The continuing M&A trend can be attributed to factors such as globalisation, increased competition, small companies` need to merge or be acquired in order to survive or remain competitive, increasingly sophisticated and demanding customers, and a continuously accelerating pace of change. The impact of M&As on our workforce has been profound, and with no end in sight it is likely that M&As will continue to impact the lives of many people into the future.
The M&A process can easily be overdone. Trade journals are filled with surveys concluding that the majority of mergers and acquisitions fail to generate shareholder value. Some studies estimate a failure rate as high as 40-70%, while a KPMG survey of worldwide M&A activity indicated that only 17% of these transactions succeeded in creating shareholder value.
Historic evidence shows that organisations have failed to measure and manage the risks involved. Decisions have consistently been made on the basis of assumption and speculation rather than with knowledge and insight, particularly with reference to the less tangible or seemingly less measurable components of the businesses.
M&A provides a wonderful potential for small to medium enterprises to capitalise and grow their businesses by being acquired or merged into a bigger entity. Unfortunately, evidence shows that individual and collective agendas have not been adequately thought out or defined. Strategic intents are sometimes hazy or blurred, or have simply been confined to a high-level macro picture which has not been taken into a more granular level of definition.
Strategic intent statements such as "we want to be a best-practice global player" might sound grand, but at a macro level they are not measurable and, if not analysed and interpreted, they can end up as nebulous.
The value of human capital
Historic evidence shows that organisations have failed to measure and manage the risks involved.
Bryan Hattingh, CEO, Cycan
Recent well-publicised mergers have shown how hard companies can fall by ignoring so-called soft issues. With few exceptions, leadership and human capital are the most significant assets of commercial enterprises. The resourcing, retention, development and maximisation of this asset in turn hinges on the quality and effectiveness of its management and leadership. It is an asset which can be volatile, unpredictable and often fickle. According to the Ayers Group, an alarming 47% of all senior managers in acquired companies leave within the first year of the acquisition, and 72% by the third year, when no systematic retention measures are taken.
M&A may seem an attractive and viable proposition based on the financial considerations, potentials and synergy in respect of service or product offerings. While this is the case on the surface, the success or failure of such initiatives has more to do with the issues of expectation, cultural synergies and value sets and styles of the organisations and their leaders.
A Vantage Partners study revealed that 70% of strategic alliances fail because of relationship management problems. Empirical studies have shown that in situations of corporate turmoil such as takeovers or M&As, turnover, healthcare claims, disability claims, an absenteeism can increase by as much as 20%. The short-sighted approach would be to cynically acknowledge this and disregard it as something that little or nothing can be done about. However, we are now living in an era in which enormous advancements and breakthroughs have been made in scientifically and accurately measuring many aspects of the human psyche and profile on an individual and collective basis. This in turn extends well beyond the aspects of intellectual capability, aptitude and personality profile to assessing and measuring attitudes, drivers, behaviours, competencies and cultural affinities.
Global events have revealed the following:
* Organisations almost always underestimate the impact and cost of an M&A in terms of the time, resources and energy required to make it work.
* Using their own management teams to manage the integration process invariably means that the normal functions and activities of the organisation are put at risk, negatively impacting their business. The ideal is to engage the right fit of external professional business partner to manage the integration process.
* While structures, infrastructure and processes may be well articulated and defined, ineffective communication - such as creating expectations that cannot be met during a period of fear and uncertainty - means the merger is doomed from the start.
* Engaging the right business partners in the pre- and post-M&A phase ensures that a forensic parity check can be conducted, thus removing any false assumptions or expectations and assisting people in curtailing personal and collective agendas.
Few people are taught through childhood and education to think strategically, so it`s not surprising that life planning, goal-setting and decision-making do not come naturally to even educated and accomplished people. It follows that if appropriate interventions were made to assist people in becoming more enlightened and definitive as to what drives and energises them, and to then find congruence with their career choices, they and their organisations would be the better for it.
It is essential for an organisation to express its broad strategic vision and intent, with the commensurate benefits in and through leadership to its people. This creates the correct framework of expectation, passion and commitment that would give increased and sustainable value to the business and its customer base. It is essential that companies practise this both in and outside of any M&A activities in order to be positioned optimally to identify and manage their initiatives with real potential.
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