As we have previously discussed, successfully directing the integration of two businesses following the closing of an M&A transaction is vital to realizing the value of a merger. The process by which post-closing change within a business is overseen – often referred to as "change management" – plays a key role in determining whether or not the integration process is smooth and the objectives of the merged entity are achieved. According to a report by Bain & Company, people, culture, change management and communication have been identified by business leaders as some of the main causes of poor integration following an M&A transaction. Although executives often intend to devote a significant amount of attention to properly managing change in the aftermath of a merger, these aspirations are easily overshadowed by the resources and focus required to meet the day to day needs of the business.
It's never too early to start
The process of identifying core areas of the business that will undergo a significant amount of change following an M&A transaction should be begin at the deal evaluation stage. A recent integration survey conducted by PwC indicates that the percentage of respondents that engaged their integration team during the deal screening phase rose from 21% in 2013 to 32% in 2016. At this point in the process, companies can begin to uncover potential trouble spots and risks to the business should the necessary changes fail to take hold following a merger. Once identified, these matters can be further fleshed out during the due diligence process and ultimately provide valuable guidance to the integration planning process conducted by the change management team.
Establish a core change management team
As suggested in the report by Bain & Company, it is important that change within the organization is driven and overseen by members of the company's core executive team. The responsibility for implementing large scale change post-merger is often delegated to human resources teams that are not equipped with the authority or "executive muscle" required to approve and facilitate the policies, programs and personnel that are necessary to implement change on a company-wide scale. Additionally, when change within the organization is directed by the top levels of the company, it sends a signal to others within the organization that the changes brought about by through the integration process are top priorities of the company.
Develop a tailored communication strategy
Regular and frequent communication with each area or department of the business is essential to effectively managing change following an M&A transaction. It is important to tailor messaging to the needs of each area and, where possible, avoid mass, generic messaging. Implementing an easy to use feedback and reporting system (and ensuring that this feedback reaches the core change management team) is vital to tracking the positive and negative changes brought about by the integration and can be a useful tool to document progress and evaluate whether integration objectives have been achieved. This can be accomplished through regular surveys and town halls as well as informal solicitations of employee feedback by individuals in leadership positions within the company.
Develop a clear organizational structure
Clearly and effectively laying out the post-merger organizational structure may reduce the uncertainty and loss of control that employees frequently experience after a transformational transaction. Establishing new reporting chains, conflict resolution procedures and well-defined departments and roles assists each person in understanding where he or she fits within the newly formed entity. It is also important to ensure that the company's policies and procedures reflect the culture and business that the change management team envisions for the post-merger business as existing or legacy policies may impede, rather than boost, people's ability to work within the new organizational structure and achieve the vision laid out by the change management team. Tailoring the tools provided to each area of the business, whether it is in the form of formal training programs or peer-to-peer mentorship can be a valuable method of implementing change as well.
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