THE BLOG

83 Percent of Mergers Fail. Leverage a 100-Day Action Plan for Success Instead.

02/04/2015 08:27 am ET | Updated Apr 06, 2015

A KPMG study indicates that 83 percent of merger deals did not boost shareholder returns. Robert Sher suggests this is because of mismanagement of risk, price, strategy, cultures, or management capacity. Don't do that. Instead, reduce your risk of failure and accelerate results by managing mergers and acquisitions at both enterprise and personal levels with a 100-Day action plan for the new team, working through behaviors, relationships, attitudes, values and the environment from the outside in:

Environment

No merger happens in a vacuum. In understanding the opportunities and risks, make sure you take into account all the important players. Think through how your customers, collaborators and competitors are going to react. Too many leaders of mergers and acquisitions assume the environment will continue to evolve as it has. It won't. Consider where the merged entity will play in the new world order.

Values

Be clear on what matters and why. If the merger or acquisition isn't going to allow you to serve some customer better than the entities could do separately, walk away. You must create value before you can capture it.

Attitude

Arguably if the leaders of more mergers and acquisitions thought through how they were going to win together fewer of them would lose together. You must get your strategy right and aligned with your posture and culture.

Relationships

ThoughtFarmer Co-founder Chris McGrath shared some startling insight into merger and acquisitions' impact on employee engagement.

  • There is a 23 percent increase in "actively disengaged employees" after a change event -- even if no one's job is affected. He got this information from an AON/Hewett study and went on to explain that
  • It takes about three years to return to pre-merger engagement levels.

He told me what had happened to his online banking team at Mercantile Bank when they were acquired by Firstar (US Bank). First his team's project was eliminated as redundant. But his team was not because their skills were "strategically important". So they were in place with nothing to do. They became the "poster boys for active disengagement", spending months reading, lunching, "Starbucking", and playing tennis until they got their retention bonuses. McGrath resigned that same day.

Forget the difference between levels of engagement (compliant, contributing, committed). Actively disengaged employees need to go away sooner rather than later so you can focus on connecting with and building relationships with the employees that are going to make a difference.

Behaviors

In almost any situation there is a small set of actions that will have the greatest impact. You're always better off focusing on them. In a merger or acquisition, these will fall into strategic, organizational and operational buckets.

Strategically, make sure you are creating and allocating the right resources to the right places in the right way at the right time over time. All is in the service of an energizing mission and vision as well as a set of shared goals that are crystal clear. It's a process, not a one-time event.

Organizationally. McGrath explained that, during a merger or acquisition, the "Number one thing is communication. You can't possibly over-communicate. Your goal is to win the hearts of employees so they truly embrace the merger." His firm creates secured merger intranet sites that both the acquirer and target's employees can access. If you can get to everyone live and in person, great. If you can't, leverage technology. Either way continually reinforce the shared vision and values along with news and successes around the integration.

Operationally, make sure you are driving towards operational excellence in the most critical highest value-creating areas and outsourcing the rest, while leading the team to deliver quick wins in order to generate and sustain positive momentum and gain engaged followers along the journey.

Keys to success

To be clear, you must manage defend yourself against each of the five horsemen of merger apocalypse: risk, price, strategy, culture and management capacity. They are each important. This article has emphasized the leadership, personal, strategic and cultural aspects not because they are more important than the enterprise aspects, but just because they are often taken for granted. This is why 83 percent of mergers and acquisitions fail and why yours won't. You're going to craft and implement a 100-Day value acceleration plan to manage enterprise and personal cultural issues.