The Role of Change Management in Mergers and Acquisitions

There’s no shortage of studies on the failure rate of mergers and acquisitions (M&A). The percentage can vary from half of all M&As to as high as a 90% failure rate. It doesn’t look great either way. Failed M&As can lead to wasted resources, often due to a lack of effective change management, can lead tolost productivity, and even damaged brand reputation. Despite this, companies are still drawn to the immense potential of M&As. The promise of market expansion, access to new technologies, and enhanced innovation makes M&As a strategic move for many businesses. 

So why do so many keep failing? 

Ultimately, a merger or acquisition is a significant change for all parties involved. A change management strategy is therefore crucial to get through this transition and come out the other end in better shape.

Why M&As typically fail

All the challenges and pitfalls associated with M&As are linked to change and how it is (or is not) handled. As a leader undergoing a merger or acquisition, you’re suddenly thinking beyond your team or company. You have to think about how the upcoming changes will affect both parties and how the two cultures will mesh together. Typical challenges faced during the change process include:

  • Cultural clashes
  • Communication breakdown
  • Employee resistance
  • Loss of morale and productivity

The importance of buy-in and culture is even more significant in an M&A than in a typical strategic plan. This is because you’re asking people to enter a new reality that is significantly more difficult than what came before.

We see examples of these failures all the time. One example is when Hewlett Packard (HP) merged with Compaq in 2002. The differences in company cultures were ignored, and time wasn’t taken to compare and sync internal software. This lack of planning led to temporary cultural clashes, trust issues, and workflow delays. All of these could have been avoided with better strategic planning. 

Perhaps the trickiest part of all of this for leadership is that you may not know if there is cultural misalignment until after the merger or acquisition is complete. You could have two separate companies that look very similar on the outside but could, in practice, be quite mismatched. 

Strategy leaders need to think about building a strategy to blend the different models or how, together, they can build a congruent culture over time.  

Also read: 13 Notorious Examples of Strategic Planning Failure

A robust change management strategy is crucial for your M&A

Designing and implementing a change management strategy offers several benefits. It will help you prevent your M&A from becoming another statistic via:

  • Smooth integration processes: A good change management strategy allows you to anticipate challenges and proactively address them. It minimizes disruption, ensuring a smoother transition for all employees. Clear communication and a well-defined plan keep everyone on the same page, fostering a sense of stability and security during a period of change.
  • Increased employee engagement: Effective change management prioritizes open communication and employee involvement. When employees understand the rationale behind the M&A and feel valued throughout the process, they’re more likely to be engaged and invested in the success of the new organization.
  • Enhanced productivity and collaboration: Change management strategies are designed to tackle cultural differences head-on. This allows you to foster collaboration across teams, streamline workflows, and integrate processes, helping employees become more productive and efficient in the new environment.
  • Faster achievement of synergy goals: A smooth transition, engaged employees, and effective collaboration pave the way for achieving synergy goals faster. M&A success is ultimately about maximizing value, and a robust change management strategy is the key to unlocking that potential.

Putting your strategy into practice for M&A success

There’s a lot to consider when designing and implementing a change management strategy into your M&A process. The following five steps should help you navigate your merger or acquisition process from A to Z.

  1. Leadership should set the tone

Many leaders fall into the trap of thinking that everyone sees the benefits of the merger or acquisition. They need to put themselves in the shoes of the people who weren’t part of the meetings where the decision was made. It is important to recognize that the rest of the organization might not understand why or how A+B = success.

The people at the top need to communicate the vision clearly to the rest of the team. They must work to make sure that as many people as possible are going to get on board with the new changes. 

  1. Conduct an internal communications audit

But the work doesn’t stop at communicating the vision. The process should be two-way. The leadership team needs to truly listen to all parties and stakeholders involved. They must take the time to learn about any concerns and resistance points and address them when possible. An efficient way to ensure this is through an internal communications audit. This audit could entail:

  • Channel analysis: Evaluate the effectiveness of existing communication channels (email, intranet, town halls) used by both companies. Are they reaching all employees effectively? Consider the need for additional channels or adjustments based on employee preferences.
  • Employee surveys and focus groups: Gather employee feedback through surveys and focus groups. This helps identify knowledge gaps, concerns about the M&A, and preferred communication styles.
  • Leadership communication assessment: Analyze the leadership team’s communication style and messaging consistency. Are messages clear, transparent, and delivered frequently enough?
  1. Assess and integrate organizational cultures

The leadership team needs to take a deep dive into the cultures of both companies. This can involve surveys, focus groups, and interviews with employees at all levels. The goal is to identify core values, communication styles, decision-making processes, and any potential areas of conflict.

Once these differences are understood, the leadership team can develop a plan to bridge the gap between the two cultures. This might involve creating a new set of shared values, establishing clear communication protocols, and providing training and coaching to help employees understand and adapt to the new culture.

Ultimately, the goal is to merge the two entities together to make it one. After a couple of years pass, you don’t want people to still view your company as Company A + Company B or Company A brought to you by Company B. They should see Company C, a newer and better version of what came before.   

  1. Align processes and systems

The success of any M&A hinges on integrating workflows and systems across both companies. Inconsistent processes and incompatible software can create confusion, hinder productivity, and stall progress. A robust change management strategy tackles this challenge head-on by focusing on process and systems alignment.

This involves carefully analyzing existing workflows and identifying areas for streamlining and standardization. Tools like AchieveIt can be invaluable in this process, allowing leadership teams to visually map out current processes, identify redundancies, and collaborate on creating a unified system for the new organization. 

  1. Measure progress and adapt as needed

Finally, it is crucial to collect data on key metrics throughout the integration process. Employee surveys, focus groups, and tracking key performance indicators (KPIs) like productivity and turnover can reveal areas where the strategy might need adjustments. 

Also read: A Guide to Strategic Alignment and Execution

Data-backed M&A progress with AchieveIt  

AchieveIt’s data collection and reporting features allow leadership teams to monitor progress toward goals, identify roadblocks, and adjust their approach as needed. Updates can be collected easily throughout the organization in a standardized manner. Your insights are now automated, on time, and clear. 

AchieveIt makes a collaborative approach to change management possible. It gives you a comprehensive view of progress across all of your integrated plans on one platform. 

To find out more about how AchieveIt can help you develop a robust change management strategy, get in touch with us today. 


Meet the Author  Chelsea Damon

Chelsea Damon is the Content Strategist at AchieveIt. When she's not publishing content about strategy execution, you'll likely find her outside or baking bread.

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