Fueling the Success of Acquisitions
    * or, If we already know that they go wrong so frequently,
                  then ...
Intent

The Goal? To help you see and mitigate hidden organization behavior-based
risks to the success of your acquisition...
What is a Successful Acquisition?



The financial targets of the acquisition are achieved as fast as possible to
build cas...
What is the Problem?



If many published reports exist about:
 Low rate of acquisition success.
 The causes for acquisiti...
“The definition of insanity is
doing the same thing over
and over again and
expecting different results.”
              Alb...
5 Underlying Causes of Unsuccessful Transactions
                 #1 Limited view of the Transaction Life-cycle
Focus is o...
5 Underlying Causes of Unsuccessful Transactions
                                         #2 Thinking Traps

The way Manag...
5 Underlying Causes of Unsuccessful Transactions
                   #3 A Mechanistic Transaction Process



Focusing on th...
5 Underlying Causes of Unsuccessful Transactions
       #4 Poor Health and Low Capability of the Acquiring Company

Many c...
5 Underlying Causes of Unsuccessful Transactions
                 #5 Treating employees are Passive Bystanders

The acquis...
Eliminating the Underlying Causes & Mitigate Risk




          11 Interconnected Remedies




                           ...
Remedy 1: Extend the view of the transaction Life-cycle

                              Go / No Go
                        ...
Remedy 2: Identify & manage the key variables (the missing links)
                      driving the transaction process


...
Remedy 3: Complement traditional perspectives with emphasis on
                      Organization Behavior




           ...
Remedy 4: Expand risk perspective to Behavioral Constraints

The Fundamental Risk:
What is the company’s capability to col...
Remedy 5: Ensure the top team and managers challenge all their assumptions

…Flawed Assumptions invariably
lead to flawed d...
Remedy 6: Break the silos and build the Return on Relationships

                              An elephant
               ...
Remedy 7: Stimulate Inclusion of Employees



Influence employee Buy-in to the transaction.
and*
Seek employee Investment i...
Remedy 8: Discover how profit is in reality created & sustained by the company



 Identify the variables driving performan...
Remedy 9: Create Structural Alignment and process for
            performance improvement


                              ...
Remedy 10: Build the Performance & Capability of Management Team

                                                        ...
Remedy 11: Unleash the Collective Intelligence & Experience of the company


“A Great Idea is simply two Good Ideas coming...
The impact of eliminating the underlying causes?

1. Accelerate the Integration Curve
2. Minimize the ‘Shock Dip’
        ...
And the impact of doing more transactions more successfully?




Increased valuation of the company

Greater competitive a...
A Behavioral Perspective in the Transaction Life-Cycle




                              Go / No Go
                      ...
Torrez BV: Operating at the intersection of diverse disciplines to help you
                      Unleash your Intangible ...
Joe Torrez
     Torrez BV

Joe@TorrezBV.Com
 +31 6 3430 5420
  The Netherlands

 www.torrezbv.com
www.twitter/torrezbv



...
Upcoming SlideShare
Loading in …5
×

Fueling the Success of Acquisitions

892 views

Published on

If we know that so many acquisitions fail, and we have an idea of why they fail, then why do transactions continue to fail? A look at possible deeper causes behind transaction failure and steps to make them more successful.

Published in: Business, Technology
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
892
On SlideShare
0
From Embeds
0
Number of Embeds
26
Actions
Shares
0
Downloads
71
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Fueling the Success of Acquisitions

