Pursuing an Acquisition? How You Behave Makes a Difference

Too often even the most strategic, well-structured transactions that are appropriately valued get into trouble soon after the deal is signed. Integration grinds to a halt, frustrations rise and tempers flare. In our experience, realizing progress and results during a merger or acquisition is largely driven by the combined firm’s ability to make integration decisions and to remove uncertainty and ambiguity quickly. However, a fair amount of the probability for deal success also hinges on how leaders in the acquiring company behave. Here are a few suggestions based on our experience with over a hundred deals and thousands of executives on the kinds of behaviors that can help preserve value in an acquisition.

Time and again, we’ve heard one characteristic of acquirers that helps drive progress and keep people focused: candor. Being honest, forthright and upfront with people about what is known, is being considered, or unknown. For many executives, erring on the side of transparency feels a little counterintuitive especially when it comes to sharing bad news such as a plant closing, relocation of a headquarters, or job reductions. In practice though, uncertainty is actually a bigger distraction for people than the bad news itself. To keep things on track, work toward letting people know answers when you know answers and establishing an atmosphere of respect for people’s ability to deal with difficult information. This includes a willingness to report “I don’t know” when questions arise that have not yet been fully addressed.

Executives in an acquiring firm have a unique tendency to want to sugar coat the situation with platitudes about how great things will be after the deal is done. Sometimes, they themselves even believe a pot of gold lies at the end of the transaction rainbow. The sugar coating and promises of nirvana start early in the deal process and can continue into integration. The downside is that people get their hopes up that things will be rosy once the transaction is consummated or integration is finished, only to have their expectations shattered by acquisition reality. The truth is that integrating two companies is complex and a ton of work. Mistakes are made. Communications get tangled. New situations arise that have never been dealt with before. There are more questions than answers. If management has painted a different picture, when the predictable complications associated with a merger begin to unfold the credibility of management goes down the tubes. Further, people equate the bumps in the road with evidence that things are not going well. This sentiment quickly makes its way through the organization like a cancer, eventually manifesting itself in declining customer satisfaction, drops in revenue, and increased turnover.

One thing is certain: managers and employees going through a deal thirst for information. This is especially true for those on the acquired side of the transaction. There is almost never enough info about what is changing and when, not to mention answers to the ubiquitous “Me” questions like “will I have a job?” or “what will happen to my commission plan?” or “will my benefits change?” In lieu of real information, people will draw their own conclusions or, at the very least, spend inordinate amounts of time speculating about what will happen and when. Executives in the acquiring organization can’t do enough to arm the leaders at the target company with information. Constantly and in as many different ways as possible, send out information about what is known and not known (see the coaching point ‘be upfront’ above) always drawing on common core message document to ensure the messages are consistent.

Completing a major deal can be a boost for executive ego. In an acquisition with a clear acquirer (I’ll leave a discussion of the dynamics associated with a ‘merger of equals’ for another time), the management of the acquiring firm can see the deal as a victory and the target firm as the losing team. But a little humility can go a long way toward preserving the value of what has been purchased. I‘m not talking about the kind of humility that shows up as a couple of half-hearted comments during initial talks after an agreement is signed. I am talking about a deep-rooted and genuine appreciation from management of the acquiring firm that the acquired company has real value embedded in its customer relationships, talent, processes, ways of doing things and systems (if not, why are you buying it?). Even though the integration strategy may require that many of these processes and systems are phased out, honoring the past through a true appreciation for what the other company has built can clear the path for objective decisions on how to integrate. This approach can also help win over those who are deeply invested in the way things are currently done in the acquired firm.