MERGERS, ACQUISITIONS, AND CONSOLIDATIONS NDMA Inc.: MERGERS, ACQUISITIONS, AND CONSOLIDATIONS
achieving the synergies through a participative integration process
A high-powered integration process can be designed for those organizations that seek synergies from their acquisitions and mergers beyond just economies of scale.
Combining two organizations does not, in itself, gain a high degree of synergy. It can eliminate redundancies and accomplish financial synergies. But a simple consolidation of organization charts does little to create the product and market synergies on which most acquisitions and mergers are based.
Specifically, the goals of a high-synergy merger include the following:
1. Build a single, integrated organization, designed to meet the needs of the entire client community (the customers of all component organizations).
2. Use the merger process to build a new, high-performance organization, beginning with a clean sheet of paper (i.e., using knowledge of the past but not the designs of the past).
- Merge all five systems within organizations: culture, structure, the internal economy (i.e., budgeting, priority setting, chargebacks, and resource reporting processes), methods and tools, and metrics and rewards.
- Select systems and processes from all component organizations that best support the new organizational design.
3. Treat everyone fairly, and put the best talent in each job, regardless of its origins.
To achieve a high-synergy merger, organizations can utilize an adapted version of the RoadMap transformation process. In doing so, they not only build a single new organization out of the pieces in a fair, best-of-both-worlds manner. They also build an organization capable of significantly higher levels of performance than any of its components.
Benchmarks of a Successful Merger
A successful merger process meets the following expectations:
Commitments
* Continue to meet all existing commitments until they are explicitly changed, and continue internal investments such as training.
* Make new commitments with respect for the time to be invested in the merger process (lost productivity).
* Clearly define the decision maker for each type of decision at each point in the merger process.
* Proactively help decision makers understand the costs and benefits of current and proposed commitments and internal investments so that they can choose what they'll buy and what they'll cut (priorities) within available spending power.
* Involve potential future, as well as current, stakeholders in merger decisions.
Merger Process
* Openly communicate with everyone concerned: the vision for the new organization, the scope of component organizations affected, the merger process, its timetable, and its status.
* Include representatives from all affected organizations on facilitation teams that plan the merger process.
* Use the facilitation team to help stakeholders design their new organization, not make decisions for them.
* Solicit everyone's input about the merger process and the design of the new organization.
* Do any necessary lay-offs before or after the organization design process, but not during, so as to create a safe environment for participation in design.
* Encourage collaboration among members of all affected organizations throughout the merger process.
* In every aspect of the merger process (eg, design of the new organization, selection of leaders), treat people equitably without regard for which component organization they came from.
- Assign jobs based on competence, using a selection process that is both equitable and perceived as equitable.
Personal Transition Process
* Clearly communicate how the merger will affect people individually.
- Quickly communicate to all employees their planned retention period (leave now, stay for a migration period, or stay permanently), and offer incentives commensurate with the objective.
* Help people deal with the personal stresses of change.
* Help people who will not have jobs in the new organization find employment elsewhere.
Organizational Design
* Whenever possible, manage global groups rather than forcing people to relocate.
* Design the new organization to meet customers' expectations of results rather than their opinions about its structure.
Merger Strategy
The strategy is essentially as follows:
1. .SH:Consolidate: Put the organizations together under a common boss, leaving their extant structures intact. While this alone gains no synergies, it gives one executive the legitimate authority to lead the merger/transformation process.
2. Integrate: Use a participative process to integrate the organizations. Through participation of all of the affected managers, the best knowledge is involved in designing a new organization to satisfy all constituents. Furthermore, the process itself is a powerful team-building experience that breaks down walls, builds working relationships, and generates commitment to the new organization - all while accomplishing real work, the design of the new organization.
Even if headcount savings are expected, it is important to go through merger process without cuts, to build a safe environment for participation. Once the new organization is up and running, its internal economy will automatically determine cuts and fund growth opportunities, continually matching supply to demand forevermore.
3. Optimize: Help each manager optimize the newly integrate group to produce the expected synergies and cost savings. This part of the process is ongoing and continual.
Of course, this strategy requires patience. A well-planned, participative process takes time. On the other hand, a hasty, top-down merger process creates chaos and turnover, misses opportunities for synergies, and ultimately takes even longer to achieve a well-running organization.
Investments in planning and participation early in the process should more than pay off in terms of both the ultimate benefits and the total time it takes to integrate the businesses.
How NDMA can help
Leadership briefing
RoadMap® Transformational Leadership Workshop:
how to systematically design organizations to maximize human performance
Publications
TRANSFORMATION: RoadMap: how to understand, diagnose, and fix your organization (second edition).
Consulting services
Consolidation Processes NDMA Inc.: Consolidation processes
shared services and acquisition integration
Contact us for a free one-hour telephone consultation on your unique challenges.
