Risk of failures are mainly due to the inherent complexity of the Mergers & Acquisitions Post Merger Integration (PMI) process.
There are indeed many ¨technical¨risks and issues, well documented already, but always speficic to each deal's context.
But it's often underestimated, that a major area of risks is related to a critical combination of psychological factors :
for any company owner, even the more rational, selling the company, he or she, has built over years, is simply like giving away a part of her or him. It's always a kind of life or death decision.
"I'm selling now, whilst not being very sure of willing this, now, like that, to these guys ..." "what i'm gonna do tomorrow ..." "what are my new goals ..."
for any buyer, there is suddenly a huge new pressure, quickly in the short term for maintaining performance, and achieving the expected value creation. it's also close to a life or death decision.
"I'm happy we closed the deal, but i'm not that sure that it will actually work, like this, with these guys..." "how far can we trust them " " how to achieve the synergies we commited to ..."
Suddenly, on deal's closing day, a whole new, exciting, unknown and sometimes dangerous path, is opening to both parties.
In this context, taking in account effects of uncertainty and anxiety of everyone is the main key.
Key success factors
Our 20+ years of experience in very demanding people driven environments, where M&A was combined sucessfully together with organic growth, to quickly achieve ambitious value creation goals, has forged 4 key beliefs :
1: incorporating in the whole M&A and PMI process a much higher dose of psychology than usually, will ease a lot to align expectations and ensure a good deal execution for both parties.
Based on market data and experience, we have identified crticial psychological parameters to handle during integration. Firstly, the alignment of both side's explicit and implicit expectations is critical. Spending enough time at this stage will unlock the potential for next steps.
2 : co-designing and co-piloting, together with both parties, the integration process will keep the right level of focus.
We roll out a bullet -proof integration process framework, which is adapted to the specific context. This approach will relieve managers from getting lost in the complexity of the process. It will reduce the induced stress for the managers and the teams, which is aiming at reducing risks of burnouts for everyone involved.
3 : being incentivized on the effective realization of synergies.
As independant consultant, we are satisfied when the M&A deal is a good deal for both parties, well executed during the first 6 months after closing. That's why our pricing model is not a % of the deal's value, but mostly an incentive on synergies realization. We are not replacing lawyers, auditors and M&A boutiques. We are complementary.
4 : ensuring that we build solid foundations for the future.
When all these conditions are met during the first 3 to 6 months, and a proper transition is organized ; stakeholders, managers and teams are happier and can touch the outcome of their hard work. There is much less stress, less frustration, less source of future conflicts, and therefore much less risk of failures within 3 years.
There is more safety and harmony for everyone involved.
Which is, ultimately, exactly what we aim at !