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Mergers and Acquisitions: Avoiding Culture Clash – 3 Tips!

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The Point: For a successful mergers and acquisitions event to take place, there typically is an avalanche of financial figure reviews/due diligence (actual, forecast, and delta explanations from both buy-side and sell-side). But we asked ourselves here at Tip of the Spear Ventures, is there more to consider than meets the financial eye? What happens when one organization’s culture is in apparent direct conflict with that of the other organization? So in this post, we examine the mergers and acquisitions topic of avoiding culture clash along with 3 tips… Enjoy!

Mergers and Acquisitions Avoiding Culture Clash 3 Tips

Mergers Create Value and Synergies (Don’t They?)

In today’s highly competitive new economy, where global industry heavyweights fight for market share, mergers and acquisitions (along with joint ventures) appear to be a logical outcome for those looking to be here to stay. Most markets across the globe (even in local communities) provide for three primary providers of products/services. Creating economies of scope and scale while establishing global brands. Or do they?

According to an M&A Harvard Business Review report, 70-90 percent of all mergers and acquisitions fail. So at some point after a merger or acquisition, somehow/someway these once promising “new” organizations that were great on paper failed in practice. So what went wrong?

Culture: The Dominant Barrier to M&A Success?

Blocking the success path for many of these mergers and acquisitions (don’t forget joint ventures too!) is what could be considered a dominant barrier with the name culture. Let’s define culture as the implicit values, beliefs and assumptions that influence behaviors of those employed in an organization. While you may not be able to see culture spelled out, you certainly can see it being played out in the daily interactions amongst an organization’s stakeholders.

So what can leaders at the helm of mergers and acquisitions do to minimize the impact disruptive company cultures can have on success? What follows are 3 tips to assist leaders of mergers and acquisitions in avoiding culture clash:

Tip #3 – Leave Your Egos at the Door

Aggressive and arrogant can be used to describe some company cultures, especially those doing the acquiring in M&A transactions. Typically thought of as “weak” and “gobbled-up” are organizations that get acquired. However, cooperation and promised synergies rarely materialize if both organizations cannot put aside their egos in order for the overall common good to take place.

Tip #2 – Recognize New Cultural Marketing Opportunities

Isn’t business funny, and the leader actions that take place in M&A? While some pretty bright people put together months worth of financial analysis, the marketing that represents the culture of the new entity is rarely recognized nor given consideration for change. On top of this lack of marketing recognition of the new brand, continuing on in a “if it worked then, it will work now” methodology has proven fatal. Recognize new cultural marketing opportunities as two become one.

Tip #1 – Failing + Failing Rarely = Success

When two failing organizations go through an M&A, rarely do we see success be the result. With the old adage of “desperate people do desperate acts” we see two failing organizations combining heading on purposeful path towards future failure. Examples prevail from button-down vs. khakis and engineering vs. sales based cultures not playing well with each other in mergers and acquisitions.

SUMMARY

The Mergers and Acquisitions landscape is a complicated one, full of financial due diligence playing itself out. However, the financial figures alone cannot help in avoiding culture clash. In this post we’ve explore M&A – Avoiding Culture Clash and provided 3 tips to help leaders achieve greater success.

 

Sam Palazzolo

Leading at the Tip of the Spear Lunch Offer

 

The Leadership Challenge: Swearing – 1 Tip!

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The Point: We’ve all had those heated moments of leadership where using swear words seems like an appropriate choice. Call it lazy, call it a limited vocabulary, call it an attempt to add “humor” or levity to a situation, hey you can even call it getting your “street cred” in certain situations! But are any of these situations appropriate to swear? Should you breach the line of “in-good-taste” and swear in the workplace? In this post we’ll explore the leadership challenge of swearing and provide 1 tip (Yes, just one)… Enjoy!

The Leadership Challenge Swearing 1 Tip

I Swear, Therefore I am!

Apple’s release of the swearing emoji appears to capstone the era of bad taste. What was once a business climate of professionally dressed stakeholders in an organization, slid to business casual and landed in casual/inappropriate attire (as an organizational leader, does it blow your mind that focus is given to dress code instead of driving revenue generation or shareholder value? It should!)

Following this trend in dress code is the vocabulary that organizational leaders and their stakeholders use. I did some consulting work with an organization recently where all (leaders and stakeholders alike) seemed to employ the continuous use of the F-word expletive. As one leader of the organization shared with me when I inquired as to the F-words prevalence “That’s just our culture here… Think of it as fuel for our engine!”

