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Why mergers and acquisitions fail

Posted by Chad O'Connor  March 25, 2014 06:00 AM

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If you can't get this piece right, keep your wallet in your pocket

Throughout my career as a People Strategy leader, I have been involved in several acquisitions on the buying side and exactly one when the company I worked for was purchased. I will politely suggest that we agreed to part ways after that deal. The reason? They completely overlooked our people when they purchased us.

I have spent my career building companies known for their cultures and commitment to their people. I hold strong to the belief that if you don’t hire correctly and nurture your talent, your company already stands a challenged chance at success. However, if your growing company is attempting to take on the added complexity of blending with another company, well, that's when your decisions become even more critical.

Technologies can match up seamlessly and the numbers can look fantastic on paper. However, if the people that you are bringing together cannot get in sync, you may as well light the whole deal on fire. Why? If the acquired company's people aren't happy in their new home, they will walk. And aren't they a key element of what you bought? What is the point of investing all that money if you can't hold on to the talent?

How does a company stack the odds of a successful merger in its favor?
First, M&As should work both ways. The acquiring company should carefully consider the company they are purchasing, just as the company to be acquired should explore their potential new parent. This begins in the early diligence phases. Understanding basic structural questions, such as whether the companies are flat or hierarchical and how they interact with their customers, gives a strong indication about what it might be like to work with each other. Then dig deeper by asking more fundamental questions about each company’s culture, core values, senior leadership style, hiring philosophy and work environment in order to achieve an even more compelling understanding of one another.

If things go well, and it looks like you are ready to join forces, dig even deeper to learn about each other's people philosophies and practices. How do you hire, develop, grow, retain and off-board talent? That's where the rubber really meets the road. Of course, everything isn't going to line up perfectly. It’s like marriage – you've got to compromise in some places, but your core beliefs need to be in sync or the shine is going to wear off very quickly.

If you have made it through this stage, and you've found you're a match made in business heaven, take the time to roll the acquisition out well. When my company was bought, we were handed a black and white stapled FAQ sheet. It was totally impersonal, which is exactly how our relationship with the new company felt. When my former company purchased companies, we took time to work with their leadership teams to create communication vehicles that brought together the strengths of both companies. The people in both organizations got an immediate sense of why this was such an important move for everyone. We also took time to meet with people and answer questions – in person, in writing, in whatever forum they preferred.

Once the deal ink is dry, remember to check in with employees often. Look for dips in morale or time off of work (job hunting!). There is bound to be friction when you bring new teams together, so you’ll need to prepare for it, work through it and lead well.

Finally, learn from the good, the bad and the ugly of acquisitions. Talk to the people involved and seek to understand, from their perspective, what you should replicate the next time and what can be done differently. And always remember, it's the people that will make any M&A activity succeed or fail…not a spreadsheet.

Christina Luconi is Chief People Officer of Rapid7.

This blog is not written or edited by Boston.com or the Boston Globe.
The author is solely responsible for the content.

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