Month: December 2015

7 Keys to Unlocking Value from a Merger or Acquisition

When a merger or acquisition is well planned and properly executed significant value can accrue to the combined organizations.

The fact is, however, the results from most business acquisitions and mergers are disappointing. Management covets the gains that consolidation and economies of scale are expected to bring, but the great majority of M&A’s do not live up to their promise. This has been demonstrated by dozens of studies covering hundreds of companies across all industries.

Photo By: Sarah Joy

Photo By: Sarah Joy

Some thought provoking comments follow:
“70 percent of mergers fail to achieve their anticipated value.” - Weekly Corporate Growth Report

“Most [mergers] fail to add shareholder value-indeed, post-merger, two-thirds of the newly formed companies perform well below the industry average.”Harvard Management Update

“One-third of the transactions provided marginal returns, while only 17% provided substantial returns to shareholders.” About these figures, one expert said: “That’s a staggering number. That means those organizations were better off before they merged than after they merged.”
Best’s Review/Property-Casualty Insurance Edition

Why do the majority of M&A’s fail to live up to expectations? Mergers and acquisitions fail for a variety of reasons. First, a deal can fail because it was simply not a good idea to begin with. Management may get caught up in the ego-boosting idea of an acquisition, and try to combine two organizations that are better off left alone.

Other times not enough research is done beforehand. Maybe speed is thought to be essential. Maybe internal managers and external agents are discouraged from pointing out potential pitfalls, and a deal goes through without any serious examination and challenge.

Confusing and/or conflicting directions from organizational leadership often leads to poor execution on the part of those directly responsible for implementation.

Frequently there is a failure to manage the “human” or “cultural” side of organizational integration. By definition, all organizations include people; people with skill sets, uncertainties, self-interests, and needs. A great number of organizational integration efforts proceed with too little effort to integrate the people aspects of the businesses. When this happens, the likelihood of failure becomes greater. Study results seem to bear this out:

“By some estimates, 85 percent of failed acquisitions are attributable to mismanagement of cultural issues.”Industrial Management

“In acquisitions that do fulfill their promise — that really make two and two equal five — leaders paid a great deal of attention to the integration process and, not surprisingly, involved people at all levels of the process.”Academy of Management Executive

Overall, the costs of an unsuccessful merging of two businesses are significant; including higher expenses, lower morale, increased employee turnover, poor productivity, customer complaints, loss of reputation, and a decrease in “owner” value. Considering the great amount of work necessary to put a deal together, and the heady sense of optimism formerly experienced among the dealmakers, the financial cost of losing anticipated merger savings may be minimal compared to the loss of respect for leadership and general organizational turmoil.

Identifying a target business, structuring the deal and obtaining the financing are all important and difficult aspects of any M&A transaction. Arguably however, the most difficult part of any such transaction is the effort to combine two or more separate organizations into one, efficient organization that can deliver the positive operating results originally envisioned for the combined business.

Photo By: William Neuheisel

Photo By: William Neuheisel

The effort to integrate different organizations and successfully manage through the transition period generally requires actions above and beyond those required for managing normal business activities. If you find yourself to be part of an organizational integration effort, please consider the seven key imperatives identified below:

1. Leadership must articulate a clearly defined vision for the future of the combined organizations
2. Potential difficulties related to the blending of different cultures must be recognized
3. Both transition and ongoing roles and responsibilities must be quickly and clearly defined
4. The skills and abilities of the people involved have to be accurately assessed in a short period of time
5. Formal project management activities must be established to ensure thoroughness, timeliness and accountability
6. Leadership must provide a vehicle for “steering” the integration process
7. Formal, open and integration specific communication channels must be created and maintained for use by everyone involved to facilitate quick and informed decision making

The effective integration of two or more organizations requires vision, careful planning and open communications. When organizational leadership takes steps to ensure an effective integration process at every level of the business the chance to realize promised results, and build value added competencies throughout the new organization, will be greatly improved.

Customer Service as an Internal Organizational Competency: Part 2

In order to project a consistently friendly, professional and competent image all members of an organization have to be prepared to interact with customers. That interaction can take place in a number of ways; through the written word, the spoken word, and/or through “body language”. Good customer service practices are seldom inherent in an organization. Customer service skills have to be actively learned and frequently practiced. The customer service “handshake” begins on the inside and then flows out.

Normally there is an expectation of good customer service when two people or organizations do business together. There may be a contractual agreement that one party can fall back on if the service provided is poor, but generally there is an implicit “handshake” expectation that, when the service is complete, both parties will be happy with value received. To the customer this “value” is generally provided through the entire service process, probably including sales, reception, operations, delivery and invoicing. The individuals performing each of those functions are part of the service chain.

By: Sean  https://www.flickr.com/photos/22280677@N07/

By: Sean
https://www.flickr.com/photos/22280677@N07/


Individual service providers at each contact point in the customer service chain must be linked through a common service language, product knowledge, readily available customer information, and the expectation that each member of the service chain will be supported by other members. The “handshake” expectation therefore, begins on the inside of the organization and flows out.

In order to ensure that the customer service chain is strongly forged, each point and method of contact with the customer must be identified, examined, critiqued and approved of. The approval process should include management of course, but more importantly must include the service providers themselves.

An excellent way to understand what type of customer service chain exits in an organization (and determining how to improve it) is through the process of “group learning”, where service providers interact with each other outside of their daily responsibilities with the intention of learning how each person’s job responsibilities impact others. During these sessions, a checklist consisting of factors important to a “values’ oriented system-wide customer service chain can be created, discussed and acted upon. The checklist may include:
the identification of the customer’s service expectations
the exploration of existing perceptions regarding departmental and/or personal responsibilities
an examination of existing standard procedures and guidelines
the creation of standard procedures and guidelines where none currently exist
the need for an interdepartmental service support structure
the development of a common service language and appropriate communication tools

In the never ending search for ways to improve the customer service a managed, bottoms-up approach frequently works best. All of the people inside of the organization impacting the customer’s perception of value received should be represented in the search. Participants will benefit greatly from a well-defined and on-going “group learning” process. When organizational insiders feel they are well supported by the others in the service support chain, the outside customers will reap the benefit and appreciate the value received.

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