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Making a corporate marriage work
- by Stefan Stern
Bringing two companies together is an enormous task. There are grand, big-picture questions that to be solved, such as the new group’s strategy and direction. There are also administrative, logistical and technical challenges. Will new contracts of employment be required? Where should the headquarters of the combined operation be located? How can the companies’ information technology systems be integrated?
“It takes a certain humility to make a merger work,” says Charles Hampden-Turner, coauthor of Building Cross-cultural Competence. “It doesn’t follow that your company is a better one simply because it has taken another company over. It just means that you’ve got more money and have been prepared to pay,” ha says.
Work on bringing the partners together should start well before the deal become public knowledge. But how can executives start planning integration without the news leaking out? Some used a so-called “clean room”, where both sides to a deal can meet and discuss future plans confidentially. Computer manufacturers Hewlett-Packard and Compaq, for example, adopted this approach in their $25bn (￡13.3bn) merger.
Speed is of the essence. Roger Pudney of the UK’s Ashridge business school says: “There is often a tendency for companies to relax once the deal is signed, but this is the point at which speed of implementation becomes crucial. Successful Mergers and Acquisitions companies stress the importance of quick wins as a way of demonstrating that the new combination is already producing added value.”
HP and Compaq ran a series of “Fast Start” seminars for their staff as soon as the deal was announced, to provide reassurance and a sense of direction – seminars that had been planned in advance in the clean room. Offering employees detailed information is essential at the early stage. An internal human resources website set up for HP and Compaq staff received 2m hits on the day the merger was unveiled.
Managers will inevitably be occupied with practical, administrative changes, such as establishing new terms and conditions and pushing through any redundancies. Yet dealing with the cultural issues in a merger is more subtle and challenging. And when things go wrong in this context they can go wrong very quickly.
Michelle Bligh, a professor at Claremont Graduate University, California, has suggested measures leaders should take to avoid the worst consequences of mergers. After studying a merger of health organizations in the US, Prof Bligh advised leaders to avoid taking a dictatorial, top-down approach or micromanaging the transition. They need to respond as the new situation demands, she says, and must “help followers negotiate, modify and even manipulate cultural similarities and differences in the post merger environment”.
Prof Bligh identifies a few simple ground rules. Managers should recognize cultural differences between the companies, for example, by learning about the history of the new partner. They should give employees reasons why change is necessary, and find practical ways of communicating. As one manager told her: “When you sit down and start showing employees the nitty-gritty, you get buy-in a lot quicker.”
Symbolism matters too. “Instead of making great speeches,” Dr Hampden-Turner suggests, “why not start acting differently and providing a lead that way? Words are too easy, but actions will be noticed.” Even apparently simple gestures can count. Discussing employees’ new working conditions and being visible on the ‘shop floor’, for example, may reassure staff that management has an interest in their well-being. One manager in Prof Bligh’s study said: “We have to start with the little things: they really matter to people.”
How do the most successful acquirers handle the process of merger integration? General Electric, the US engineering conglomerate, has made more than 400 acquisitions in the past 20 years. But it is still learning how to make these deals work better. When GE bought Amersham, the UK bioscience company, for $9bn, it made a big effort to reassure the acquired business that it would not be steam-rollered.
Talk of a revival in merger and acquisitions activity is on the rise. Investment bankers and management consultants are once again seeking out potential deals and making flattering noises as they lead candidates to the altar. But marriages succeed or fail in the years following the wedding. Even before the hangover has worn off, the hard work has to begin.
- by Stefan Stern
Bringing two companies together is an enormous task. There are grand, big-picture questions that to be solved, such as the new group’s strategy and direction. There are also administrative, logistical and technical challenges. Will new contracts of employment be required? Where should the headquarters of the combined operation be located? How can the companies’ information technology systems be integrated?
“It takes a certain humility to make a merger work,” says Charles Hampden-Turner, coauthor of Building Cross-cultural Competence. “It doesn’t follow that your company is a better one simply because it has taken another company over. It just means that you’ve got more money and have been prepared to pay,” ha says.
Work on bringing the partners together should start well before the deal become public knowledge. But how can executives start planning integration without the news leaking out? Some used a so-called “clean room”, where both sides to a deal can meet and discuss future plans confidentially. Computer manufacturers Hewlett-Packard and Compaq, for example, adopted this approach in their $25bn (￡13.3bn) merger.
Speed is of the essence. Roger Pudney of the UK’s Ashridge business school says: “There is often a tendency for companies to relax once the deal is signed, but this is the point at which speed of implementation becomes crucial. Successful Mergers and Acquisitions companies stress the importance of quick wins as a way of demonstrating that the new combination is already producing added value.”
HP and Compaq ran a series of “Fast Start” seminars for their staff as soon as the deal was announced, to provide reassurance and a sense of direction – seminars that had been planned in advance in the clean room. Offering employees detailed information is essential at the early stage. An internal human resources website set up for HP and Compaq staff received 2m hits on the day the merger was unveiled.
Managers will inevitably be occupied with practical, administrative changes, such as establishing new terms and conditions and pushing through any redundancies. Yet dealing with the cultural issues in a merger is more subtle and challenging. And when things go wrong in this context they can go wrong very quickly.
Michelle Bligh, a professor at Claremont Graduate University, California, has suggested measures leaders should take to avoid the worst consequences of mergers. After studying a merger of health organizations in the US, Prof Bligh advised leaders to avoid taking a dictatorial, top-down approach or micromanaging the transition. They need to respond as the new situation demands, she says, and must “help followers negotiate, modify and even manipulate cultural similarities and differences in the post merger environment”.
Prof Bligh identifies a few simple ground rules. Managers should recognize cultural differences between the companies, for example, by learning about the history of the new partner. They should give employees reasons why change is necessary, and find practical ways of communicating. As one manager told her: “When you sit down and start showing employees the nitty-gritty, you get buy-in a lot quicker.”
Symbolism matters too. “Instead of making great speeches,” Dr Hampden-Turner suggests, “why not start acting differently and providing a lead that way? Words are too easy, but actions will be noticed.” Even apparently simple gestures can count. Discussing employees’ new working conditions and being visible on the ‘shop floor’, for example, may reassure staff that management has an interest in their well-being. One manager in Prof Bligh’s study said: “We have to start with the little things: they really matter to people.”
How do the most successful acquirers handle the process of merger integration? General Electric, the US engineering conglomerate, has made more than 400 acquisitions in the past 20 years. But it is still learning how to make these deals work better. When GE bought Amersham, the UK bioscience company, for $9bn, it made a big effort to reassure the acquired business that it would not be steam-rollered.
Talk of a revival in merger and acquisitions activity is on the rise. Investment bankers and management consultants are once again seeking out potential deals and making flattering noises as they lead candidates to the altar. But marriages succeed or fail in the years following the wedding. Even before the hangover has worn off, the hard work has to begin.
From the Financial Times.
1 comment:
thanks for the articel, used it in class
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