The Leadership issue in M&A

The Leadership issue in M&A

Over the past 14 years, I’ve had the opportunity to lead over a dozen acquisitions and divestments. It all started back in 2001 when I led the acquisition and integration of a financial services business. From that point onwards I learnt a little more about the ‘do’s and don’ts’, what works and what doesn’t, how to manage change with empathy but also with decisiveness.

From these experiences I’ve come to observe and understand where common mistakes are made, how to keep people motivated and focused, and above all, how value can be best extracted from an M&A deal and subsequent integration.

Now it might be somewhat unsurprising for many of you to hear, but if I was to bring it down to one thing, and one thing only, that defines M&A success, it is leadership.

Perhaps not exactly a epiphany for many of us but let us delve further..

I once wrote an essay on the dichotomy between pragmatism and idealism in leadership as part an MBA unit. I always think of this as the eternal issue that plays itself out in every M&A deal and subsequent integration.

With regards to pragmatism, it’s readily seen in those managers amongst us who are always focused on the practical, here-and-now aspects of getting things done. Time is short and there’s a pressing need to produce short term results.

When it comes to M&A and deal value, the fastest, and dare I say, the easiest way of delivering value is through the elimination of cost and inefficiencies where there’s duplication.

Our market economy and organisations rewards the pragmatic delivery of deal value, and rightly so. Fundamentally, a leader should always look to injecting speed, accelerating efforts and looking for ways to deliver returns from a deal quickly and easily.

But that’s where it often stops! The ‘integration’ is brought to a close, and staff return with a sigh of relief to their daily business life.

With regards to idealism, it tends to manifest itself differently. In this case managers are the dreamers who want us to see the ‘big picture’ and opportunities for long term growth. They are not so concerned with short-term accounting earnings. Instead, they are in for the long-haul, to stay the course with a focus on shareholder returns that could take year or more to deliver.

We know fundamentally that deals need to be driven ‘with-the-end-in-mind’ guided by a high level vision and objectives designed to deliver long-term and sustainable revenues.

We know deep down this is the right thing to do. But we also know it’s hard, much harder to do.

And herein lies the problem. Our pragmatic and expedient focus on short-term results, whilst is readily applauded by all stakeholders – shareholders, management and customers alike, can leave the deep underlying value within a deal left wanting.

Knowing it is much harder to do, it requires those who are driven more by principle than expediency, to focus on the long-haul and deliver against those pre-deal promises, knowing it can take a year or more to do it.

So what’s the answer? I would say quite simply that the delivery of M&A value should be seen as a transformation that makes difficulties and disruptions, the highs and lows all worthwhile. Yes, have a strong pragmatic sense on what must be done to deliver in the short-term, but don’t forget why the acquisition was made in the first place and the ultimate prize to be achieved.

I think our mental models and the very way we think frame the M&A and integration process tends to force us down the road of disappointment.

A more enlightened view is required that rekindles and inspires us to think of M&A differently is required.   As organisations look to transform themselves through inorganic growth will force this period of enlightenment and a new age of M&A.

I’d like to explore this path in future blogs but always, interested in what others think on M&A and the issue of leadership. It is always the ‘elephant in the room’ and one that cannot be ignored.