How To Apply Corporate Values When You Plan For M&A
September 30, 2020
In 2020, we’ve seen some industry leaders position themselves for long-term success by acquiring other companies. As the second half of 2020 got underway, businesses had launched eight deals of more than $10 billion in the six weeks, according to Refinitiv data. This activity is to be expected during a time of turmoil. Leaders don’t stand still during difficult times.
The resurgence in deals raises a question, though: How many will actually succeed? In fact, as I noted in my latest Forbes Councils article, most will fail. That’s because too often, business leaders involved in mergers don’t take into account their corporate values when they plan for a merger.
According to one study (via Deloitte), “54% of leaders believe that neglecting to audit nonfinancial assets such as organizational culture increases the danger of making the wrong acquisition; however, only 27% of them made cultural compatibility a priority during due diligence.”
Two firms planning to integrate can only thrive if they prioritize learning about each of the firms’ values and then blending these values ahead of anything else. Finding alignment is critical. While I delve into the importance of values in my forthcoming book, The M&A Solution: A Values-Based Approach to Integrating Companies, here are three keys to aligning your values as you plan a merger/acquisition:
1. Ask The Right Questions
As you hold initial discussions with a counterparty, ask questions such as:
- Why is this transaction important to you? What value will it bring to your company — and the world?
- Why do you want to buy our company (or sell yours)? Will it expand your market reach?
- What do you think we can do for you? Can we help you sell new products to your existing clients?
- At the deepest levels, what do you wish to accomplish?
- Do you believe our values and culture have similarities or align?
These questions are not transactional; they are extremely personal. M&A are all about the people involved. Take the time to get in sync with the values of the people on the other side of the table. If you fail to do this, you will run into problems down the integration road. Disagreements are typically caused by misaligned values. With proper alignment, however, the next stage of the process is more likely to proceed smoothly.
2. Compare Your Values, Mission And Vision
Businesses spend a lot of time comparing financial spreadsheets when they plan a merger. They need to share their values, mission and vision, too. Values, mission and vision statements indicate where your two companies align — or don’t. Likewise, assess the administrative or operational systems and processes to make sure they align with the mission statement, vision and values.
If gaps exist between the mission and values and how they are expressed in the systems and processes, you risk working with a leader who doesn’t walk the walk. If this is the case, there may still be reasons to continue with the transaction, but realize that caution and know that there will be substantial work to create alignment.
3. Create A Communications Plan
Many businesses make the mistake of creating a communications plan as they are about to seal the deal. This is a mistake. Once both parties feel committed to a merger/acquisition, they need to figure out how they’ll communicate it, including the all-important role that values play in the merger/acquisition. Why? Because creating a plan forces you to articulate why you’re undergoing a merger/acquisition in the first place — and to do that, you need to dig deeper into the reasons for making the agreement.
In addition, you absolutely need to get your people, clients and shareholders on board, or else the merger/acquisition won’t succeed. To do that, you need to help them see the deeper, cultural bonds that your two organizations share. Remember, we’re living at a time now when employees, clients and shareholders are judging companies by their values. Set yourself up for success early on.
Set Yourself Up For Success
No merger/acquisition is perfect, however hard you plan. But when your values are in harmony, you build a foundation to endure the occasional bumps in the road, and you establish a common ground that guides your decision-making.
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