According to a recent Harvard Business Review report and most published research, the failure rate for mergers and acquisitions (M&A) sits at between 70 percent and 90 percent.
This represents a huge failure rate especially when you consider that the process demands high levels of due diligence, significant emotional stress, disruption and expensive short term rationalisation.
Of course, the big question is, ‘why?’
If you Google the issue you will find lists and lists of reasons for failure. Some reasons are practical and financial but many come under the banner of ‘cultural’. If only the reason was something concrete like infrastructure or IT systems, that would be easier to understand and probably easier to fix. But no, we have to face up to the fact that the most commonly cited reason for expensive failure in M&A revolves around something we all think we know about, recognise as important but find difficult to explain and even harder to change.
Most people would argue that there isn’t a magic bullet that ensures the cultural implications of M&A don’t undermine success, but having worked with a number of merged and merging organisations we have stumbled upon a way of cutting the risks to a minimum. It’s a bold claim we know but hear us out.
Our starting point is an assumption that in order to realise the long term financial benefits of a merger, the customer experience must improve and your people must be inspired. Without this happening the benefits of any merger cannot be fully realised as the short term financial benefits may be delivered but the long term returns will never materialise.
So, our solution, and one we have seen have a dramatic impact, is not to isolate cultural change in a singular, specific programme but allow it to be the happy output of the development of a new branded customer experience. Doing it this way orientates the newly merged business towards the needs of the customer, ensures silos are ‘bust’ and a new culture is embedded leaving a lasting legacy for those responsible. In addition to this, effort is prioritised and resources focused. It seems too good to be true as it in effect kills at least three birds with one stone. Here is a quick 2 step guide:
Develop a new vision for the newly merged brand. By this we mean, work out what it should stand for and give it a distinctive set of values and personality. Do this by involving people from all levels of the newly merged team so that they feel ownership and that it is aligned to what the business needs and can deliver. It’s important to do it quickly and above all, make it inspirational. You might need to develop a snappy guide to how you want everyone to work at this stage (see our separate blog for more on this) but if you do, make sure that they are aligned to the new vision.
The next step is to create the new customer experience. Do this by first mapping the existing customer experience and then by defining what you want it to be. Again do this collaboratively and ensure that you identify the brand basics and pinpoint those places where you can amplify the brand (we creatively call these ‘The Brand Amplifiers’…what genius…ahem). Make it simple and inspirational so that the business can’t stop talking about it and is galvanised by it.
Tackling the cultural issue that undermines the success of M&As by developing a new branded customer experience is a powerful way to merge two organisations. We have first-hand experience of seeing this at work in markets as diverse as pharmaceuticals and leisure, both national and international. It works beautifully and is fantastic to be a part of (dare I say…’it’s fun?’ and incredibly rewarding).
So, the next time you see a newly merged company embarking on a ‘cultural change programme,’ consider that they are possibly barking up the wrong tree and tackling it the wrong way. As we have seen, by taking the customer experience route, two will definitely go into one……...beautifully.