The Conversation That Must Happen For Your Merger To SucceedMay 26, 2021
If you are planning a merger this year, you have plenty of company. The global M&A market is heating up in 2021 after a blistering finish to 2020. Unfortunately, many mergers/acquisitions will fail. In my career, I’ve been involved in more than 40 M&A deals. So I’m going to let you in on a little secret: if you want your merger to succeed, you need to make sure your two CEOs have a conversation about your shared corporate values. If you do that, your merger will have a greater chance to flourish. If you don’t, you’re digging yourself a very deep hole.
The CEOs of the companies involved in a merger are ultimately accountable for the success or failure of the deal. Yet, too often, they offload the job to someone else in their company. To be sure, a CEO isn’t going to have the time to manage the nitty-gritty details of a merger. I know mergers entail many moving parts, and CEOs should not micromanage them. But mergers are too high-risk for a CEO to take a hands-off approach. I believe it’s essential that when two companies plan a merger that their project plans include regularly scheduled check-ins at the CEO level. The check-ins need to include topics such as:
- Agreed-upon goals for the merger.
- The role of each CEO post-merger, with responsibilities clearly understood.
- The timeline for completion.
- Status on progress of the merger, including any roadblocks that might have emerged.
- Most importantly: a conversation about shared values.
Why is a conversation about shared values so important? Because if the values of your two companies are not aligned, they will experience a fundamental conflict that will torpedo the merger. Oh, you might sign the deal as planned if your values are misaligned – but the conflict will manifest itself sooner or later when your newly merged company makes critical decisions about everything from hiring people to servicing clients. This is especially true at a time when people increasingly decide to do business with companies based on their values.
And corporate values start at the top. That’s why the two CEOs need to have a discussion to compare each other’s corporate values. They need to ask questions such as:
- What exactly are the espoused values of each business? If a CEO can’t name their corporate values, that’s a red flag that the CEO doesn’t take them seriously.)
- How do their respective companies live their values? Ask for specific examples.
- Do they spot any sources of incompatibility in their corporate values? What are they? How seriously misaligned are the two companies’ values? There is no hard and fast rule on assessing incompatibility. Most corporations espouse several values. Certainly if the majority of your values are not aligned, then you have a problem, and you should reconsider the deal.
Finally, make sure that the conversation happens early. Don’t put it off. Having the dialogue early on will either save your two companies time and effort if you need to call the deal off, or it will lay the groundwork for a stronger merger.