A Post Merger Integration horror weekly series
By Sergio Bruno, Italy Partner, and Alessandra Silvestri, Associate at Global PMI Partners
Introduction
Deal done! The final closing took place. Company A finalised the purchase of 100% of the stocks of Company B. It looks like something big just happened.
But we need no magician, to know that suspense will take our breath away…. until something else happens. Exactly, what?
[Some music, please, while the opening credits appear on the screen].
“Post-Merger Integration” is the title of the horror (Television series) that you are going to watch from now on. A one-week series of short films. One a day. A warning: Be prepared. Some scenes may scare you.
Why horror? Worst practices can make a horror series out of the whole film.
That is exactly what happens if the Post Merger Integration is not performed in the right way.
There are seven episodes; for each episode we will provide a description of what happens and then we will show the consequences as a comment.
Monday episode
Where the new CEO lies to the employees at the beginning of the M&A process.
We have a new local CEO; he was just appointed by the global CEO, who meant to replace an old -but beloved- ex “tyrant”. The new CEO approves dedicated budget for “key positions” (BU Managers, Marketing Director, Technical Director, Financial controllers). Unfortunately, he messes up the recruitment process, stopping everything. He “highly recommends” to hire his friends and/or former colleagues in place of selected candidates. No remark, advice, or counterproposal is allowed. After two months, a communication addressed to all employees announces that an M&A operation just began.
Consequences:
Everyone’s sentiment (and not only the “old teams’” feeling) after that communication suggests the CEO has created his project dream team of “chosen few” who already received preferential information about the merger. Such new hires are perceived as the shining, successful “new ones” facing a prosperous future against an undifferentiated “old” bunch of people, whose destiny is uncertain. The members of the “dream team” are meant to take advantage of the information they have in every possible way at others’ expenses.
The employees already know the identity of the new hires, because of the sector’s rumours, and embarrassing situations arise during their onboarding period. Any confidence in the CEO, in the bright future he is preaching and, in his staff, disappears.
Tuesday episode
Where the Managers who propose different solutions (or express disagreement) during a M&A process are immediately replaced
During the M&A phase, there are some managers, or employees, who, hearing about decisions or solutions chosen by the company’ decision makers, try to propose different actions to the CEO. Others approach the Top Management explaining their point of view. They may ask questions about the future consequences of such decisions. Or they may simply try to gather more information about topics like, as example: “make or buy” decisions, technology transfers, mass cost reduction, etc. They want to open the discussions because recurring rumours of future decisions they have no confirmation about do alarm them, or their teams. All these managers or employees are soon labelled as “traitors” and therefore immediately fired. No further explanations or justifications for such actions are given to the Management and/or the teams. Everyone knows they are no longer working with them but doesn’t know why.
Consequences:
A “psycho-terrorism” mood diffuses among the employees because of the absence of feedback surrounding these terminations. Even those who are not directly involved in the proposals or discussion of future moves. In their minds, every remark may be generating sudden, damaging backlashes. Every attempt to be a contributor is considered useless noise. Proposals are criminalized.
Such perception of being in danger is perpetuated and emphasized during the whole M&A phases, especially within the middle management; young managers think there is no room even for thinking, not only for proposals. Old managers prefer not to do it because of fear. They just do as little as possible, because they fear they will be the first ones in the blacklist, the to- be- terminated.
Even new hires replacing them in turn, after a very short period, become afraid of being victims. Paranoid feelings diffuse because no definite and transparent communication is given, both about the decisions and the sudden “disappearing” of some colleagues. Trying to be practicing an open and transparent communication is the first rule. Answering awkward questions with patience, the second.
Wednesday episode
Where the local CEO and BU Managers are Organizing lavish awareness events for the creation of a new BU’s and anticipating the launch of brand new, extraordinarily successful products during the first phase of the M&A.
Some among such events look just like one of Great Gatsby’s parties: Crystal champagne, fancy dresses, luxury food and cocktails, DJ sets. All employees and local authorities are invited, and each one not belonging to the BU is welcomed as the poor relative of the countryside. The launch of the “Super product” is communicated as imminent, and only “the best team” can be achieving such a glorious goal…. Anticipating the launch of Units and products without having any certainty about the future is not exactly a wise move. Even if such launch is proposed by a Global Department, some prudential attitude is requested to the Managers. If the predictive mistake is about a product, it’s something human. if it involves several organizational positions, such responsibility is much higher.
