AI Issue 4 2018 - John Harrison & Company

12 Acquisition International - Issue 4 2018 &A is a regular feature of modern business. Even in times of deep economic uncertainty M&A activity continues, as surely as night follows day. And rightly so. Acquisition of new capabilities usually outperforms deals based on increased scale alone, and strong companies can accelerate growth by acquiring the assets, territories, technologies or skills of others. For this to play out well, mergers and acquisitions need to be completed successfully – and that means they need comprehensive and structured post-deal integration. We’ve helped a lot of organisations successfully navigate the M&A process, examined what makes deals go well, and have published a comprehensive research report on the topic of “Inconvenient Truths” . In the March issue we outlined three crucial pre- deal leadership behaviours that help companies achieve M&A success. Now we are looking at three more ‘late pre-deal’ leadership behaviours which can play a role in success or failure. 1. Be aware of, and resist, deal fever . In our research more than 90% of people said ‘deal fever’ had a significant if not critical impact on M&A performance. 12% said it always had an effect, and 24% said it had an effect most of the time. You can be sure this effect wasn’t positive. So what is deal fever, and how can it be avoided? Howleadershipbehaviours can helpM&Adeals bemore successful M There is often a psychological predisposition among M&A teams to get the deal done, no matter what. M&A teams often operate at a highly strategic level. There might even be financial incentives to complete a deal, and will almost certainly be the prospect of loss of face if a deal fails. The time and energy spent building towards a deal is significant and the closer the deal comes to completion, the more pressure builds. The more energy – and money – is invested, the harder it is to pull out, and the more difficult it is for the M&A team to express reservations. The irony is that as the finishing line approaches, due diligence or negotiations are more likely to expose reasons to step back, and these are less likely to be acted on. Two strategies can help an organisation avoid deal fever, and they are easy to implement: - Put stage gates in place to act as effective stop points and use these to bring people together to take stock. Allow people space to step back and examine things in a cool- headed, detached way. Support free and frank expressions of opinion where people can say what they think without fear or favour. - Ensure all deal assessment includes looking at what will happen after the deal. How will IT systems be integrated? How will organisational cultures be united? How practical are the M&A aspirations? What risks might integration pose to day-to-day business? If there are doubts, can they be mitigated or is the deal not such a good idea as first thought? 2. Don’t let politics and ego get in the way of objective debate . At BTD we have seen plenty of situations where an overbearing CEO pushes a deal through while others are too timid to voice their opinions. We’ve also seen situations where some executives, often (but not always) Finance Directors or those with a legal remit, push against a deal, perhaps because they see additional work and risk coming their way without sufficient recognition or rewards. Such dynamics around the executive table can’t help an objective evaluation of a particular deal. This is no small matter. Our research found that 90% of executives at least occasionally withheld objections to a deal when there was widespread support for proceeding, and 23% said they did this always or most of the time. The CEO must lead by recognising these dynamics and motivations – including in themselves – and ensuring the environment allows all voices to be heard and respected. The same stage gates designed to help mitigate deal fever can also facilitate this process. 3. Ensure that those doing the deal are accountable for delivering the benefits . M&A teams are often deal specialists whose role requires them to step back once the deal is done. Consequently, they don’t always understand – or need to care much about – the operational practicalities of making the deal work. This can’t be right. For example, if a merger has entry into a new territory as its primary goal, then surely those responsible for successfully executing the market entry should be involved and accountable pre-deal, so that the practicalities and risks of making it work are on the table, and those agreeing to the deal itself are the same individuals charged with delivering the goods post-deal. This will be quite a challenge to some executive teams, as it will involve including lower-level managers and staff in the decision-making process. But the alternative is a poorly thought out deal plus disgruntled middle managers who feel saddled with an acquisition they do not fully understand or would not have voted for. At best this results in reduced motivations, at worst the very talent that’s expected to see the merger through may lose faith and jump ship. By recognising and adopting these three ‘pre-deal’ leadership behaviours, leaders can help their M&A deals proceed to long-term success that is good for the business and everyone in it.