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Mergers And Acquisitions Today: Higher Risks Require New Methods

October 2016

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Years ago, you could blame the turkeys. Back in 1994, Northrup Corporation discontinued the annual Thanksgiving turkey give-away that recently acquired Grummond Corporation staged for employees. “Never underestimate the culture of the company,” a human resources executive later said of this experience. “It will come back to bite you.” Bite, nudge and grumble it did–complaints about that event continued for years. It was one of the company’s first essential lessons in mergers and acquisitions.

But that was more than two decades ago. Since then, the corporate appetite for M&As has increased. Verizon and Yahoo. Microsoft and LinkedIn. These two big events are part of a much bigger trend; in 2015, M&A reached $2.283 trillion in the United States–a record level. And while understanding an organization’s culture remains essential, culture itself has changed. Today, relationships are built on an ever-expanding, ever-changing kit of interpersonal and digital tools. How employees connect with others has come to define an organization. While the free turkey give-away still matters, understanding the networking and collaboration patterns of two companies is one of the most important things you can do for a successful M&A transformation.

It’s clear that today, communication drives culture. When the web of communication is mottled with gaping holes…well, you can imagine. Small compromises can lead to tremendous frustration (and even failure). For example, I think of a large services firm that acquired a digital company and agreed to let it continue to use an external cloud-based tool for knowledge sharing. This was a digital tool the firm’s existing employees were not allowed. This decision led to irritation and resentment. Not a great way to begin a new relationship.

So, what’s the alternative?

Assessing Collaboration Styles

There are so many ways to connect today. In addition to traditional methods—face-to-face, phone, video, and E-mail—our current digital tool kit includes Slack, Skype, Yammer, Twitter, Instagram, Snapchat, LinkedIn. (And, no doubt, brilliant minds have already mapped out what’s next.) But finding out which tools a company uses—or doesn’t—is only the beginning.

The good news is that these tools provide data that can help define the bigger picture. In working with clients, we use digital data sets to do connection analyses that reveal communication patterns for a person, team or an entire company. In a merger or acquisition, a comparison of two companies’ connectivity styles will shine light on interventions that can better align methodologies. It will also clarify the changes that will have to take place.

And, finally, a company’s commitment to digital connectivity tools is a way to assess its collaborative muscle and its readiness to change.

Using Connection Analytics To Improve Integration

Recognized for its aggressive acquisition strategy, Cisco knows a thing or two about the process. Since 1993, it has acquired more than 140 companies. Culture is crucial: Cisco prefers companies with “one or two failures in the past due to risk taking appetite.” With multiple purchases each year, it has a well-organized and standardized approach to assessing every aspect of a possible deal.

Even so, according to Cisco, integration is the “big problem.” No matter how similar, the merging of two cultures will always require good strategy executed with finesse. Understanding the connectivity patterns of a company and its individual employees is an important source of such creative solutions. For example, a connectivity analysis will identify superconnectors, those positive influencers who are most connected across the organization. Work with these superconnectors to:

• Promote new standardized collaboration processes. Fill them in on the plans and give them specific roles and responsibilities as the two companies merge into one

• Begin a mentorship program. Match them with mentees across different business units.

• Start and lead affinity groups. Topics could include social media, consumer technology, software as a service, global economy. Accelerate informal connections with extra-curricular events such as lunch & learns and social gatherings (such as happy hours).

Private equity groups and corporate M&A departments have become experts at analyzing the numbers. But less time is spent on human capital plans, which might be based on brief interviews and shuffling boxes around organization charts. Rising risks demand a better approach to assessing communication and collaborative styles, an approach that can identify synergies or expose existing gaps in communication. Acquirers can no longer afford to underestimate the importance such details, which, in fact, may mean the difference between success and failure after the deal is done.

 

This article was written by Erica Dhawan from Forbes and was legally licensed through the NewsCred publisher network.

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