How to avoid the three main factors hindering the success of mergers and acquisitions

Some hear mergers and acquisitions. Some hear Scylla and Charybdis. Either way, most are lured to death or destruction. While the lure of the Sirens was a myth, we know that 83% of M&A deals don’t add value. And we know why. They fail because of poor strategic focus, poor cultural integration and/or poor synergy. Unfortunately, avoiding these sirens requires more than just earwax. This requires deliberate and detailed effort.

Strategic focus

How many times have you heard someone say that one of their growth strategies is mergers and acquisitions? But mergers and acquisitions are not strategies. They are a means of implementing another strategy.

Strategy is about creating and distributing resources in the right place, in the right way, at the right time, over time to overcome barriers and achieve what matters. This means that this is the wrong place, the wrong time, and the wrong way. So strategies are about the fundamental choice of where to play and how to win. And the essence of how to win lies at the heart of the organization.

Michael Porter suggests that almost any value chain includes design/invention, manufacturing, shipping, and customer service/experience in addition to marketing and sales. Your single overarching strategy must define the right way to create and leverage the various competitive advantages in one of the top four, as well as marketing and sales—which every organization should do in one way or another.

This core strategic focus flows into strategic priorities supported by enablers and opportunities. For example:

  • Apple wins with a majority design and technological innovation. His stores are a marketing tool.
  • Coca Cola wins with a majority production a system based on its physical assets, in partnership with the prevailing distribution system of its bottlers.
  • walmart wins with a dominant product offer /Delivery infrastructure.
  • The Ritz-Carlton wins with the dominance of people service/guest experience.

The 17% of value-creating mergers and acquisitions tend to leverage an existing strategy. Apple should pursue mergers and acquisitions that expand the possibilities of design. Coke should focus on production. Walmart should focus on product delivery or shipping. The Ritz-Carleton must focus on the guest experience. And you should focus on mergers and acquisitions that allow you to focus on the essentials.

cultural integration

How many times have you heard someone say that they are going to acquire another organization and keep it as a separate organization in order to maintain the acquired strengths? Too many times. Almost by definition, you won’t be able to reap the synergies of a merger or acquisition if you do it separately. It cannot turn on your main focus separately. You must combine them and integrate them.

You have three options. 1) assimilate their people into their culture. 2) Introduce your people to their culture. 3) Combine them into a completely new culture. The first two choices are painful for people who abandon their heritage. Many of them will not make the transition and leave one way or another. The last one is the hardest. In any case, the culture should correspond to the main focus:

Ensuring Synergy

Too often, “synergy” is a euphemism for “cost savings.” To be fair, saving money is an important way to free up funds for other investments. But the most important synergies combine complementary strengths to deliver on strategic priorities.

See how Disney acquired Pixar. They didn’t care about saving. They bought Pixar a) to use its technology in all animation and b) to get a new lead in Disney Animation. They then hooked others up to a new enhanced platform to gain access to other characters and distribution channels through the acquisition of Marvel, then Lucas Films/Star Wars, and then Fox.

The right way to think about mergers and acquisitions

None of them are easy. Thinking is complex. The required implementation and change management is complex. When considering future mergers and acquisitions, consider:

  1. strategic focus. Make sure you have a clear understanding of where you are focused and how the purpose of the merger or acquisition will enable you to achieve your strategic priorities.
  2. cultural integration. Yes, Virginia, you need to integrate your acquisitions. Have a prejudice to choose one culture or another and assimilate everything into it.
  3. Ensuring synergy. Yes. Savings matter. And look for additional synergies in line with your strategic focus and new unified culture. Yes. All three of these ideas are integrated, as your M&A should be.

Click here a list of my articles in Forbes (of which #786) and a summary of my book: Mergers and Acquisitions Leadership

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