- Challenges in M&A processes
- Top team journey - a crucial step at the beginning of integration
- How can you minimize the risk of the M&A process failing?
- Leading M&A processes to success with cultural due diligence
- We support not only before the acquisition/merger
- Growing together through appropriate change communication
- M&A change consulting - our special Timmermann contribution
1. Challenges in M&A processes
The deal has been finalized. The board members of two previously separate organizations are now facing each other. Curiosity sparkles in their eyes as they wonder, "Who will take the lead?". In the background, middle management is feeling a bit anxious. Who will oversee R&D? Who will guide the sales team? And so, the journey begins.
It is well known that mergers and acquisitions are risky ventures. Depending on the study you read, 50-80% of M&A processes fail to achieve their goals and have a negative impact on shareholder value. Power struggles between executives are just one of the typical change challenges. The most frequently cited problems in M&A processes are:
- Culture differences
- HR integration problems
- Management retention problems
- Integration problems in financial reporting
- Too little commitment from employees
Despite all these, M&A processes remain an important way to enable leapfrog growth or conquer new markets.
2. Top team journey - a crucial step at the beginning of integration
M&A processes that kick off with team development for the top team (which may be newly formed) tend to yield better results. Initial technical disagreements and interpersonal conflicts among top-level executives often create obstacles to integration and hinder the realization of synergies. Through an intensive Top Team Journey, the top team fosters trust, establishes effective collaboration, and enhances their leadership skills within the unique merger context. This paves the way for a smoother integration process, allowing for the full leverage of anticipated synergies.
3. How can you minimize the risk of the M&A process failing?
The key lies in starting off on the right foot, ensuring that strategic, procedural, and structural aspects of business integration are carefully managed, alongside addressing the behavior and attitude of employees and managers. This proactive approach extends to effectively handling diverse corporate cultures as well.
The journey starts even before the merger itself with a cultural due diligence. How aligned is the target company's culture with your own? What possibilities and challenges may arise at this stage?
As integration begins in earnest, it's crucial to have a clear understanding of the change landscape and a robust change strategy in place. Addressing and improving upon common human dynamics, such as widespread uncertainty, can be effectively managed with the right approach.
4. Leading M&A processes to success with cultural due diligence
During a "due diligence" assessment, it's common for the focus to heavily lean towards financial and economic factors. Yet, extensive research highlights that overlooking the nuanced elements like organizational culture and leadership style frequently leads to the downfall of M&A endeavors.
Recall the high-profile union between Daimler and Chrysler? With their diverse product lines and customer demographics, this merger had all the makings of a landmark success. However, the integration faltered on the softer, yet crucial aspects of corporate synergy. For instance, when it came to work culture and core values, there was a stark contrast: Daimler was synonymous with a top-down approach to communication and a relentless pursuit of quality, whereas Chrysler celebrated a culture of teamwork and affordability. Unfortunately, these differences led to a less than favorable outcome.
During a cultural due diligence, we uncover "soft" factors, including
- Decision-making and leadership style
- Entrepreneurial thinking and acting incl. e.g. e.g. appropriate risk taking
- Discipline and acceptance of responsibility
- Collectivism, e.g., characteristic of silo culture
- Efficiency and excellence orientation
- Openness to change and approach to obstacles
- Degree of professionalism
- Identification with the company
- Customer centricity
Based on the information available, we tailor our methods to suit our clients, utilizing techniques such as thorough interviews, systematic observations, document analysis, employee surveys, data reanalysis, and culture workshops. While it may seem challenging to analyze cultural aspects in M&A processes due to limited information accessibility, we find it equally feasible, similar to assessing other due diligence information. Through these analyses and our M&A experience, we identify potentials and risks, aiding our clients in making informed investment decisions based on all critical factors, including the intangible ones.
5. We provide support not only prior to the acquisition/merger
Our clients also greatly appreciate it when we use the findings from cultural due diligence in the event of a positive M&A decision. We are happy to help develop, plan and also implement measures that facilitate the merger and make optimal use of synergies in practice. Dealing with great uncertainty, appropriate communication and concrete measures that further develop attitudes and behavior are a decisive factor for success. If desired, we can assist with cultural development for the new company, ideally combining the best of both worlds and sending them on a journey together to an even better shared culture.
6. Growing together through appropriate change communication
Despite a harmonious cultural and strategic alignment, the integration process can still stir up unease and queries among staff and leadership alike. Thus, it's essential to devise a communication strategy that not only informs but also resonates with employees on an intellectual and emotional level throughout every stage of the merger.
7. M&A change consulting - our special Timmermann contribution
We bring a unique blend of expertise as business psychologists, cultural experts, and former consultants from top strategy and process consultancies. This allows us to deeply understand the business challenges in M&A processes and effectively shape the merging of companies to align with the overall strategy.
We bring expertise in navigating through uncertain situations, providing a structured approach with a touch of empathy and expertise in change management to ensure a sense of security and clarity. Our toolkit includes proven methods, customized models, and years of experience in fostering cultural integrations that lead to mutual growth. As active members of the German M&A Association (Bundesverband M&A e.V.), we are dedicated to sharing our knowledge through regular lectures on this subject.
