Evans Incorporated

Good CAARMA improves Merger and Acquisition Outcomes

by Sue Evans

Between 50 and 80 percent of mergers and acquisitions fail to reach their projected operational and financial potential[1].  Among the reasons frequently cited is lack of consideration for the human factor in the transaction – e.g., dismissing clashes of culture, or lack of resources committed to engaging human talents.   Buyers, however, can employ assessment tactics that minimize their risk and improve outcomes. 

mergers

Formulate: Set business strategy and acquisition criteria
Locate: Identify target markets and companies; issue letter of intent
Investigate: Conduct due diligence, draft integration plan and set negotiation parameters
Negotiate: Set deal terms, secure talent, and close deal
Integrate: Finalize integration plan for organization, financials, people, and systems

The majority of company information is collected in the INVESTIGATE stage – to inform the overall value of the deal and set the stage for the NEGOTIATE stage.

What is often lacking during this stage is an assessment of the organizational culture, defined by individual and collective behaviors, beliefs, values, norms, and roles, as well as managerial and leadership styles, and even the office layout or special perks. Confidentiality agreements, terms of the letters of intent, and time pressure to close often restrict access to employees beyond senior management, making it difficult to assess employee attitudes and beliefs especially in comparison to leadership assertions. So it’s not until the deal is closed and parties are in the INTEGRATION stage that disconnects surface.

Human-centered Risks in Integration

Once the deal has closed, realizing the envisioned financial and operational value relies on a comprehensive integration plan that includes strategies and activities, led by dedicated integration managers, to mitigate risks.  While plans typically address legal, financial, contractual, system and HR transaction risks, human risks are frequently ignored.  These may include:

  • gaps between leadership’s assertions and employee beliefs
  • culture gaps between the acquiring and acquired organizations
  • client dissatisfaction due to disgruntled employees
  • accelerated employee turnover due to failure to engage

A step towards effectively managing these risks starts with understanding the parties’ [SE1] readiness for change itself.

Mitigating Risks by assessing Readiness for Change

To mitigate this risk, we suggest a 360-degree analysis of an organization’s capacity for change. This promotes feedback from all levels of the organization and clearly highlights areas to be addressed.

The Evans Change Readiness Assessment measures the organization’s preparedness for change through the lens of managers, employees, and the change team across four dimensions of Leadership, Culture, Resources, and Conditions. Each dimension is assessed individually to target specific areas to be addressed, such as communicating a clear vision for the future or providing sufficient resources and incentives for employees to forge a unified culture.

Outcome

Since access to employees is typically not possible until the Integration stage, the Change Readiness Assessment is an effective component of a comprehensive communication and change management strategy.  It’s an easy-to-tailor and quick-to-apply tool that uncovers potential human issues that can derail a successful transaction.  Its targeted outcomes ensure that integration resources are directed effectively to mitigate high-priority risks – and improve successful deal outcomes.


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