Succeed with your M&A strategy, first time and every time

  • Posted on June 6, 2023
  • Estimated reading time 5 minutes
Succeed with your merger & acquisition strategy

Thousands of mergers, acquisitions and divestitures happen in business every year. The drivers vary widely – to scale and grow, open new markets, to accelerate environmental, social and governance (ESG) transformations, fund new investments or to acquire skills and technology.

Businesses know plenty about the markets they operate in. But when it comes to integration, there’s little focus beyond “we want to acquire this company.” The risk? As many as 80% of mergers and acquisitions (M&A) fail to achieve the business outcomes that triggered the process. That’s true for organizations that have done dozens of deals as well as first-timers.

Success in M&A is more than just finding the right target. It's about being prepared for the entire process. While contractual commitments may require a rapid transition for the deal, rushing it can be hugely counterproductive, with adverse impacts on total profit and loss (P&L) and the ability to capitalize on growth opportunities. Put simply, the primary reason for failure is lack of planning.

What issues often get overlooked?

• Cybersecurity: The rush to integrate two company networks is an ideal time for threat actors. When a new network is connected, they move laterally across business systems, looking for data or to cross-contaminate through malware.

• Technology: After the first day of integration, employees often can’t request access to resources in another business or region or log in to key business systems like email, HR and communication platforms, or they struggle to work on incompatible technology environments.

• People: M&As often prove to be a frustrating experience for employees. Too often employee onboarding into the new entity is not systematically addressed. And that’s before any cultural alignment. As a result, it’s common for resources with key skills and institutional knowledge to leave a company before and during the transition.

Without proper focus and investment, these problems can drag on. We’ve seen it in our post-M&A work: two merged organizations were cooperating but lacked a workplace or systems integration even after two years. They were culturally divided and spending millions on duplicated software licenses, business systems and HR. In doing so, they failed to generate the return on investment (ROI) that the M&A set out to achieve.

But that doesn’t have to be the case. These risks can be mitigated. The good news is the approach, planning and execution are repeatable, deal after deal.

Step back to move forward
To make M&A a success, deal-making businesses need to take a step back and look at how people and processes will be impacted. And then consider the speed at which things need to be done – at the very least identifying what to do before Day 0, and between Day 0 and Day 100.

The approach depends on whether it’s an acquisition, merger or divesture. You could operate separately, assimilate or reverse assimilate, forge a new culture, operate as a subset or split off from the company. But in all cases, the most important thing is to think about the approach. Many companies don’t do this until the last minute, if at all.

Knowing the business strategy and drivers helps define the best approach, linking the future IT strategy, security considerations and the employee onboarding process with the direct needs of the business. In short, C-level executives need to come together early to ensure a successful outcome, considering five key issues:

1. Operations and governance: Define business and IT operations before, during and post-migration, and with an alignment target in sight, understand governance policies and processes and how they will need to change.

2. Change management: Every employee should clearly understand why the change is happening and “what’s in it for me?” Resistance management is vital, so with ambassadors on board and leading the way, deploy targeted and tailored communication and training for end users, superusers and IT.

3. Migration planning: Know who is responsible for every step of the migration across process, tooling, technology and people. There should be one person’s name next to tasks, not a department or committee.

4. Workforce wellbeing: How do employees feel? Are they at risk of burnout? How engaged are they, and do they have the support they need from their managers? These are questions you can answer using workforce analytics.

5. Operating model and culture: Understand how the current business is structured operationally, as well as which elements or functions will need to change and by how much. While merging to create a better, unified culture is the ideal, parallel operation of separate organizations can sometimes be the better strategy.

Rinse and repeat
The key to any successful M&A is to engage your integration partner as early as you possibly can. Avanade’s intelligent workforce planning solution is designed to anticipate any roadblocks along the journey. That way, you can move forward in a planned and methodical way, keep cybersecurity watertight, and make the company a desirable place to stay. After all, the people who’ve built the organization or technology you want to acquire are the ones you want to keep.

Once established and put into practice, the majority of integration processes are endlessly repeatable. And M&A can be a success first time, every time.
The next blog in our M&A series will dive deeper into the importance of technology in helping you shape and execute a successful M&A deal that delivers speed, certainty and value.

Ready to get started? Register for our 5-day workplace advisory workshop and we’ll help accelerate your journey to M&A success.

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