Buck Bond Group

Three Simple Tips for M&A Success Post-Day 1


Tip #1: Keep your people and culture front and center—up to Day 1 and beyond!

A merger or acquisition can be an exciting event. The C-Suite is full of talk about “Shareholder Value,” the trade media is buzzing and the Markets are excited by the prospective value of the newly combined organization. The Day 1 atmosphere is filled with promise and optimism. But as the memory of Day 1 recedes, employees tend to lose that sense of excitement or, even worse, begin to be skeptical of the future.

“Profitability and shareholder value cannot be driven by cost containment alone.” Rick Wildt Conduent HR Services Principal, Management Consulting

The reality is that more M&A deals fall short of expectations due to people and cultural issues than due to transactional fundamentals. Day 2 and beyond is where the rubber meets the road. It’s imperative to have a well thought out, yet nimble, change and communications strategy that effectively utilizes change enablers like onsite action teams, integration mentors and coaches, local office training and teambuilding activities, and leadership outreach through videos, WebEx and live townhall meetings.

Understanding people and cultural differences should begin during the diligence process and continue well beyond Day 1. Leaders will need to determine their actual tolerance for incorporating the positive attributes of the acquired company (culture, process, technology, etc.) – and if the decision is to incorporate little-to-none of these, communicating this honestly, but sensitively, is better than promising a “best of both worlds” approach. This will help to build trust and get everyone on board with what is changing, resulting in a retained and committed workforce.

Tip #2: Mitigate integration fatigue with sprints and clear finish lines

Maintaining integration momentum is critical to achieving long-term success. As the integration drags on (and it will!), and as the “run the business” activities increase, leaders become less visible and effective, management and employees start to lose interest and disengage, and business productivity and results are tapered. It’s like running out of gas on the highway.

Defining an integration finish line, getting leadership alignment on the conditions that must be met in order to achieve goals, and clearly articulating these parameters to change teams and to the broader workforce ensures that a set of common end goals are in sight.

Approaching integration as a series of sprints rather than a marathon will create the right level of urgency with an added opportunity to celebrate quick wins and milestone achievements. This approach also enables a concerted focus on integration vs. optimization, leaving the longer-term optimization efforts as a downstream objective. By maintaining an “integrate first, optimize later” approach, bookmarked by manageable timeframes, you can achieve milestones that add value to the deal while also providing a sense of accomplishment to your team, keeping them committed and energized.

Tip #3: Stay focused on revenue generation, not just cost savings

It’s an easy web for even the most seasoned business leaders to get tangled in. A deal is announced, inflated synergy targets are established and overly optimistic shareholder expectations are set, leaving executives with a significant burden to produce instant and often unattainable results. This scenario has played out time and time again, driving companies to obsess over achieving efficiencies and synergy targets in order to drive shareholder value, often at the expense of planning and executing effective growth strategies. Some of the most catastrophic deals in M&A history were not undermined by culture clashes, turf wars, or the failure to realize synergy targets alone. These deals also failed due to their inability to capitalize on new market channels and customer segments, brand power, diversification of products and services, or the intrinsic innovation value that each company had to offer.

Profitability and shareholder value cannot be driven by cost containment alone. Being able to define and articulate growth opportunities for the newly combined organization are just as critical, if not more so than identifying the synergy opportunities. Cost containment will remain a critical part of any M&A strategy, but being able to grow the top line while also realizing operational efficiencies will almost always guarantee deal success.