Swearing… It’s What’s for Breakfast (Lunch and Dinner!)

The essence of swearing is derived from civilization’s back alleys, back countries, and backyard sporting events. If the goal of business is to push forward their initiatives/agendas, then why do so many leaders revert to this backward vocabulary choice?

Now I’m no angel! There have been plenty of times (more than I care to admit) where in a round of golf a mishit ball has caused me to exclaim a few choice words (Yes, Mom… Even the aforementioned F-word!) I’ve even worked for a leader right out of graduate school that used the F-word in his vocabulary as nonchalantly as Cousin Frankie requesting to pass the potatoes at Thanksgiving dinner. But does it have to be this way?

1 Tip for The Leadership Challenge of Swearing

I would contend that leaders, and stakeholders alike, would achieve much more success and create harmony in the workplace if swearing was done away with. If as a leader you are looking to advance agenda items, and as stakeholders execute said items, then why would you succumb to swearing?

So here is my 1 tip for the leadership challenge of swearing:

“If you feel as though you must swear… Just don’t do it!”

If the laws of persuasion and influence are alive and well (Thank you Dr. Robert Cialdini!), your vocabulary can help elevate your consistency, likeability, authority, social proof, scarcity, and reciprocity moments. If you’ve spent your entire career building your professionalism, why would you undo it all in a split second with a poor word choice? Know this much… It will take effort and energy NOT to swear.

SUMMARY

In this post we’ve explored the leadership challenge of swearing and provided 1 tip. You can learn a lot about a person by the vocabulary they select. Perhaps there is room for swearing in the locker room, but the boardroom?

 

Sam Palazzolo

PS – I’m proud to say at Tip of the Spear and our platform companies that we’ve had in place for over five years now a “No F-Word” policy. This policy prohibits stakeholders from directing the f-word at each other. It’s written into our code of conduct, and can be used to release one of their duties. I understand that vocabulary is a choice, and am a proud proponent of one’s first amendment “freedom of speech” rights. However, there are plenty of places where one can work if their choice is to employ vocabulary unbecoming.

PPSS – Here’s a nice use of the f-word: “The ‘F-word’ you must use every day in your career” by Danny Rubin

Mergers & Acquisitions – Six Diversification Questions

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The Point: A standout amongst the most difficult decision an organization can face is whether to expand/diversify – rewards and dangers can be exceptional. There have been examples of success stories, and more similarly, numerous stories of infamous and exorbitant failures. What makes expansion such an erratic, high-stakes amusement-like game? A typical reason is that organizations, for the most part, confront the decision in an atmosphere that is not helpful for clear decision-making. The truth is that diversifying shouldn’t be such a roll of the dice. There is an abundance of literature about how to approach it! So in this post we’ll discuss Mergers & Acquisitions along six diversification questions that must be asked… Enjoy!

Mergers & Acquisitions - Six Diversification Questions

Six Questions Leaders Must Ask/Answer When Considering Diversification

If managers consider the following six questions, they can push their reasoning somewhat further to lessen the bet of diversifying. Note that the inquiries won’t prompt a simple Go/No-Go decision. However, the activity can enable administrators to survey the probability of successful achievement.

Question #1: What Can Your Company Do Better Than Other Competitors?

This question will help you decide on the nature of strengths accessible – which are, by and large, vital resources. When confronted with the choice for diversification, managers need to ponder on not only what their organization does, but also about what it does better than its rivals. Pinpointing vital resources is a market-driven way to deal with business definition and identify unique selling propositions.

Question #2: What Strategic Assets Are Needed To Succeed In The New Market?

The late 1970s diversification misfortunes of various oil companies highlighted that it is unsafe to go up against a royal flush when the total of what you have is a couple of jacks.

Just like the game of poker, the lesson for organizations considering to diversify is the same – You need to know when to hold them and when to overlay (fold) them. If an organization is holding just a couple of key resources in an industry where most players have a superior hand, there’s no reason for putting cash on the table.

Question #3: Can We Catch Up To OR Leapfrog Competitors With What They Do?

If a company is considering diversification without all the required strategic assets in hand, specific assets must be obtained by possible means. If this is not done, moving forward into new markets may backfire.

