In Complex Sectors, Rely on Three Secrets to M&A Success

Following a competitive bidding war earlier this year, Alaska-Virgin America secured its spot alongside Delta, United and American Airlines within the pantheon of the top-five largest U.S. carriers. Pair this with a trio of healthcare deals worth a combined $45 billion—involving big names like Abbott Laboratories, AbbVie and Sanofi—and Microsoft’s recent acquisition of LinkedIn for $26.6 billion, it’s clear that the M&A boom has been reignited.

gettyimages-166076219-compressorYet, as investors and customers have seen all too often with past M&A activity in complex sectors, buying a brand name or earning a spot atop industry charts is not enough to call any deal a success.

It’s up to leaders of the merging entities to ensure deals go beyond ‘one plus one equals two’ and exploit the synergies between the two companies to build a better combined business. To do so, here are three steps leaders across every industry must take to ensure M&A success.

1. Craft a vision centered on the opportunity ahead. The single biggest pitfall that derails successful M&A transactions is a lack of vision for the opportunity that is following the integration process. In fact, the vision should be informed by an ‘expanded due diligence’ that looks at both quantitative factors, including financial and performance metrics, as well as the two organizations’ people and culture. To foster a sense of urgency and excitement around the deal, leaders must clearly spell out the opportunity inherent in the change ahead; be understandable, tangible and compelling to employees throughout both companies; and, most importantly, answer the question, “What more could we become together?”

“It’s up to leaders of the merging entities to ensure deals go beyond ‘one plus one equals two’ and exploit the synergies between the two companies to build a better combined business.”

2. Leverage informal networks to drive change. To cultivate the desired energy and culture for the new entity, leveraging the power of an informal networked team structure, running alongside the traditional organizational hierarchy of the combined firm is critical. While hierarchical organizational structures are important to ensure day-to-day tasks run smoothly in the new company, they aren’t always as successful when it comes to driving change among employees or incubating a new organizational culture. It’s vital that these informal networked groups run alongside the hierarchy, forming a “dual operating system” of sorts, to help accelerate the transference of ideas and execution of priorities and address the people challenges of change.

3. Test, learn, repeat. Leaders of the combining entities should encourage a ‘test-fast, fail-fast’ culture that allows and encourages the integrated, informal networked groups to act with more strategic agility and speed than a hierarchy, alone, could act. By allowing the network to quickly adapt to new ways of working, innovate and test out new processes, and disseminate new cultural norms, the leaders of the merging companies will, in turn, ensure key cultural traits do not get lost amid the chaos of the deal.

While success is far from guaranteed in any M&A transaction, it will hinge on the ability of leaders to craft and carry out a vision that combines the forces of hierarchical and network structures to create and sustain change in the reimagined business.


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