  1. 1. Fueling the Success of Acquisitions * or, If we already know that they go wrong so frequently, then why does it still happen? 5 Hidden Causes for Failure 11 Remedies for Increasing Success Rate 1
  2. 2. Intent The Goal? To help you see and mitigate hidden organization behavior-based risks to the success of your acquisitions, and as a result help you increase success rate, accelerate growth and generate sustained returns. The Perspective? Deep experience in organization behavior & performance psychology, assessing and changing leader, employee, and team behavior and performance; generating gains in organic and inorganic growth; complimenting the financial, legal, and technical expertise of leaders to develop and implement new strategies and initiatives, improve innovation, solve performance problems, and integrate businesses. Why You? You have a vested interest in increasing the success of your transactions: • To grow the bottom-line and enhance the value of your company (or those in your portfolio) and generate increased returns for shareholders, or • As transaction advisor, to satisfy your customers and create a significant competitive advantage for your firm. 2
  3. 3. What is a Successful Acquisition? The financial targets of the acquisition are achieved as fast as possible to build cash flow (and minimize burn rate) and profit. Added shareholder value is created in the combined enterprise. Productivity is maintained during the transition and shows sustained increase over time. Employees and customers remain engaged to the company. 3
  4. 4. What is the Problem? If many published reports exist about: Low rate of acquisition success. The causes for acquisition failures, and how to fix them. and, Leadership teams and their advisors know: It is Financial Suicide to ignore human capital - employees, customers, suppliers - and fail to bridge culture gaps Then why do transactions continue to fail or underperform? 4
  5. 5. “The definition of insanity is doing the same thing over and over again and expecting different results.” Albert Einstein “At some point in the life cycle of virtually every organization, its ability to succeed in spite of itself runs out.” Brien’s First Law 5
  6. 6. 5 Underlying Causes of Unsuccessful Transactions #1 Limited view of the Transaction Life-cycle Focus is on getting the deal closed rather than making the marriage successful. Deal Close Financial, Legal, Create Plan for Identify Target Technical Due Implement Plan Integration Diligence Financial, Legal, & Technical perspectives dominate. Advisors (internal or external) measured on his/her own perspective and responsibility for closing the deal. Integration-related activities begin only after deal close. Management Team and Advisors often rewarded for Deal Close rather than Deal Success. 6
  7. 7. 5 Underlying Causes of Unsuccessful Transactions #2 Thinking Traps The way Management Teams perceive, think, discuss and decide about a transaction creates risk and limits the potential of the acquisition. Perceptions: Own interests, silos argued & protected. Discussions: Strong voice wins. Voices of dissent or alternatives quieted. Fear-driven (‘don’t lose opportunity for promotion, bonus, etc’). Superficial. Decisions: Fast. Driven by quick and easy solutions. Dysfunctional Thoughts: “This target is perfect; this deal is a slam dunk.” “We need this.” Just get it done. Now.” “We’ve succeeded in the past; if we follow the same formula, will succeed again in the future.” “This company was my baby. I know we must let go, but…” “We’ll take care of the culture stuff later. The finance and legal stuff needed to close the deal.” “It was their fault that last transaction didn’t work. We don’t need to do anything different.” “The right governance structure will solve everything.” No one wants to marry a loser; in our minds s/he is a princess or prince. Until s/he becomes the frog. In which case it is typically too late. 7
  8. 8. 5 Underlying Causes of Unsuccessful Transactions #3 A Mechanistic Transaction Process Focusing on the “What” versus the “How” of the process. (‘Check-in-the-Box’, project management mentality) Driven by financial, legal, technical expertise with a fixed perception on acquisition risks related to those points of view. …and blind to the risks that impact employee performance and sustainable profit generation. 8
  9. 9. 5 Underlying Causes of Unsuccessful Transactions #4 Poor Health and Low Capability of the Acquiring Company Many companies… Acquire because of their inability to create organic growth (within the existing limits of their market). Have fundamental challenges implementing any major initiative or change. Are unable to deal with complexity. Adding a new floor to an already shaky foundation … It might become the tallest building in the area for a while but at the expense of stability and longevity. 9
  10. 10. 5 Underlying Causes of Unsuccessful Transactions #5 Treating employees are Passive Bystanders The acquisition typically happens to managers or employees (on either side of the transaction). Very few employees involved in the process. Employees hide their Knowledge and Expertise to maintain their own security & value in the company. Formal communication often a superficial sedative to calm employees. As the transaction and integration draw out over time, rumors gain power. Impact Skepticism, fear, anxiety, conflict, disengagement (sit and wait for ‘the’ package) diminished quality & productivity, employee attrition, customer attrition 10
  11. 11. Eliminating the Underlying Causes & Mitigate Risk 11 Interconnected Remedies 11
  12. 12. Remedy 1: Extend the view of the transaction Life-cycle Go / No Go Decision Deal Close Pre-Acquisition Due Diligence & Integration Integration Plan Learn, Adjust, & Alignment & Integration Planning Implementation Sustain Planning Forecast Assess & mitigate leadership and organization risks of acquiring company, early in each transaction. Engage leadership teams early. Include behavioral risks in due diligence and integration forecast. Plan integration before deal close. Focus on successful marriage rather than only deal close. Impact • Quicker achievement of Performance Targets • Greater buy-in and trust amongst leadership • Improved Employee & Customer Engagement (Retention) • Sustained business success of combined enterprise 12