Question #4: Will Diversification Break-Up Strategic Assets?

This is where managers need to ask whether the strategic resources they plan to export are transportable to the new industry. Many organizations erroneously expect that they can separate bunches of capabilities or abilities that, only work because they are together, strengthening each other in a specific competitive setting.

Question #5: Will We Be Simply A Player OR Emerge A Winner In The New Market?

To accomplish a sustainable favorable position, diversifying organizations need to come up with something unique. An organization’s upper hand will be short-lived if rivals in the new market can emulate the organization’s moves more rapidly and cheaply.

Question #6: What Lesson Can Our Company Learn By Diversifying, and Are We Well Organized For It?

Managers who are forward thinkers, will not only be worried about accomplishment but just as similar to great chess players, they will also be thinking about few moves ahead. They will ask themselves about this last question while considering diversifying further.

SUMMARY

In this post we’ve explored the topic of Mergers & Acquisitions – Six Diversification Questions. Diversification is not an easy task, it is therefore important that managers examine their cards painstakingly. It takes shrewd players to know when it’s best to raise their wagers and when it’s best to fold.

 

Sam Palazzolo

PS – If you or your organization are challenged as a result of M&A activity, please don’t hesitate to drop me a line and request future post titles! Here are a few of the other M&A titles previously published/in the works:

– Will Your M&A be a Success of Failure?

– The Importance of a M&A Strategic Plan – 3 Tips!

– How to Successfully Survive Mergers & Acquisitions

– M&A: Creating Shareholder Value

– M&A: Should You Go For Stock or Cash?

 

The Importance of a Mergers & Acquisitions Strategic Plan – 3 Tips!

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The Point: The thought of acquiring another company can be a very seductive strategic plan when CEOs wish to improve corporate performance and overall growth. Companies spend a huge amount of money every year on acquisitions – yet studies have confirmed that the rate of failure among mergers & acquisitions is at an all time high (peak!). What exactly are the causes of these failures (and more importantly successes)? In this post, we’ll discuss the importance of a Mergers & Acquisitions Strategic Plan and provide 3 Tips… Enjoy!

The Importance of a Mergers & Acquisitions Strategic Plan – 3 Tips!

What Leadership Does Wrong?

A large number of acquisitions miss the mark in regards to expectations since organizational leadership mistakenly attempts to coordinate candidates with the strategic aim behind the arrangement, neglecting to recognize bargains that may enhance current operations and those that could drastically change growth prospects of the company. These often make organizations pay the wrong price (i.e., overvalued) and integrate the acquisition wrongly.

There are two motivations behind acquiring a company, which most executives frequently befuddle. The first, and the most widely recognized one, is to increase your organization’s present performance – That is, to hold a superior position, while cutting expenses. The second, and less-known reason for acquiring a company, is to re-evaluate the mode of business operations through expense reduction – This is most likely to confound investors with spectacular pay off (especially when labor costs are slashed).

Integration often determines whether the acquisition will succeed or fail. You should be able to describe exactly what you are buying to foresee the way integration will play out.

One powerful way forecast effectively is to view the established targets/goals in its business model. Additionally, value is created and delivered through 4 interdependent elements of a business model:

– The customer value proposition is the first element

– The profit formula

– Available resources (such as technology, employees and cash)

– Lastly processes (including budget, R&D, manufacturing, and sales)

Three Tips of Having a Good Mergers & Acquisition Strategic Plan

Tip #1: Helps in Acquiring Resources That Command Premium Prices

Having plans to improve a new product or service is no guarantee to command a price premium. Buying improved components (compatible with their products) is a strategy that is routinely done by some companies to command premium prices.

Tip #2: It Helps to Lower Company Costs

Leadership often promise that an acquisition will lower costs, where in reality, it’s only possible in few scenarios, such as, and acquiring company with high fixed costs can expect higher profit potential. Most deals succeed using almost the same strategy.

The parent plugs some particular assets from the procurement into its current model, ejecting whatever is left of the acquired model and closing down, laying-off or offering redundant assets for sale. The execution help comes about because of utilizing the objective’s assets such that scale financial matters can drive down expenses. The strategic use of resources from the target will help in boosting performance and drive down costs 

Tip #3: A Disruptive Business Model can be Acquired

Disruptive business models and products have been proven to be the most reliable sources of massive growth in both margins and revenues. Disruptive companies typically offer simpler and more affordable products than what bigger players offer. Their footholds are well secured in the low-end of a market and gradually step up to products with higher margin and performance.

