Jim Szakacs, CFO, TayganPoint
In their book “Exploring Corporate Strategy”, Gerry Johnson and Kevan Scholes define strategy as “the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations”.
For hundreds of companies in 2015 that announced an M&A deal, the work has just begun on executing a rock-solid change management plan. More importantly, at the highest levels of the organization, the change in strategy has shifted everyone’s focus in multiple directions. Each component of Johnson & Scholes definition of strategy is impacted and must be redefined for the new post-deal organization. For example, a big-pharma company may need to shift their strategy from investing in R&D for a particular product, to investing in a promising drug at the acquired organization. Depending on the stage of development and marketability, the investment will require alternative commitments. Additionally, new stakeholders emerge the instant a deal is announced who will require a clear business plan for limited resources and competing in new markets and/or geographies. Not to mention, the geopolitical implications on a deal will define the strategy for the post-deal business environment.
Judith Millsaps, Principal, TayganPoint
Similar to needing a strong and clearly articulated strategy for the post deal organization, another challenge organizations will likely face is the change in the physical footprint of the new operation.
Decisions on where to locate the headquarters of the merged company will likely have already been decided during the integration discussions, but there may be opportunities to make additional location changes to benefit the post-deal (integrated) business. Merging the culture of two organization can prove to be quite challenging. Location changes can support the change by physically moving people to a new location driving new conversations to happen, new ways of working and an opportunity to develop a culture by design. No matter the decision, implementing change execution plans to ready the business for a post-deal culture and location change are critical. Messaging to stakeholders about the potential for changes in the real estate plan initiates the change process. Early announcements about the process of reviewing and deciding where the business will run its operations both informs and engages employees who have a very vested interest in the outcome.
Managing change effectively, leaning towards over communication and transparency, will buy much goodwill during a difficult transformation in the post deal period.
Amy Flynn, Principal, TayganPoint
When one company merges with, or acquires another, there can be far reaching changes to individual’s roles and responsibilities (R&R). R&R changes impact members of both organizations and the impact itself shifts during the course of the integration as you enter steady state.
At closing, or shortly after, a subset of individuals from both organizations is typically assigned new, temporary roles on an integration team. Integration team members are held responsible for project management, representing a group or function as an overall subject matter expert (SME), communications between the function they represent and an integration team, and as “ambassadors of change”. The integration team is accountable for bringing together the two organizations including processes, systems, data, and people. Integration team members have an opportunity to work with different parties than those they usually encounter including management, legal and new internal and external partners. They also have a unique view into the inner workings of how a deal gets done. In most cases, integration team members hold dual roles, continuing in their functional job while serving on the team.
As an integrated organization, individuals from both sides of the alliance should anticipate R&R changes. From the administrative aspects of reporting structure, job title, level, scope or compensation, and position description to the actual activities and accountabilities associated with a role, individuals from both organizations will be affected. Combining teams and departments and eliminating redundant positions is an inherent part of almost any M&A deal and a change to those directly moved or eliminated as well as everyone with whom they interact. While different companies often have similar job titles, Human Resource and Talent Management organizations in large companies typically require full alignment of titles, levels and compensation. Beyond the administrative aspect of aligning roles, the actual activities, decisions, and deliverables associated with the same role will be different in each company because company processes differ. These differences can be obvious or subtle and can take time, and unfortunately errors, to uncover.