Business executive • MAY 11


these will be vast amounts of disruption, chaos and immense customer frustrations. Service levels are sure to fall during the merging of functions. That said, back office savings are usually the most reliable source of advantage in an M&A.


strategy and growtH models M&As usually demand some alignment of companies’ strategies. Two businesses coming together will often have completely different strategies and growth models. These, the fundamentals of a business, are often unseen from the outside. Maybe one or both were flawed in the first place. The result is either a new strategy or the imposition of one party’s strategy on the other. This usually leads to some level of failure, because the ‘one size fits all’ approach to business strategy is problematic. Each business, market and customer franchise is unique in some way – no matter how small that may be. The risk is that this could get overlooked.


Brand management Brands are often ignored by the M&A planners because they fail to understand fully what makes up brands. Very often we see situations in M&As where very strong brands are swept aside by the name of the new owner. This can have disastrous consequences, destroying the value and offending customers. Where brands have current and future value, they deserve respect and investment.


customer focus Customers are too often forgotten in a merger. The question, “What will the customers think?” is rarely asked. The customer is the lifeblood of the business. However, many M&As still take place with an arrogance that ignores the customer.


management comPetence Is the competence equal in both organisations? How will balance be achieved? Does the acquiring company really understand its new acquisition? Too often the acquirer puts its own team in and fails to grasp what makes the acquired company tick. If a new, single board is to run the new combined company, often this board cannot manage the complexities of the new, larger organisation. Simple management weakness is a common trap.


comPany culture Even with quite different cultures, mergers can work well. But clashing cultures can be the undoing of the deal. A proper culture adoption plan, or a change programme, needs to be put in place and managed well, with strong corporate champions. Culture is a great enabler but it can be the hidden destroyer of a merger.


leadersHiP All too often leadership is tested beyond its abilities when it comes to handling a bigger commercial enterprise. The integration challenge is one area that is more vital than most. For shareholders the true motivation of leadership is critical.


tHe cHaos tHeory In the end, some deals take place for reasons involving pride and vanity and not enough analysis of the business case. They


may also take place out of desperation – the desperation to grow, add products, to satisfy the cravings of shareholders – or because of ambition. No deal should be analysed to death, but nor should it be done before a cooling shower of reality and sanity.


motivations Investment bankers are the people who make the most money from M&A. They win, no matter how flawed the deal is. But what makes mergers and acquisitions work isn’t on paper, and it isn’t what the bankers spend all their time on. It is people, sentiment, emotion and authentic commercial opportunity.


outlook Organic growth is still a widespread challenge; if boards are mandated to acquire, the M&A market will flourish. Many senior people stand to gain hugely from M&A; motivations today are, if anything, greater than ever. What is clear is that more and more corporate assets will


start to be owned by emerging economies. This trend will accelerate in 2011 as western companies become more cautious about how they invest overseas. M&A skills will remain strong in the US and UK but the


deals will be chased far further afield. Contact: stephen.archer@springpartnerships.com


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