Public Relations is a great tool for the Management of soft-issues in Mergers and Acquisition. Oftentimes, managers bother only about the hard-issues but value-attrition mostly occur when the
Public Relations is a great tool for the Management of soft-issues in Mergers and Acquisition. Oftentimes, managers bother only about the hard-issues but value-attrition mostly occur when the soft-issues are not properly addressed.
1. MANAGEMENT OF CULTURE IN MERGERS AND ACQUSITIONBy Bolaji OkusagaManaging Director, The Quadrant Company
2. What is a Merger? A merger involves the integration of all products, services, processes, systems and administrative functions of two or more organisations to improve the competitive positions of the organisations.
3. What is an Acquisition? This is a structured transfer of one organisation’s assets to another in an agreed and orderly manner. The organisation acquiring is usually referred to as “the acquirer”, while the organisation being acquired is referred to as “the target”.
4. Synergy Defined WORKING TOGETHER Combined action + operation Greater Advantage This assumes that the collective advantage to be gained by joining forces is greater than the separate existence of each organisation.
5. THE M&A2 PROCESS AcquisitionPlanning Phase Phase Integration PhasePRE-MERGERPHASE POST MERGER PHASE Negotiation & Integration Initiation Transition
6. Why do Organisations Merge?The Hard-issues / Strategic FitHorizontal share Vertical have different the same market niches within a larger segment in the same industry. industry. AdvantagesAdvantages Expansion of product Expansion of portfolio Diversification of Franchise / Market product / service mix share Enlargement of market Economies of Scale scope and customer Dominance of market segments segment
7. Mergers & Acquisition FailureRates Mergers and Acquisition have less than a 50:50 likelihood of success Up to one-third of mergers fail within 5 years Up to 80% of mergers never live up to their full expectations A 3-way or 4-way merger is exponentially more difficult than a 2-way merger.
8. Why do Mergers / Acquisition FailThe Soft Issues CONFLICTS OF CULTURE – this usually affects operations and processes MULTI – VISION – this affects organisational strategy FAILURE OF LEADERSHIP – this leads to the pursuit of self interest instead of the larger organisational interest
9. Why do Mergers / Acquisition FailPeople & Culture Fit Corporate culture and existing value systems Staff qualification Core competencies and Intellectual Capital Leadership styles and communication systems Strengths and weaknesses of the critical success factors of each business units These factors make or break mergers and acquisition deals.
10. Why do Mergers / Acquisition FailStakeholder FearsTHE SHAREHOLDERS : fear of a dominating merger partnerTHE MANAGEMENT: fear of loss of position & relevanceTHE STAFF: conflicts due to fear of changes in middle management
11. News of the Merger Commitment to The SituationDenial EnjoymentFear LikingAnger Interest Sadness Relief Acceptance
12. Pitfalls of the Transition Processo “How is all this going to affect me”o The personal / departmental list anxietyo Organisational proliferation – emphasis on temporary rules & reporting relationships at the expense of the jobo Infrequent and Irrelevant Communicationo Triangulation – conflicting objectives & loyalties6. Time management – balancing time constraints with adjusting to the new reality7. Leadership crisis
13. Checklist for an M&A What competitive advantages do we have? In what market(s) shall the new organisation play? What are the strengths of the partners in the deal. Do the organisations fit together? The vision and corporate personality is not negotiable
14. Problems Associated WithImproper Cultural Integration1. Realization of difference – the “them” and us “syndrome”2. Mutual stereotyping3. Mutual blaming4. Battle for cultural dominance
15. Fixing the Soft Issues in aMerger & Acquisition DealCorporate Culture:This is simply put: “the way we do our thing around here”Culture Mechanism Strategy MarketValues Structures Products CustomersStyle Capabilities Delivery Competition Reward Systems Shareholders
16. Cultural Due Diligence in M&A Cultural due diligence is imperative in any M & A transaction because all mergers and acquisition transactions are human transactions; failures or successes are therefore attributable to the human factor. Explore the cultures of the organisations involved in the deal as you explore the financials and the legal implication of the deal.
17. Cultural Due DiligenceProcess Assessment Process involving three core steps: -Determine Current State -Define Desired Picture -Conduct Gap Analysis Determine appropriate alignment / intervention initiativesTools: Culture Mapping Climate Survey
18. Benefits of a Cultural DueDiligence Gives employees clarity and sense of purpose Helps employees to view the integration as a meaningful process Helps shift the focus from just getting the deal done to making the partnership viable over the long haul Helps employees to focus on similarities and not differences Supports in the creation of a culture by design and not by default