Leadership

Can This Merger Be Saved?

Yesterday’s Leadership Daily Advisor examined the current pace of merger and acquisition (M&A) activity and discussed what experts identify as an often-overlooked cause of merger failures: the culture clash. Today’s issue offers three more tips to successfully blend corporate identities:

Swiftly define what you want to build. Call it shared vision or dual identity, but making the call on culture and then communicating it well should inspire prompt action. Case in point: When the proposed merger of The Bank of New York Company and Mellon Financial Corporation was announced at the end of 2006, developing and articulating a culture for the company was a priority from Day One, according to Lisa Peters, former chief Human Resources officer.

Key to the integration of these two financial powerhouses was an executive committee that developed a culture through shared values—including client focus, trust, teamwork, and outperforming expectations. Employee communications were ramped up quickly and included an e-mail box where employees could ask questions and communicate directly with the CEO. An HR call center also handled merger-related inquiries, fielding more than 23,000 calls in a 3-month period.

Then, before the merger closed in 2007, employees got a chance to weigh in on the culture, mission, and management through an employee-engagement survey that asked the tough questions: “Are these values and goals believable to you? Can you live with them? How do you feel about management?” Honest feedback tested readiness for change and played a big role in the successfully combined company’s performance-based culture, Peters says.

Merger Mindfulness: Think the Unthinkable

‘Premortem’ your deal. Effective due diligence is about balancing opportunity with informed skepticism, notes Dale Stafford, a Washington-based leader of Bain & Company’s M&A practice, and rigorously planning ahead for what could go wrong is a wise move. Ask key stakeholders in any deal to think a year ahead or so, imagining that the alliance didn’t work out as hoped—for whatever reason. Then jot down everything that contributed to the imagined failure. It’s kind of like thinking the unthinkable. Or brainstorming for doom.

Next, focus on the showstoppers—things that have the greatest likelihood of derailing success and future prospects. Once you have that list, you can aggressively manage those risks upfront and dramatically improve the odds that your deal will deliver as planned. The upshot: Conducting a premortem greatly increases your chances of never having to do a postmortem.

Give it a test run. In some cases, companies seek out ways to work together as a trial—testing the relationship before making the union official. Benefit: Doing so enables both sides to gauge respective strengths and weaknesses more fully and collaborate proactively on managing risks. Experts at global advisory firm EY acknowledge that many proposed alliance situations contemplate parallel operations for some period of time before the “eggs are scrambled,” so to speak, and the merger becomes concrete.