were headquartered in a different country. They instantly blew us away with their realness, honesty and transparency. We felt their values in every interaction and could tell that joining them would improve us.
Related: Are You a Leader Loyal to Your Values? Here's How to Align Your Leadership Style With Your Values
2. Transparent communication
Communication is how we keep everyone aligned and involved. We have a meeting every Wednesday with each acquired company led by the integration leader from "their side" to provide updates on progress on various fronts — such as the integration timeline, brand, benefits, new swag, etc. On "our side," we give shoutouts to people who have been instrumental "in the kitchen."
Even if the news is the same as the week before, we affirm things are on track, and if things are delayed, we explain the dependencies. If we are waiting on something, we simply say so. We aim to ensure people are in the know every step of the way. Total transparency is key.
Related: This Unique Leadership Model Will Transform Your Business and Ensure Success
3. Understand culture
Understanding a company's values takes more than a motto — we need to understand the lived behaviors that reinforce the values that make up the culture daily. How do they hire, reward and recognize people? How do they make decisions? What programs or rituals reinforce them? Where are they on a Friday afternoon? If they say they promote from within, what's their average tenure? How do they celebrate people and milestones? What's the banter on their internal chat channels? What are their D&I metrics? Who's on their leadership team? What is their T&D budget?
In most M&A due diligence, many processes overlook corporate culture. It's understandable: Culture isn't seen on paper, and CEOs of acquired companies may not describe it objectively. Let's face it — they are not the ones to ask. But not understanding the other company's culture makes it easy to get wrong. Like dating the wrong person — those little things we ignore early on turn into bigger deals in time. Before too long, we can't get past what we used to overlook.
Not to say both cultures need to be identical for M&A success, but we should understand the differences and how to address them intentionally. For example, At CI&T, our culture is a learning environment, which means we bring many people to our meetings on a day-to-day basis so they can listen and learn. It's not unusual for a meeting to have over ten people, but only half actively contributing.
At first, this confused one of our acquired companies. Their hiring philosophy was to hire only experts and bring the necessary people to meetings. When we explained our culture, we decided together which meetings would have more bandwidth for our approach. Yes, we discussed and agreed together on how to integrate their approach with ours. Flexibility to change is a good sign of a smooth transition.
Related: 7 Deadly Sins of Merger and Acquisition Negotiations
4. Bring in the right people
Understanding a company's values and cultural differences from the beginning makes it easier to put together the right communications plan and approach an integration. Including the right people must be more than an afterthought. They should be an integral part of the M&A process.
HR often has a better touch on the pulse of an acquired company's people and can provide a more realistic and objective picture of its values and culture. Ideally, the HR leaders from both sides are willing to "get real" real quick.
Perhaps many M&A efforts fail because understanding deeper aspects of a company, like values and culture, requires the right people involved — not business people, not salespeople, but "people" people. Even on the acquiring end, HR has a role to play in upfront discussions — even more for me as an acquired employee who has found success in my new role. I can assure new acquisitions, "Hey, you can trust these people." I'll be honest that the process won't be easy, but these are good people and working through those challenges together makes us all the better.
