Merger mania is in the headlines again with Three & O2, LSE & Deutsche Boerse, and Hon Hai & Sharp, amongst others, all busy at the start of this year.
But beware the belonging challenges that lie beneath. Will the big promise of “look at the size of my merger ” turn into value or tears?
80% of mergers fail to create value and 50% actively destroy it: and the prime cause is failure to merge cultures. This was the finding of KPMG’s research a few years ago and the reality is still playing out in the aftermath of big deals.
It’s just one aspect of how culture and belonging can harm businesses, as well as help. We’ve identified some of the belonging challenges that business leaders and deal makers need to be aware of.
How often has the promise of a ‘merger of equals’ turned into a domination game, or a ‘marriage made in heaven’ reduced to a living hell, burning both value and employees.
Yet in the due diligence around a deal it is still unusual for companies to consider cultural issues alongside all the benefits of distribution, production, geographic reach and complementary markets – all of which carry the potential for increasing shared value. But what about the people who turn all this into value? Are they willing to work together? Are they used to working in similar styles?
The symptoms are obvious in hindsight, they’re easy to see when reading the horror story of a failed merger that has destroyed the value of both companies.
Culture and belonging are often dismissed as ‘soft’: more true is that leaders find it too hard to pin down. It can be easy, once you know where to look and how to assess belonging.
You can see, hear and feel the symptoms of belonging, and then take the right action to address issues early. Here are a few favourites:
The victor and the vanquished: a hefty status play between ‘winners’ and ‘losers’ of a deal. This can suck the motivation from teams faster than a Death Eater. It often comes from a lazy answer to a complex challenge – let’s change the signs and unify it all under one brand. But the best commercial outcome requires a more nuanced view: integration, independence, or comfortable co-habitation?
You can feel these symptoms in daily interactions. Do people exchange openly and easily as they pass in the corridor? Or are they huddling in corners or behind folders in hushed gossip?
Legacy tribes: from a chunk of brands acquired quickly but left as a loose collection, without attention to how they work together.
You can hear and see these symptoms.
When an employee dissociates from the new name of the company, pointing their thumb over their shoulder to indicate the past, saying, wistfully
“Oh no, we didn’t use to be that, we used to be [OLD Co name]”
Or when the CEO points forward, to indicate the future, saying, exasperatedly
“Why don’t they get it?! Now we’re [NEW Co NAME] !”
Refusal to cooperate, isolationism: a reaction to the first two symptoms can be for small tribes to ring-fence. Far from collaboration, teams refuse to share knowledge, relationships or trust.
As I heard on a visit to a company as part of an assessment of belonging and culture
“No, no, we’re not them: we’re specialists and they’re different.”
“Oh no – we don’t tell them about that – this is OUR research, we have to protect our knowledge”
You can see and feel the potential harm at social times.
Do teams from the former companies have lunch together? Or do they go to different places – as happened in one bitterly failed merger, to two diners across the street from each other in a small Kansas town like the turf of rival gangs.
You can see, hear and feel the fragmentation, the senior teams cashing in on an early exit, the haemorrhage of talent. But it can take a while to realise that this is a whole that’s less than the sum of its parts. Left unaddressed this is a time-bomb.
A small investment, before a merger, in assessing the basis of belonging to both companies, and afterwards in bringing the tribes together, will pay great dividends longer term.
A company can promise great value from collaboration between teams and specialisms, but it will only happen because people want to make it work. The potential will only be realised when people have the motivation and it is easy to shift to new ways of thinking and working together.
- Unlocking Shareholder Value: The Keys To Success. Mergers & Acquisitions, Global Research Report 1999 by KPMG
– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –
Belonging Space helps organisations create a sense of belonging.
At our next seminar we’ll be looking at
What do I belong to?
How to overcome the belonging challenges of mergers, acquisitions and integration
on 21 April and 19 May
A few places left. Drop a line to Francis if you’re interested
Tel 0207 833 6434