Consequences:
The “Stars’” BU becomes a Supernova after some months. The M&A period requires indeed a “vacation” from going public with extraordinary efforts, because the risk of being contradicted by subsequent events is (too) high. The local CEO and the BU Managers involved in the launch have been somewhat naïf. If the “trendy” BU doesn’t release the planned products at a worldwide level, increasing the joy of competitors, and letting “the bunch of employees” (from the countryside) speechless …. the damage is not only concerning the image of a company. “Ultimate talents” being hired for the brand-new Unit locally, in turn, will become the first employees to be offered as a sacrifice to the “early victory” attitude of their managers.
Thursday episode
Where the Corporate HR department is organizing separate one-to-one assessments for the Managers directly reporting to the CEO. In this episode the CEO is supported by a renowned global independent consulting firms requested by the Headquarter in order to identify and evaluate “double roles” in management.
Such management assessment, typical either in a horizontal or cross-border merger, should be the first action of a global evaluation of the workforce before taking any decision about employees in a company experiencing a M&A at any level. But if, shortly after a “regular” assessment, one or more face-to-face collective “clash” or “competitive” meetings of the same managers are organized and managed by the local CEO… What conclusions did you draw? Well, an assessment isn’t that important, only the jungle is. Because business is jungle, business is war, and only those who survive the war can show how brave, bold and skilled they are. And they deserve to stay in the game.
Consequences:
Hostile feelings and behaviours, envy and fear spread progressively in the first line management, on both “sides” of the merger. The risk of cascade diffusion of such suspicious, mistrusting and aggressive survival attitudes requested to them by the upper level can impact on the general performance of both companies merging. And this because every Manager nurtures suspect against his fellow manager and tries to act in order to neutralize a possible opponent.
Observing managers desperately fighting to “save their own life” is not a way to prove their ability to generate value both for an old or new organization
Friday episode
Where one “double role” in the acquired company is introduced to her new team in the acquiring company.
After one of the “two opponents for one role” is chosen, the losing one on the other side of the merger is subject to a dismissal order. The first thing the fellow employee covering the “double role” does, as soon as the newly acquired team is introduced to him/her, is to threaten employees saying that they may be ending like their former boss. You can imagine their reactions will be something different from happiness.
Consequences:
All concerned employees, the members of the new team, feel helpless, unprotected and feel like they are losing their points of reference.
They will try to hide their feelings, behaviours, motivations. They will become less productive in order to reduce the chance to be attacked, personally belittled or demoted. They are afraid they could even be fired “only” because of their being on the other side of the merger.
Threatening employees because of the belonging to the “other” side of the M&A is not recommended. Not at all. It prevents from acknowledging possible talent in its “native environment”. Missing something so important, like finding real talent in a different situation is nearly unforgivable for a manager.
Saturday episode
Where the CEO allows the pay out of “merit increases” to all managers of first line.
In this story the CEO does not have the smallest idea of their performances during the M&A phase; nonetheless he gives everyone the same bonus, just as if performances were exactly the same The CEO doesn’t take the time and the effort to analyse his Managers ‘performance in a delicate period.
Consequences:
Even if the compensation system is a fair one, the review must be seriously performed, double-checked and discussed. Even during an M&A phase.
Otherwise, the top manager “lose the grip” on real performance, especially in a period of changes. His strategies can be misled by objectives he does not control. He is losing respect.
Sunday episode
Where some Top Managers displace difficult people, who can’t be fired.
The managers cannot find immediate solution in the organization because they don’t have enough creativity or project management skills
Consequences:
They don’t have real room for extreme manoeuvres. Their decisions will soon turn against them because such “exile” is temporary. The M&A period will come to an end, and the outcome of such painful situation may be ghastly, costly, or both. Because the company they leave the “enemy” in may be the one which wins at the end of the day, or where there will be less losses. And the emperor with the new clothes? He is naked, at the end of the day.
Conclusion
If you prefer happy ending movies, and you haven’t thought this horror series is amusing, especially for those who are so lucky to make experience of it, you’d better involve specific competencies and not letting a Business as Usual situations degenerate into a horror series..
Remember: Post Merger Integration is NOT Business as Usual. It is better to avoid using people that are strong in Business as Usual as Post Merger Integration Mergers.
Sergio Bruno
Italy Partner
Associate
Sergio Bruno is a US Partner for Global PMI Partners, an M&A integration consulting firm that helps mid-market companies around the world by delivering exceptional consistency, speed, and customized execution on the complex operational, technical and cultural issues that are so critical to M&A success.