  13. 13. Remedy 2: Identify & manage the key variables (the missing links) driving the transaction process Structural Emotional Clarity Separation Anxiety Alignment Security & Value Integration (across Fear of Unknown teams & units) Trust Rational Biases Thinking Flaws Mental Models Groupthink It’s not simply about “Culture” per se. 13
  14. 14. Remedy 3: Complement traditional perspectives with emphasis on Organization Behavior Financial Technical Legal Behavioral And make hidden risks visible. 14
  15. 15. Remedy 4: Expand risk perspective to Behavioral Constraints The Fundamental Risk: What is the company’s capability to collectively and coherently think about, discuss, understand, solve problems, plan, and implement a transaction? If low, then odds of a failed transaction greater. Risk Mitigation Tool: Structured Visual Thinking™ process Improve the quality of the thinking; create shared meaning and commitment. What are the behaviors limiting… 1) Planning and implementing an acquisition 2) Business performance, pre- and post-acquisition 3) Organization change 15
  16. 16. Remedy 5: Ensure the top team and managers challenge all their assumptions …Flawed Assumptions invariably lead to flawed decisions which invariably lead to flawed behaviors and to flawed outcomes…no matter how well accepted they are. And unsurfaced, unchallenged assumptions reinforced by past success create unbounded optimism and illusions of superiority and control. The ‘Disease of Victory.’ 16
  17. 17. Remedy 6: Break the silos and build the Return on Relationships An elephant is like a brush Finance An elephant An elephant An elephant is like a is soft and is like a rope mushy Field snake Sales / Operations, Marketing or Operations / Customers, CEO Manufacturing or Suppliers An elephant is like a tree trunk And create a clearer, shared view of strategic fit, risks, integration needs; of new strategy and operating model…that all can commit to. 17
  18. 18. Remedy 7: Stimulate Inclusion of Employees Influence employee Buy-in to the transaction. and* Seek employee Investment in the transaction. Investment currency: Knowledge and Expertise and* Embed the Right Structures to draw out and sustain both. (I.e. communication & engagement, collaborative processes, technology etc.) *Buy-in without Investment breeds passivity, helplessness, disengagement. Investment without Buy-in breeds ambivalence, misalignment, waste, cynicism…and disengagement. With poor or no Right Structures, neither buy-in nor Investment will be sustained. And in any case, success of acquisition at profound risk. 18
  19. 19. Remedy 8: Discover how profit is in reality created & sustained by the company Identify the variables driving performance. Identify the weakest link in each of the separate companies. And the weakest link in the combined company. Manage the weakest link and the flow across all connections. 19
  20. 20. Remedy 9: Create Structural Alignment and process for performance improvement Current Reality “What are we actually getting?” Correction Performance - “What do we do Performance Gap to close the gap?” Strategy & Tactics “How will we act to get there?” Vision & Aspirations; Goals & Objectives “What do we want?” 20
  21. 21. Remedy 10: Build the Performance & Capability of Management Team Collective Intelligence / Right Collective Sensing People on “the Bus” Structural Dynamics & Source: Jim Collins Systems Thinking Organization Design + Values & Behavior Team Building Learning Shared Focus on the Results + Personal Vision of the Whole Engaging Excellence Enterprise Challenging Others across Beliefs & Peer Accountability Boundaries Assumptions Clarifying, Mutual Commitment Aligning & Shared Meaning Integrating Healthy Conflict Leadership Trust & Transparency Source: Patrick Lencioni Source: Peter Senge 21
  22. 22. Remedy 11: Unleash the Collective Intelligence & Experience of the company “A Great Idea is simply two Good Ideas coming together to meet for the first time.” Create a networked enterprise to increase… Speed Agility Resiliency Innovation Competitive Advantage …and engage people to do the right thing. And put the “Old World” organization model to rest. 22
  23. 23. The impact of eliminating the underlying causes? 1. Accelerate the Integration Curve 2. Minimize the ‘Shock Dip’ Deal Announced / Closed Business / Employee e C urv Performance n io & Engagement g rat e Int Shock Dip Time 100-day wall And minimize lost revenue, lost opportunity cost, cash flow burn rate 23
  24. 24. And the impact of doing more transactions more successfully? Increased valuation of the company Greater competitive advantage, larger marketshare Greater profitability Greater predictability (not forecasting) future performance & profit growth. 24
  25. 25. A Behavioral Perspective in the Transaction Life-Cycle Go / No Go Decision Deal Close Pre-Acquisition Due Diligence & Integration Integration Plan Learn, Adjust, & Alignment & Integration Planning Implementation Sustain Planning Forecast An experience behavioral perspective will ... Build shared understanding & commitment, before and after the deal. Improve accuracy of deal valuation. Maintain engaged performance and productivity, before and after the deal. Make the marriage successful. 25
  26. 26. Torrez BV: Operating at the intersection of diverse disciplines to help you Unleash your Intangible Assets Performance Care Problem Resolution Conflict, Infighting, Stress Commitment, Accountability Strategy Trust Leadership Development Sustained Development Business Performance Business Process Implementation Improvement Design & Org Psychology Optimization & Behavior Change As a partner with Private Equity, M&A Advisories, and Family Offices I help: • Generate sustained growth and increased returns, by fueling organic or buy-and-build strategies…in a sustainable manner. • Unleash significant untapped value hidden by behavioral and operational constraints at all levels and links in the value chain. • Build capability of management teams to predictably, consistently run and grow the business while mitigating performance risks. • Accelerate implementation of strategy and achievement of targets. • Create healthy, dynamic, Built-to-Last companies 26
  27. 27. Joe Torrez Torrez BV Joe@TorrezBV.Com +31 6 3430 5420 The Netherlands www.torrezbv.com www.twitter/torrezbv 27

×