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> [原創] Outcomes and opportunities of M&A, Thoughts and Reflections
Pearltea
發表於: Feb 16 2016, 20:26  評價+1
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I've been thinking a bit lately on some of the takeaways from M&A (Merger & Acquisitions) and change management, and would like to share a few thoughts here.  These are pretty scattered thoughts I'll try my best to articulate them in a more structured manner.
 
Part of my daily work involves taking parts during the M&A process by providing insight from my perspective, and my inputs are driven based on how much benefits the deal can bring in my area of focus.  So by no means I’m an M&A expert since there are experts in different fields and there are specialists who understand the process in totality, but through the experiences of seeing the process, from the decision making to the post M&A integration, I’ve observed some practices and trends, all of them seem unique yet variate little in terms of the motives behind them.

For those who are not familiar with M&A, it is simply a transfer or combination of ownership between two parties, where it involves a buyer and a seller.  Without getting into too much technical detail, let’s focus on a few main reasons of such interests and transitions: 1- to eliminate competition, 2- to form a larger group in order to create dominance in market share, 3- to optimize the utilities of two parties, or 4- to integrate strategically in order to provide better efficiency etc., all of which is to achieve the maximum business profits possible.

Now let’s make an example based on an M&A of two for-profit companies.

So what happens when the deal is said and done, don’t two companies just combined? The short answer is yes, but in reality a lot more needs to be done internally than most can imagine: Operations, Legal, IT infrastructure, Human Resources, Finance, Marketing, Strategies etc. For example, legal filings, systems integration, financial/management reporting, branding, communications, just to name a few, will face many struggles along the way for the duration of the merger. However, the biggest challenge is not in the levels of difficulties or the complexity of the process, but the lack of collaboration which originates from people when everyone is not on the same page.  

Are people being difficult? It depends entirely on your perspective of difficult.  In reality, no one was intentionally trying to be uncooperative for the sake of doing so.  However, since the two formerly existing companies formed into one new company, the intrinsic values of two former companies still remain largely different and apparent, and these values (or business culture) are carried down by two parties – the sense of belonging, the pride in its old glorious days, the ways of doing business, and the proximity between certain groups. And when it comes to facing changes, it creates a level of uncertainties and the lack of trust between the new colleagues, which can result in resistance to changes and moving forward, and this poses serious risks to the success of the combined companies.

As one company, it’s important to recognize and retain some of the standard practices that worked well in each individual company and got each of them to where they were before the merger.  However, it is not optimal or even realistic to operate in the old ways in parallel without proper standardization and integration, because the combined companies would not benefit from the synergy as one but hurt by the lack of visions and directions.  Something has to give and it’s guaranteed that each side will not find the offset perfect and optimal. But the change is for the greater good for one and its future.

In this time, what is the most important thing that top management needs to do?  In my opinion, it is to identify a team of trustworthy managers who have deep understanding of the values and the advantages of the two individual companies, who can identify opportunities and execute strategies for the best interests of the combined companies, and who can manage and communicate the changes in the most effective way.  Whether the change means a completely different way of doing business, giving up on discretionary expenses, implementing tedious internal operating requirements,  the company can’t afford to have someone telling his/her old team that “I agree that the change sucks – I’m sorry and I’m with you on this, but there’s nothing much I can do about it.” It needs to be someone who can determinedly presents the vision of the future state, and the benefits of getting there. A good leader will say, "Let’s focus on our goals here. There were inefficiencies in our old practices and we to make some changes.  If we do better on building solid relationships with our existing clients, it will allow us to retain more businesses and achieve higher organic growth.  If we can improve this by x% annually, we can look at doubling our market share in n years.  Another opportunity here is that as one company, we have expanded network and additional resources to tap into if necessary; it will make our jobs easier.  We value your hard work and effort which brought us to where we are today and our success will rely on your continuous support."

Now down to the level of individual employees. As an employee, there are a variety of choices:  you can be unsupportive and revert to doing things the old way; you can move forward unwillingly; you can embrace the changes with a positive attitude, adjust, improve, and do your best to show your flexibility and competency; or you can pursue opportunities elsewhere.   The choice is entirely yours, but when the M&A cannot be undone, it is unrealistically to expect that changes will never happen, or the management is willing shift their direction for the interests and benefits of one or a smaller group.

From my experiences, the success of an M&A really depends on the integration of people into one identity.  Even if the transaction makes the best business sense from a branding/finance/sales perspective, without cooperation, collaboration and unity, the deal is doomed to fail.  We read about all types of outcomes of the M&A, the good, the bad and the ugly, and most experts tend to draw conclusions by attributing the factors behind the core business models.  While I agree that some indeed failed due to being a poor strategic merge to begin with, it is more important to remember that the core value of the company lies within the people. The purchase is only good when it is contingent upon acquisitions of the right talents, where the right people demonstrate adaptability by welcoming changes with an open attitude, and the ability to identify opportunities and strive for improvement under different conditions.

Perhaps I am alluding this to something we’re discussing or even debating heatedly over recently. Although there are some clear variations on the requirements and the operating differences between a macro and a micro level, the formulae of success can be quite similar.

EDIT: grammar/spelling

本篇文章已被 Pearltea 於 Feb 18 2016, 14:59 編輯過
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發表於: Feb 17 2016, 05:15  
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It's highly depends on employees personal attitude towards team spirit. When a company/department completed exceptional achievements in the past, they created their high degree of self-recognition, mutual trust, perhaps even the sense of "Splendid isolation". That made some colleagues believe that they perform better efficiency by working independently.

This reminds me an issue from my company that told a story about team work.
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Pearltea
發表於: Feb 17 2016, 16:56  
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Thanks for your response. 

Companies often host team building activities, career developing workshops, or departmental gatherings trying to boost employee morale and encourage team collaborations.  Some worked well and got the messages across.  However, some failed and created more distrust and cynicism among employees.

The lack of trust is the biggest drawback in teamwork and it could hinder the success of the company when it comes to implementing changes or moving towards different directions. From my experiences,  here are some of the approaches that a company might take to address that:

Establish two way communications – host routine meetings to keep communications more transparent.  Employees would feel more comfortable getting a sense of the status of the changes, what it means to the company performance and their job securities. On the other hand, create routine surveys to gauge the sentiment and receive constructive feedback from employees.  Look at the quantitative measures as well as the qualitative evaluations – make adjustment to improve efficiency and address employees’ concerns and needs as necessary.

Build a strong leadership team – insert key and trustworthy personnel into the management team. The worst thing the company can do is to have a leader who doesn’t communicate the directions and the reason for the changes effectively.  A good leader is able to understand and implement the changes – what it means to the future of the company and what it means in terms of behavioral/attitude adjustments, and communicate them in a clear, concise, and positive manner to the organization.  The good leader also demonstrates the ability to listen feedback; attract, motivate, and retain the right talents.

Incentivize performance – reward drives actions and results. Individual goals can be set, but it’s more important to set clear and relevant goals (or the buzzword SMART for specific, measurable, achievable, result-focused, and time-bound) for the management. Hold the leaders accountable and reward them base on business performance, talent retention, and employees’ satisfactions.

本篇文章已被 Pearltea 於 Feb 17 2016, 20:16 編輯過
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