Organizational Transformation

5 Lessons from M&A Leaders

Post-merger integration can be a tricky business. CEOs from some of the biggest mergers share what they have learned.

What does it take for a merger to be successful? Sherry Duda, who leads Korn Ferry’s merger and acquisitions (M&A) solution, has worked with the CEOs involved in some of the largest mergers and acquisitions over the past 25 years. She spoke to several of them recently to find out the biggest lessons they have learned and what they say they might have done differently.

M&A Lesson #1: Secure Your Leadership Team

Successful post-merger integration hinges on securing a winning leadership team. This means having governance in place as quickly as possible to create stability, direction, and focus.

“M&A leaders tell me that selecting the right leaders in mission-critical roles—both the C-suite and ‘top 100’ positions—sets the tone for the entire M&A,” says Duda.

Shared service functions are like Noah’s Ark, says Duda. “You have two of everything, which can create a tense environment as people are waiting to find out who’s in and who’s out.” To address this, CEOS should select their Chief HR Officer early in the process, and subsequent leadership decisions can be made from there.

The new leadership team will play a crucial role in articulating why the new company will be more than just a combination of Company A and Company B. The questions they’ll address are vital for anyone going through an M&A:

How will our new company differ from our competitors?
What will make it a success?
What’s the compelling vision and what are the benefits for key stakeholders?
What parts of the business will remain unchanged?
What will be even better?

M&A Lesson #2: Communicate Honestly and Consistently

Leaders should aim to be as open as they can be, ideally sharing a projected timeline about when key decisions will be made. After a merger, everyone knows that changes will be coming, and providing timelines can help control anxiety around potential changes and also stem the flow of misleading information.

When decisions have been made, be sure the leadership team is aligned with them, and then share the decisions and/or information around them. This is far from a one-time event. Ensuring top leaders and middle managers understand what’s happening on a weekly basis is critical.

One risk with M&A communication is staying on message, especially as details and timelines evolve. “CEOs often mention how exhausted they feel saying the same thing over and over again, but that this messaging consistency is also critical for keeping people engaged and focused,” says Duda.

Still, you need to walk a fine line with messaging consistency and transparent communication, while also being rigorous in dispelling rumors. “If you try to answer questions that you’re not ready to answer, people will see right through this,” says Duda. “Yet, if you don’t address these questions, people will fill in the blanks on their own.”

Don’t try to hide or hedge an answer, says Duda. “Be up front and say, ‘We don’t have an answer to this today, but we anticipate having more information by this date.’ People will wait if you give them a reasonable timeline to address their questions.”

Be prepared with a day-one roadmap. People will want to know answers to issues that relate to them—things like who they’ll be reporting to, what their job title is, whether they can still work from home, and if their salary has changed. Develop a communication plan aligned to the roadmap and empower leaders with the relevant messages.

M&A Lesson #3: Put People First

One of the biggest lessons M&A leaders and CEOs shared with Duda—don’t try to sidestep the difficult people decisions. “Talent decisions should be a top leadership priority,” she says.

It’s tempting to focus on all the get-to-close activities that need urgent attention rather than people issues. But this approach is short-sighted and may create longer-term problems.

When you double the size of your company, most critical roles become bigger as their scope and impact increase to accommodate the needs of the business. This means you not only need to decide if current incumbents are the right fit, but you may also need to create new roles and consider the best talent for those roles as well.

Duda says successful M&A CEOs observe new leaders in action and at the same time develop a consistent, objective, and transparent talent planning process to ensure the right person is in the right role.

There’s also the matter of business process duplication. It’s common for the acquiring company to insist that their process approach is used in the newly merged company. This can demoralize people on the receiving end, especially if their processes are objectively more effective.

Teams that have developed these processes feel pride for what their business processes have allowed their company to achieve. “While it’s critical to state non-negotiable decisions, an objective review of both talent and business processes is important for long-term success and buy-in,” says Duda.

“Establishing a cultural baseline and creating a one-company culture should be at the heart of your integration strategy. But it’s not enough to just say what the culture is. Leaders need to live it.”

M&A Lesson #4: Focus on Your Customers

“Nothing changes until it changes,” says Duda, a phrase she coined when she led a mega-merger a few decades ago. It underscores the reality that for most employees during a merger, their day-to-day work doesn’t change quickly, if at all.

“Executives are in the eye of the storm—they’re surrounded by significant change and constant decision-making,” says Duda. “A merger creates uncertainty, which can be distracting to many. But for 75% of the organization, their work remains the same.” This can create a disconnect between top leadership, employees, and customers. The key, she says, is to maintain focus on what matters most.

One way to maintain focus and engagement is to rally teams around the newly created company’s three-to-five “must-be-great-ats.” These are the value drivers for which the premise of the merger is based. Communicate the vision for these business capabilities and why they matter to customers and to the company’s future.

M&A Lesson #5: Prioritize Culture

Almost every merger-related press release includes an optimistic proclamation on the similarity of Company A’s and Company B’s cultures. “This is one of the riskiest assumptions to make without quantitative data affirming cultural similarities and differences,” says Duda.

The successful CEOs Duda has worked with say that gaining an accurate culture baseline was vital. From there, the goal was to create the new company's aspirational culture tied to its strategic objectives, asking the following questions:

What are the cultural similarities and differences?
Where are we today?
Where do we want to go in the future?

“Employees want to know the new rules of the road and what great looks like in order to be successful. And leaders play a crucial role in culture integration,” says Duda. “When they can emotionally connect with and model the newly formed company’s values, everyone else will begin to shift in the same direction.”

It’s critical that all actions at the top are culturally consistent, she adds, especially during times of change when everyone is watching.

"Establishing a cultural baseline and creating a one-company culture should be at the heart of your integration strategy. But it’s not enough to just say what the culture is," says Duda. “Leaders need to live it.”

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