We watched with curiosity as the global marketplace spent in 2021. $5.8 Trillionon acquisition deals, accelerating past the previous annual record of $2 trillion. Companies executed more than 63,000 transactions in order to capture more market share and cash-rich, according to a report. Harvard Law School Forum on Corporate Governance paper, emerging from their 2020 caution in order to capitalize upon soaring stocks and high company valuations as well as low interest rates.
Analysts expect the buying frenzy to continue in 2022, according to analysts. According to Morgan StanleyThe key elements that made 2021’s M&A market so strong have largely been in place. This is good news for global economic health. But deal-makers would be well advised to review the history of Whole Foods and Amazon.
In 2017, the tech retail giant bought the iconic grocery brand. More than $13 BillionMany believed that this transaction would bring together ideal partners. Their cultures didn’t match.
Whole Foods employees shared their stories of food shortages. Broken moraleunder Amazons governance. Harvard Business Review This is the detailed explanation of the incongruityThey were critical of their operational styles, citing the differences between Amazon’s tight culture and Whole Foods loose cultural. They didn’t fit and the employees suffered.
According to Deloitte 30 percent fail in mergersBecause companies fail to integrate their cultures. McKinsey says that 25% of leaders cite the following: Lack of cultural alignment and cohesionOften, this is the main reason why mergers fail.
As more companies pursue M&A deals, they are more likely to fail. Leaders either make insufficient attempts at cultural integration or ignore it altogether. That strategy is even less effective in a situation of pandemics or post-pandemics.
The Great Resignation of 2021 gave rise to discontent among the workforce. A Record breaking 4.5 million U.S. workers leave their jobsAccording to the Bureau of Labor Statistics 22 states reported an increase in quits rates over October, while 23 others reported an increase in November. M&A may not have driven this trend but the stress of adapting to a new corporate culture could have caused many to reach their breaking point.
COVID-weary staff have endured two years of disruptions and uprooting. Employees may feel compelled not to speak up when a new stakeholder comes into the picture. However, a merger can be a motivator for employees to stay if it is done correctly.
To achieve this, CEOs must be sensitive to the cultures of the businesses they acquire. Leaders must bring more than just solid financials to these deals. They must also bring a human element to them, creating not only scaled market shares but also a new organization where people want to work.
As a CEO for industrial and consumer products businesses, I have had the privilege of seeing what works and what doesn’t in M&A.
How do you do it? Here are three ways to do it.
M&A can be made more emotional by bringing a high level of emotional intelligence to the table
Two years of stress management has been a part of the daily life for employees. They feel anxious and tired. They become more anxious and tired, which could lead to disengagement.
GallupGlobally, only 20% of employees consider themselves to be engaged at work. 41% reported that they experience a lot worry. Gallup estimates that this combination costs employers $8.1 billion globally.
Gallup found that if 80% of employees aren’t engaged, organizations’ resilience in a crisis will be at risk. Leaders won’t be able achieve their goals consistently. 2021 State of the Global Workplace report. Leaders cannot be effective if their people don’t pay attention.
Leaders need to be sensitive to the challenges faced by employees before they can bring high emotional intelligence to merges. Assimilation of new employees should be open, honest, transparent, and humble. Introduce them to the culture you have and then welcome them into it. Transitions can be difficult. Leaders who communicate effectively, show empathy and demonstrate positivity will have greater success.
Match words with actions
Although words are important, employees, from warehouse workers to senior managers, pay more attention to actions. I have seen many CEOs speak about respecting the culture of a new company, but then act in a negative manner.
In one instance, a CEO spoke to associates of newly acquired companies about how ineffective their current leadership was. He also suggested that new management be better. I also witnessed a CEO mocking the culture of an acquisition company directly to his employees, making a first impression. Under its new management, this group would be less productive.
Leaders have a responsibility for showing their commitment to newly acquired units with actions as well as words. Dismissing new employees and their culture immediately raises doubts about a leader’s integrity. It can also demoralize the workforce before the integration process even begins.
M&A deals may lead to difficult reorganizations and separations. Your new employees will be triggered by their instinctive job-preservation mode. They will be watching from this space, alert but wary. To calm them down and engage them, you should show them your leadership style. Do not just tell them.
Recognize the value of human capital
Although it might not make the balance sheet, human capital is one of the most important assets in an acquisition. Leaders who buy companies spend a lot of time evaluating the financials. They should also invest the same diligence in evaluating the people behind these assets.
We buy companies to find great people. Meta CEO Mark Zuckerberg once saidYet, some companies have yet to learn this lesson. Employees of the acquiree are more likely to leave in M&A deals than those of the acquired. This is especially true in the tech sector where a strategy called acqui-hiring has been developed to acquire startups and hire top talent.
J. Daniel Kim, University of Pennsylvania Wharton School, found that in fact, High-tech startup acquisitionsAcquired workers are more likely to leave their new companies than regular employees. Kims study revealed that 34% of acquired workers quit within one year after an acquisition, while only 12 percent of traditional hires leave their startup within the same period.
[U]Kim wrote that unlike regular hires who choose to join a new company, most acquired employees don’t have a say in the acquisition decision. This lack of worker choice can lead to organizational mismatches, which in turn increases turnover rates among acquired workers.
Even during the best times, integrations are difficult. They are more difficult than ever after two years of COVID. Leaders should see the M&A process not only as an opportunity to improve the company’s culture but also its market share.
Before making any major changes, it is important to be sensitive about the values of new employees. Assist new employees with the transition. Know their culture before you start the acquisition process and give top talent an incentive to stay. