Fishburn Hedges

13.09.2010

Business pages are currently full of speculation about new M&A activity in the business world. Confidence is beginning to course through the City once again, but with little opportunity for organic growth in the current environment, ambitious leaders are casting covetous glances at competitors.

Clearly, it’s heartening to see signs of renewed confidence and strategies for long-term growth rather than short-term retrenchment. But now that leaders see acquisitions as their route to a bright future, we can only hope they have learned lessons from the past.

People issues are the common factor

Academics believe that 50-80% of mergers fail to add the value expected of them (the exact stat depends on the academic you ask!). While there are many contributory issues, all commentators agree that people issues are a common factor.

In merger situations, they say, too much attention is focused on meshing balance sheets and operations, and not enough time is devoted to integrating and inspiring the combined workforce. 

Short sighted on performance issues

This seems strangely short-sighted. After all, any organisation relies on its people to deliver its grand plans in practice. The need to connect with and support employees is even greater during takeovers.

People (on both sides) need to understand what is happening, why and how they are affected to aid their focus on ‘business as usual’ and their commitment to the subsequent integration process. Being able to engage, equip and support employees in this situation is not a ‘nice to have’, it’s a real performance issue. 

Clear vision dissolves barriers

Effective employee engagement is also a vital factor in the post-merger integration process. It can help embed a clear vision for the future and stimulate common purpose across previously disparate (and often competing) workforces. It can break down barriers and strengthen collaboration that helps knit the new organisation together.

It can help leaders identify and address questions, concerns or new ideas from staff. It can facilitate progress through redundancy and synergy programmes as smoothly and sensitively as possible.

The merger between Thomson and First Choice, which took place a few years ago, is a good example; employee engagement was seen as fundamental from day one and used as a key tool to aid the integration of the two operations from that point on.

Time and attention, not an "add on"

To achieve any of this, engagement has to be seen as an important element of the M&A process. It has to be given sufficient time and attention, alongside financial and infrastructure issues, rather than treated as an ‘add-on’ or implementation activity when the exercise is in full swing.

So if and when any of the potential purchasers identified by the media do get round the table with targets, let’s hope they have people as well as pounds near the top of their list. Without this, their deal may not be worth what it appears on paper.

 

Posted by Paul Sweetman