11 Feb Move Beyond the Transactional Mindset
Driving Transformation through M&A: Tip 1 of 10
This is part of a series of posts about driving transformation through Mergers and Acquisitions (M&A). Click here for the first post in this series which summarises the M&A challenge and the ten recommendations I have for success. If you haven’t seen it then take a look.
Let me ask you… have you experienced this before?
Your organisation has just acquired a new business. Behind it all is an exciting strategy to build a better business with new capabilities in digital, products and customer experience.
It’s tantalising, career enhancing; it’s your chance to play your own part in making an enduring difference in the firm you work with.
Yet, somehow, once post-deal activities kicked off, the original intent and proclamations about the future, start disappearing into the ether (sometimes referred to as the ‘too hard basket’). In the end, the business was integrated; some cost synergies were delivered, and ‘success’ was claimed. The team moved on. However, all the things said about new capabilities, and long term growth opportunities never got a look in. There’s a sense of disappointment with hopes dashed. It could have been better.
I’m sure many of you will have experienced this before. I certainly have, and similarly wonder what happened to those original dreams and aspirations. I believe it comes down to a mindset – a kind of group-think that infects all those performing the work. It’s called The Transactional Mindset.
The Transactional Mindset
The transactional mindset is a way of thinking and behaving that looks at M&A as cutting deals, buying and selling companies, hiring and laying off people – make a deal, get it closed, hire & fire. It’s a management paradigm that seeks efficiency, standardisation and continuity.
There’s no inherent problem with this approach; that’s how transactions work. The problem is that it’s common to see this transactional way of thinking and behaving infiltrating the rest of the M&A process: from initial strategy through to integration. When this occurs, M&A becomes a reductionist exercise that shrinks the scope of work to what must be done to complete the deal and combine the business. It has a way of diminishing understanding, eliminating complexity and reducing the quality of decisions.
Let me be clear! If M&A is being used to achieve transformational goals, whether it’s in existing operations, products or customer experience, the transactional approach will almost certainly guarantee failure from the very start.
The transactional approach to M&A will not deliver transformational results
I get it. There’s a natural desire to keep things simple and not screw it up. The focus is narrowed to just getting the combinational basics right from a deal. However, this is unfortunate as the strategic purpose of the deal can be easily lost within a plan driven by time and tactics. While the pre-deal synergies to get the deal across the line may have been realised, the opportunity to dramatically transform future growth prospects are left wanting.
The Transformational Mindset
The transformational mindset, on the other hand, represents a more expansive view of M&A. It’s much like widening the aperture of a camera.
When we widen aperture more light comes in. This provides a greater awareness of the surroundings; enhancing the ability to see new perspectives and different shades. More light allows you and others to see opportunities that would otherwise be shrouded in darkness. By widening the aperture, the mind is illuminated by new possibilities.
By taking a more expansive view of M&A the mind is illuminated by new possibilities
The transformational mindset is a way of thinking and doing that sees M&A as an opportunity to deliver both short-term, and long-term value. It’s eclectic in its approach and aspirational in its goals. It’s about creating value – not just capturing it.
Transformational M&A is about creating value – not just capturing it.
To better understand the transformational mindset let’s do a comparison with the more traditional alternative.
Take a look at each line in this table and see the difference in mindset and leadership behaviours. It’s quite distinct. It also highlights that driving transformation through M&A is a far more challenging and nuanced exercise. So it’s understandable that organisations prefer to take the transactional approach at the expense of the transformational.
I appreciate that none of this is easy. However, the rewards are extreme. To be successful requires deeper, stronger integration skills and intense management commitment. The integration approach also needs to be flexible enough to allow leadership to create value beyond the transaction itself. Driving transformation through M&A really is an experience-driven skill set – the more you do the better you get.
Transformational M&A is an experience-driven skill set – the more you do the better you get.
It therefore requires leadership, courage and boldness to play a long term game that goes beyond what the transaction itself delivers.
Transformational M&A success means playing the long term game
Hopefully, this particular tip has given you some thought. As an industry veteran, I’ve been working on transformational deals for several years, and as is often the case, it’s the softer side of things – people, leadership and culture, that really matter. The process will naturally follow when you get these right. My email is below; happy to discuss this and other posts in further detail.
Thank you for reading!
Senior consultant, BTD Consulting
The inspiration for this piece came from “Transactions vs. Transformations” by Kent Frazier. It’s a good article and has a certain emotional appeal about it.