When M&As Go To The Dogs

by: Mike D’Amico

Recently a colleague was discussing his family’s experience dog-sitting for a week. They had been considering getting a dog of their own but soon discovered how unready they were.

After a few days the kids were no longer keen to take the dog for walks. When a family emergency arose and they needed leave town, they realized they had to figure out how to accommodate the dog.  It soon became clear that a dog was really not going to fit into their lifestyle.  Any thoughts of getting one have been dropped for now.

Sadly, animal shelters are full of pets dropped off by owners that hadn’t thought things through. Despite spending a lot of money on a purebred dog, without the proper planning, integrating the new pet into the family can be challenging and often ends poorly (especially for the dog).

This is analogous to how many M&A transactions play out. While companies invest significant effort into the front-end due diligence leading up to the acquisition of another firm, many mergers fail in the post-merger integration of the two organizations. Various articles quote failure rates from 50% to 90%.

The effort reserved for due diligence, transaction financing and negotiations should at least be matched by work on integration planning. A merger or acquisition will be a time of immense change for both organizations. Two corporate cultures must be combined. Hard-won leadership roles will change. Employees may have new managers, new job titles, new roles and responsibilities, and a new compensation plan.  Many people are worried that their jobs will be eliminated.  All of these changes can be stressful, can result in employee resistance, and if not addressed in a planned and proactive manner, can result in the eventual failure of the transaction.

Neglecting to put in place a proactive post-merger Integration plan that involves detailed change management actions, and strong communications and engagement activities, can entrench an ‘us vs. them’ environment within the merged organization.  When integration goes to the dogs, the likely results are employee attrition, a distracted workforce, low morale, low productivity and unhappy customers. Not only does the company not achieve its ambitious M&A objectives, it could face substantial financial losses.

It’s worth doing good integration planning upfront to avoid these outcomes. As a large number of regretful CEOs know, there really are no drop-off shelters for a failed integration.

You may also like: Managing a Successful Post-Acquisition Integration

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