1. May 2, 2013
Carolyn Vavrek, Partner
Heidrick & Struggles - Leadership Advisory Services
M&A As The Ultimate Leadership Test:
Are Your Leaders Ready?
3. 2
What separates the best from the worst?
What makes a good leader?
At Their Best
BUYERS
► WHAT THEY DO: Understand the strategy. Translate
information to action. See decisions in a broader
context. Think outside of the personal impact. Have
confidence in the outcomes.
► HOW THEY ACT: Listen. Influence. Reframe.
► WHAT THEY SAY: ―I hear you but look at it from this
perspective.‖
SELLERS
► WHAT THEY DO: Create relationships. Build bridges.
Act as ambassadors for their company. See the
transaction as a learning opportunity. Have faith in
the outcomes.
► HOW THEY ACT: Show-up. Share. Seek.
► WHAT THEY SAY: ―Interesting. Please help me to
understand more.‖
At Their Worst
BUYERS
► WHAT THEY DO: Miss the broader context. Focus on
the short-term. Keep score of decisions as win –
lose. Focus on their personal gains. Worry.
► HOW THEY ACT: Challenge. Deflect. Belittle.
► WHAT THEY SAY: ―I don’t believe you. What’s in it
for me?‖
SELLERS
► WHAT THEY DO: Hide information. Block people.
Selectively participate. Negotiate everything. Focus
on their personal gains. Doubt.
► HOW THEY ACT: Hide. Lie. Question.
► WHAT THEY SAY: ―You are wrong. My way is better‖
4. 3
Critical Leadership Competencies
Source: Heidrick framework for assessing leadership effectiveness.
Competencies critical in a transaction situation highlighted.
LEARNING AGILITY
Understanding the
Environment
► External awareness
► Best practice perspective
► Customer orientation
► Internal awareness
DEDUCE
Mastering Complex
Business Problems
► Analytical thinking
► Conceptual thinking
► Creative thinking
SELF LEADERSHIP
Mastering Self
► Adaptability
► Emotional facility
► Self development
POSITION SPECIFIC
REQUIREMENTS
Business/Functional Mastery
Customized, critical:
► Business/Functional Acumen
► Business/Functional
Experience
ENVISION
Leading Visionary Change
► Visionary leadership
► Organizational buy-in
EXECUTE
Leading Results
► Driving results
► Decisiveness/Decision
making
► Drive and determination
► Managing innovation
ENGAGE
Leading Involvement
► Openness of
communication
► Team leadership
► Relationship building
► Modeling key values/ ethics
► Delegating and empowering
5. 4
Critical Leadership Competencies
Source: Heidrick framework for assessing leadership effectiveness.
Competencies critical in a transaction situation highlighted in bold and yellow.
LEARNING AGILITY
Understanding the
Environment
► External awareness
► Best practice perspective
► Customer orientation
► Internal awareness
DEDUCE
Mastering Complex
Business Problems
► Analytical thinking
► Conceptual thinking
► Creative thinking
SELF LEADERSHIP
Mastering Self
► Adaptability
► Emotional facility
► Self development
POSITION SPECIFIC REQUIREMENTS
Business/Functional Mastery
Customized, critical:
► Business/Functional Acumen
► Business/Functional Experience
ENVISION
Leading Visionary Change
► Visionary leadership
► Organizational buy-in
EXECUTE
Leading Results
► Driving results
► Decisiveness/Decision
making
► Drive and determination
► Managing innovation
ENGAGE
Leading Involvement
► Openness of
communication
► Team leadership
► Relationship building
► Modeling key values/ ethics
► Delegating and empowering
ENVISION
Leading Visionary Change
► Visionary leadership
► Organizational buy-in
EXECUTE
Leading Results
► Driving results
► Decisiveness/Decision
making
► Drive and determination
► Managing innovation
ENGAGE
Leading Involvement
► Openness of
communication
► Team leadership
► Relationship building
► Modeling key values/ ethics
► Delegating and empowering
DEDUCE
Mastering Complex
Business Problems
► Analytical thinking
► Conceptual thinking
► Creative thinking
SELF LEADERSHIP
Mastering Self
► Adaptability
► Emotional facility
► Self development
Option 2
6. 5
Case Study: Leading a merger of equals
Leading a transaction
Case Study: Leading a merger of equals
Agenda For Today
Main takeaways
7. 6
Exercise
Question 1
Which of the two leaders would you recommend the
Board select to lead the combined company? Why?
