The Human Factor in Mergers and Acquisitions
The Human Factor in Mergers and Acquisitions
By Alan Olsen
There are a lot of factors of success and failure in mergers and acquisitions that go into a merger or an acquisition. These business deals come in all shapes and sizes and can be massive or rather small. However, they all involve at least two companies that are either combining or transferring their ownership, operating units or business organizations.
The reasons behind mergers and acquisitions will also vary depending on the circumstances. Sometimes they occur because one company is trying to grow and get bigger. In other instances, a company could be struggling to stay afloat so it decides that being bought or taken over is the best way
y to stave off going under. Still other deals involve two companies of basically the same size doing equally well and both see an advantage in joining forces. Whatever, the reason behind a merger or acquisition, not all of them end up being successful.
Building Business Communities
I recently spoke with Peter Adams, the Founder and CEO of Lighthouse Information Systems Inc., and we discussed some of the important elements of a primary reason for why mergers and acquisitions sometimes fail is due to the. As Peter sees it, the main reason many mergers or why do acquisitions fail sometimes? is because the people behind them fail at making a smooth transition. “Really what matters, I think, is the human factor.
This often gets overlooked in acquisitions and certainly by technologically oriented people.” Peter explained that in reality businesses are really just communities of people. These communities have some kind of guidance and leadership in a certain direction, but it’s not necessarily about the facts and the data and gathering the stacks of documents to mitigate liabilities. Peter said he is much more interested in the human being factor. How many mergers and acquisitions fail.
Communication Is the Key
According to Peter, “the biggest reason for failure is a cultural mismatch and people misalignment.” To do an effective job in an M&A transaction you need to understand first and foremost that you are taking two different cultures and combining them together.” According to Peter, the initial step in this process is to sit down and start talking to people.
The key is to openly discuss ideas and goals, as well as struggles and the overall vision of the companies. He also pointed out that this should take place throughout all levels of the company. Doing this will give you a vision of what needs to be worked on and how you can improve.
Don’t Fall Into the Supremacy Trap
The process of integrating companies presents many challenges, not the least of which is to get everyone on the same page. Peter said that one of the biggest mistakes that acquiring companies make is to have this mindset of supremacy. Often they are bigger and more successful, which leads them to believe that the company being acquired should change everything it does so it becomes more integrated with the acquiring company and its processes.
However, Peter said this is a big mistake. Instead, he said it’s important to evaluate what the company being acquired is doing right and focus on the things that made them attractive in the first place. “Let’s figure out what those kernels are. Let’s preserve those and integrate those into the new whole.” In the end, Peter says that the cultural environment is the key to success factors to consider before merger and acquisition.
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Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com. GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.
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