Mergers and Acquisitions-Busting a few Myths

During my long career, I am lucky to have been asked to facilitate 12 major mergers/acquisitions.  Each project lasted between one to five years; nine were successes; two was total failures (I was fired twice)  and one is still far too early judge.

Lots of myths exist in the domain of mergers/acquisition.  Mergers and acquisitions are a nightmare, filled with power struggles and severe anxiety.

The prevalent myths about the boundless opportunities of a merger remind me of the “happy happy fun fun” times promised around holiday time, when families get together, people get depressed , fat and/or drunk and trauma rooms fill up with attempted suicides.

In this brief post, I will share my lessons learned about the fascinating area of organization development in mergers and acquisitions.

  • There are no mergers-just acquisitions. One company becomes dominant and in a Darwinian struggle, the acquired company is partially digested. Even in the best of cases, the acquiring company remains with a case of mild indigestion whilst the acquired company is dominated.
  • It is impossible to take the best of two cultures and form new improved culture. The very claim that this can be done is pure alchemy, fake news and charlatanism. What does occur is a protracted Darwinian struggle between a stronger and a weaker culture which fizzles out about 10 to 15 years later, or when people from legacy companies leave or die.
  • Interpersonal trust is the most important glue that was ever invented. Trust is built in face to face meetings, intensive travel and lots of informal quality time together. Building trust in conference calls or on-line chats is like using a shower curtain as a condom.
  • For about a year, everything is a struggle: budget codes, travel policy, nomenclature, titles-it becomes a fucking bloodbath unless decisions are taken early. The more buy-in and agreement one tries to establish, the longer it takes to make decisions and the worse the fighting becomes. Fast authoritarian decisions taken quickly work best.
  • Managers who cannot build relationships of trust and transparency across geographical borders should be axed if they cannot adjust with 3 months.
  • If things are broken in the senior management team, the merger will fail. The senior management team is where most OD effort is needed.
  • Mergers and acquisitions are very painful for a long time. Expectations must be adjusted accordingly.
  • Cultural differences are important, but far less important than competency of senior management who manage these differences. Too often, poor management will blame cultural differences for problems that management could have solved if more brain power was available.
  • Many people who were competent in their legacy companies become incompetent because their former skills are not scalable or relevant.
  • Due diligence before mergers/acquisitions is highly flawed and tainted.  After the ink has dried, those who lied and/or misrepresented need to be pardoned or removed
That is no country for old men. The young
In one another’s arms, birds in the trees,
—Those dying generations—at their song,
The salmon-falls, the mackerel-crowded seas,
Fish, flesh, or fowl, commend all summer long
Whatever is begotten, born, and dies.
From Sailing to Byzantium-William Butler Yeats
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“A revolution is not a dinner party, or writing an essay, or painting a picture, or doing embroidery; it cannot be so refined, so leisurely and gentle, so temperate, kind, courteous, restrained and magnanimous. A revolution is an insurrection, an act of violence by which one class overthrows another.”
Chairman Mao
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A merger is a nightmare.
Chairman Allon

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14 thoughts on “Mergers and Acquisitions-Busting a few Myths

  1. Allon: I shared your post about mergers with a long-time friend and colleague who has done a lot (12-15) of those merger/acquisitions. He very much agrees with what you said. He also had a few things to add. Here they are:

    > Much more blame for the failures belongs to the investment bankers whose motivation is the fee for getting the deal done; flaws, financial and otherwise, are covered up or glossed over, or minimized;
    > The time of great disruptions is far more than a year on average. Sorting out/integrating the IT issues of different systems is far more complex than 20 years ago — suppliers and customers suffer far longer than a year with screw-ups and internal processes grind their gears for years, and fixes are run to hundreds of millions more than initial estimates
    > Talent departures are significant impact items he doesn’t reference; you either pay enormous retention bonuses/contracts/severance agreements, or risk competitor poaching of your best and brightest
    > Most of the ones that work — at large size — either: a) are run as near-independent subsidiaries (you’ll see that with Raytheon and United Technologies I’d expect next year); or are completely absorbed with, as he says, most of senior management gone along with their systems and processes, and the products/services and customer based fully absorbed.

  2. Reading Fred’s added comments, I thought to add one more from my experience of m&a’s. When AT&T bought us, Teleport Communications Group, in 1998 for $11.3 billion, we thought that we would be a “positive virus” for change that would be a catalyst to transform the stodgy Ma Bell culture. Instead, we were torn limb from limb and absorbed into The Borg. Our entrepreneurial CEO, who we thought would rise to the top and take over, left shortly thereafter to build another company. As Luke Skywalker says in The Last Jedi, “This is not going to go the way you think.”

  3. Allon,

    This is one of your absolute best posts!

    I must admit, I have for years fallen prey to the idea of merging cultures as both a desirable and do-able thing. Wrong! as your posting so powerfully states. As I think about my experiences over the years, I can see that I actually observed your truth run action. And, I would have avoided a few mistakes if I had paid attention to what my eyes were telling me and not to the rose colored lenses emplaced by so-called merge and acquisition gurus.

    Thank you for dropping my fairy tale lens into the dust bin of my personal history. I will henceforth sing your wisdom.

    This is one of those postings that seep into one’s DNA and truly changes one’s world view.

    Well done, Sir!

    Cordially,

    Ed
    Drive On!

  4. Allon,

    This is one of your very best posts.

    I admit I had put on the fairy tale lens of those who espoused the idea of merging cultures. I did so despite observing your Truths over the years. Had I paid more attention to my eyes and less to the words of so-called change gurus, I probably would have avoided some of the mistakes I made trying to drive square pegs into round holes.

    Thank you so much for causing the rose colored glasses to drop from my eyes. I will henceforth maintain and proclaim the truth of your posting.

    Well done, Allon!

    Cordially,

    Ed
    Drive On!

  5. Allon,
    Oops..

    Sorry for the near-double posts. I thought the first one had gotten deleted by your system. I went ahead and posted the second one because I feel so overflowing in gratitude for the gift of your wisdom.

    On another note, I have decided to follow your example and move to blogging. I am in the process of researching platforms/outlets. More later.

    Cordially,

    Ed
    Drive On!

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