What conditions / assumptions would change your
recommendation?
8. 7
Exercise
Question 2
In the first meeting with you (the integration
leader), the CEO asks you to advise him on his role
in the operational integration, customer
engagement, people selection, ongoing business
issues, Board relations etc. What do you
recommend to him?
12. 11
Main Takeaways
Leadership is the most important enabler in a
transaction
Leadership comes in different flavors
Leadership is not just an individual but a collective
effort
14. 13
2008 issue of the Journal of Business Strategy
Mergers and acquisitions destroy
leadership continuity in target companies’
top management teams for at least a
decade following a deal. Target companies
lose 21 percent of their executives each
year for at least 10 years following an
acquisition – more than double the
turnover experienced in non-merged firms.
15. 2008 issue of the Journal of Business Strategy
Mergers and acquisitions destroy
leadership continuity in target companies’
top management teams for at least a
decade following a deal. Target companies
lose 21 percent of their executives each
year for at least 10 years following an
acquisition – more than double the
turnover experienced in non-merged firms.
Option 2
16. 15
2013 Heidrick & Struggles research on New CEOs
I would reprioritize my actions in my first
months. I rolled up my sleeves and started
‘extinguishing fires’. Instead I would spend
more time on longer-term actions like
strategy clarification, operational
efficiency, and sales improvement.
17. 16
2013 Heidrick & Struggles research on New CEOs
As a leader in transition, you have a finite
window in which to make a lot of change;
after that, the organization’s gravity just
sucks you in, and you’re back into business
as usual. There’s a period of six to nine
months when everyone expects the new
guy to make changes, and you have to
move quickly to make the best use of that
opening.
18. 17
2013 Heidrick & Struggles research on New CEOs
If I could do it over again, I would re-charge that
sense of urgency around a change roadmap, and
realizing that it really is about having a finite
amount of time. Was I being as clear as I needed
to be? Was I driving as much change as I needed
to? I would be more explicit on the people
front, focusing on the top team and one layer
down, and moving more quickly to get it right. I
would think very hard about how I needed to
spend my time differently.
19. 18
2013 Heidrick & Struggles research on New CEOs
Identify the critical few things that are
most important, then stay focused on them.
Keep in mind that whenever the CEO or the
Board ask questions, people have to
scramble around finding the answers; be
judicious in the number of questions you
ask, so you don’t get your people off task.
21. 20
Interesting M&A Leadership Quotes from Different
Sources
► Journal of Business Strategy July 2008 Vol 29 – ―A study published in the July/August 2008 issue of the Journal
of Business Strategy suggests that mergers and acquisitions destroy leadership continuity in target companies’ top
management teams for at least a decade following a deal. The study found that target companies lose 21 percent of
their executives each year for at least 10 years following an acquisition – more than double the turnover
experienced in non-merged firms (Newswise, July 14, 2008). (Trying to find actual source – article by Jeff Krug)
► Mercer – Impact of Culture on M&A - ―For example, in a 2004 transatlantic study of executives involved in M&A
deals, 75 percent of them cited ―harmonising culture and communicating with employees‖ as the most important
factors for successful post-merger integration.‖
► Senn Delaney – The compelling business case for culture integration in M&As - ―It’s been well documented
over many years that up to one third of mergers fail within five years, and as many as 80 percent never live up to
their full potential. A great deal of evidence indicates that the ultimate success of mergers and the amount of time it
takes to get them on track is determined by how well the cultural aspects of the transition are managed.‖
► Senn Delaney –The compelling business case for culture integration in M&As - ―A study published in the
July/August2008 issue of the Journal of Business Strategy suggests that mergers and acquisitions destroy
leadership continuity in target companies’ top management teams for at least a decade following a deal. The study
found that target companies lose 21 percent of their executives each year for at least 10 years following an
acquisition – more than double the turnover experienced in non-merged firms.
