17/04/2014 Leave a comment
The subject of mergers and acquisitions has come up in a number of conversations with clients and colleagues over recent months. A ‘typical’ conversation will not focus on the reasons for the merger or acquisition (the plan or strategy) but on the implementation and integration aspects (the execution of strategy) following the decision. In other words, a conversation about the challenges being faced and consideration of the options, decisions and actions required to address these.
Such conversations bring to mind the old adage ‘strategy is easy – execution of strategy is difficult’.
An article ‘Why do so many mergers fails?’ in Business Matters at the back-end of 2013 serves as a useful reminder of some of the reasons why mergers and acquisitions fail – or put another way, why they fail to deliver/achieve the expected benefits/value identified in strategy/business case. In the article, and according to research by KPMG, “90% of mergers and acquisitions fail, compared with around 40% – 50% of marriages.”
From a knowledge management perspective, some of the reasons for the failure of mergers and acquisitions can be clustered around the concept of learning (or not learning) before doing e.g. poor due diligence; or not reflecting (and then applying if relevant) on lessons from past mergers/acquisitions from within or external to the organisation; or forgetting that mergers and acquisitions are change management activities.
The reasons for ‘failure’ can be many and commentators, consultants and advisors will each have their check lists or versions of their ‘top 10’. Understandably, it is the success or failure surrounding large-scale mergers and acquisitions that gain most coverage (in the media etc.), but whilst the size, context and complexity of mergers and acquisitions will vary, they all have one thing in common – people. By ‘people’ I mean those impacted by the change and those managing the change – and with people comes knowledge e.g. existing know-how (which is likely to be one of the reasons for the merger or acquisition in the first place).
In an era when mergers and acquisitions has become a popular growth strategy for SMEs, how can they (who unlike their larger counterparts may not have any merger or acquisition experience from which to learn) avoid the ‘challenges being faced’ conversations mentioned earlier?
Well one way is to ask and answer robust ‘learning before doing’ questions, and to do so when a potential merger or acquisition is more of an idea than a reality. Questions might include:
- What critical ‘business’ knowledge do we need to consider and plan for a merger/acquisition?
- What critical ‘commercial’ knowledge do we need to execute the deal?
- What critical ‘management’ knowledge do we need successfully implement the decision?
- What critical’ performance’ knowledge do we need to ensure that anticipated value and benefits are assessed and realised?
I’ll leave to you to comment on what ‘learning before doing’ questions you think should be asked and answered before getting married!