SUMMARY

In Mergers & Acquisitions, we all believe that success will be the end result. However, wrong companies are being purchased daily for the erroneous motive, wrong elements are integrated into the wrong business models, and wrong measures of value used when pricing deals (This is a mess that shouldn’t be!) You must be able to predict accurately if a company under acquisition consideration is a great deal, or just a debacle in the waiting!

 

Sam Palazzolo

PS – If you or your organization are challenged as a result of M&A activity, please don’t hesitate to drop me a line and request future post titles! Here are a few of the other M&A titles previously published/in the works:

– Will Your M&A be a Success of Failure? (CLICK HERE)

– How to Successfully Survive Mergers & Acquisitions

– M&A: Creating Shareholder Value

– M&A: Should You Go For Stock or Cash?

The Leadership Challenge: Will Your M&A be a Success or Failure? 3 Tips!

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The Point: Recent research by Harvard Business Review reported that the rate of failure in most mergers and acquisitions is around 70% to 90%. So what made this possible? This is simple anyway – a company that focus mostly on what to get from an acquisition is less likely to succeed than a company that focus majorly on what it has to give it (Think of this as a play-off of the “In order to get, you have to give” principle). This truth was also echoed from Adam Grant’s book “Give and Take” – stating that people who are keen to giving rather than on taking, especially within the interpersonal/business realm often later do better than those that concentrate more on increasing their own position. In this post we’ll discuss how mergers and acquisitions can be among those deemed successful… Enjoy!

The Leadership Challenge: Will Your M&A be a Success or Failure? 3 Tips!

Value Creation: The Secret to M&A Success?

Being successful with mergers &acquisition has long been proven to be challenging, yet there have been records of serial acquirers who are more successful with M&A than other companies who occasionally make an acquisition. The major secret behind this success is value creation.

Creating value is regarded as the real essence of any business – it can be easy to forget about this important concept when trying to merge and acquire a new company. Value should be concrete/real, and creating this should always have a positive effect on any business. Most products of true value are embedded with definite way(s) of serving consumers – through a service, for instance, value is being created.

The basic premise of any merger should be that merging parties create greater value together rather than in pre-merger (or while separate entities). Value creation is supposed to be executed by all mergers, yet about 80% of mergers fail to follow this fundamental leadership principle.

Other than making a compulsory effort for creating value, there are also other things that will determine the success or failure of mergers & acquisitions. Below are 3 tips that can help an acquirer improve its competitiveness and increase the chance of succeeding.

3 Tips for Any Acquirer to Improve its Competitiveness

Tip #1: Develop a Clear Strategy

There must be a clear strategy coupled with an open communication channel between stakeholders. Failure to identify a strategy and communicate will hinder the merger or acquisition in delivering desired results. There should be transparency in the process, likewise, it must be realistic and every area of management should be involved for success.

Tip #2: Allow a Wide Range Engagement

When the purpose of mergers & acquisitions are well defined and regularly communicated to stakeholders, market share and growth will allow a natural process to be managed and make goals more realistic. There would be some challenges along the way for sure. However, your strategy must assess any potential risks and challenges that may surface during the process.

By carefully utilizing some employee engagement programs with other strategies built around communication, M&As can operate successfully – it should be at the center of their overarching strategy.

Tip #3: Use a Board and Specialists from Outside

It is a smart approach to build an advisory board regardless of M&A stage – this should include heads of departments, major stakeholders, some internal staff and specialists from outside the organizations to assist with the process.

With the help from an independent source, great business decisions can be validated, claims can be challenged and leadership has a better ability to stay on track toward set goals. A specialist from outside will ensure that employees acquire needed support via a merger or acquisition (See the previous comments on transparent communication and employee engagement surveys).

Summary

In this post titled “The Leadership Challenge: Will Your M&A be a Success or Failure?” we have discussed how not all mergers & acquisitions will succeed (In fact, a high percentage often fail!) To succeed, mergers and acquisitions could run smoother (i.e., achieve better results in less time) by applying the 3 Tips discussed above.

 

Sam Palazzolo

PS – If you or your organization are challenged as a result of M&A activity, please don’t hesitate to drop me a line and request future post titles!