Research – to be made
into a conference slide
22. 21
From Deloitte – How Transformative Leadership
Skills Can Deliver Success
► Deloitte– ―After weeks of negotiations and due diligence, it’s easy for the leadership team to forget that some
stakeholders may be caught off guard when they hear about a pending deal.
― Effective leaders control potential rumors and speculation by considering the perspective of their stakeholders—
analysts, shareholders, employees, vendors, and customers—as they respond to each group’s concerns.
― Influential leaders go beyond control; they create good buzz. Along the way, they provide the words that spur
stakeholder excitement and anticipation by sharing the value that will likely emerge from the combined entities.
From this common message, the vision can be tailored to each group and milestone along the journey of
merging the organizations. Laser-focused on new opportunities for all, influential leaders set realistic
expectations through clear, honest, and transparent actions and words.‖
► Deloitte -- Engaging Leadership to Lead Differently -- Effective transformation through M&A demands that
functional leaders demonstrate a new set of skills. ―As a prime member of the leadership team, CFOs should
challenge themselves and other leaders to think and act in ways that balance the demands of the future with the
needs of the present,‖ Ms. Fernandes notes. They also should identify what they can be doing differently to help
move the organization forward by:
― * Encouraging a collaborative environment among the leadership team with integration planning that is
transparent and synchronized.
― * Asking themselves to communicate specific ways finance can contribute to the new organization’s goals—and
how to reward the finance staff for doing so.
― * Identifying synergies that could be created within various areas and how to go beyond the obvious growth
and cost savings.
― * Making sure that frontline managers have the information, training and tools required to explain each
employee’s role.
Research – to be made
into a conference slide
Source: http://deloitte.wsj.com/cfo/2012/04/30/how-transformative-leadership-skills-can-deliver-success-in-ma
23. 22
From Egon Zehnder – Return on Leadership (joint
study with McKinsey)
Egon Zehnder
While such organic growth is driven by excellence across a broad cadre of senior managers, the study’s
analysis suggests that inorganic (M&A) growth is driven primarily by top teams. The key competencies for
M&A differ too: top executives must have mastered the ability to shape sophisticated, integrated strategies
that address customer needs and market trends (Exhibit 2). To be within the top-quartile inorganic growth
bracket, executive teams of the respective companies had to excel in a broad range of competencies; along
with Customer Impact, two additional key competencies came out very prominently:
― Market Insight – the ability to look beyond the company’s current context to discern future growth
opportunities
― Results Orientation – the ability to lead and transform a business for high performance
22
Research – to be made
into a conference slide
24. 23
From Egon Zehnder – Return on Leadership (joint
study with McKinsey)
Egon Zehnder
► While such organic growth is driven by excellence across a broad cadre of senior managers, the study’s analysis
suggests that inorganic (M&A) growth is driven primarily by top teams. The key competencies for M&A differ too:
top executives must have mastered the ability to shape sophisticated, integrated strategies that address customer
needs and market trends (Exhibit 2). To be within the top-quartile inorganic growth bracket, executive teams of the
respective companies had to excel in a broad range of competencies; along with Customer Impact, two additional
key competencies came out very prominently:
― Market Insight – the ability to look beyond the company’s current context to discern future growth
opportunities
― Results Orientation – the ability to lead and transform a business for high performance
Research – to be made
into a conference slide
25. 24
From Egon Zehnder – Return on Leadership (joint
study with McKinsey)
Egon Zehnder
Research – to be made
into a conference slide
26. 25
From McKinsey – Do you have the right leadership
for your growth strategies
Research – to be made
into a conference slide
27. 26
From Mercer Study – Impact of Culture on M&A
Research – to be made
into a conference slide
