Articles | March 10, 2020
Mergers and acquisitions always come with a whirlwind of excitement. But as an executive in charge of managing such a monumental task, you need to take stock of your M&A readiness now before a potential deal is considered and not in the heat of the moment.
A merger or acquisition stirs plenty of strong emotions in its participants — and that includes both leaders of your organization who take part in designing the deal and the employees who may ultimately make it work. Whether it's excitement, apprehension or anything in between, these feelings are almost sure to make the M&A process both an exhilarating and stressful time at your organization.
The emotions and anticipation felt in the heat of the moment can cloud your better judgement and cause you to make a costly mistake or, more likely, obtain results that are less than you have predicted. That’s why, before you find yourself in the middle of a merger or acquisition, you should perform an unsparing self-assessment of your M&A readiness.
Whether you are first focusing on the strategic aspects or the operational imperatives, you have a lot of ground to cover. You should start by asking yourself a basic question: why do you want this merger or acquisition in the first place?
It’s easy to lose sight of the forest for the trees when you find yourself in a flurry of financial statements and contracts during the M&A process. One important way to safeguard against this loss of perspective is to identify why your organization needs this structural change. Remember that you’re about to take a big risk that will fundamentally alter your company’s DNA—you need to keep in mind the strategic goal for this merger or acquisition in order to effectively find success.
Broadly speaking, you can group the most common motivations for an M&A into two categories: aggressive or defensive.
Aggressive motivations include:
Defensive motivations include:
When you’re reviewing the latest red-lined contract from the other organization’s legal team, egos and emotions can sometimes dictate your strategy. But if you clearly define why you want this M&A before you start huddling up with your lawyers, you’ll have a good framework for deciding what battles to fight.
Identifying your motivation beforehand for the M&A is a great first step for assessing your readiness, but you still have more work to do. One of the most difficult-to-manage aspects of an M&A is keeping your people engaged and efficient during a tumultuous period of change. Some of the reasons an M&A can cause morale in your workforce to plummet include:
As you work through planning the deal, it is important to remember that most of your employees will not have the same luxury of time to get used to the idea as you did starting at day one (or earlier) in the planning and discovery process.
While all of your employees will likely struggle with the general stressors listed above, you also need to think about how specific parts of your company will react to your new way of doing business. Human resources will have a different set of questions they’ll need answered than will your salesforce, for example.
A pre-diagnostic for your organization’s M&A readiness can help point out where the major bumps on the road lie for when you’re ready to go forward with a merger or acquisition. For instance, taking an honest look at whether your workplace culture supports rapid growth or how intense the competition is between internal teams in your company will help you prepare for the upcoming change.
We’ll explore in more detail exactly how we can work with you in future articles covering this topic—or you can cut to the chase and speak with one of our experts.
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.
Don't miss out. Join 16,000 others who already get the latest insights from Segal.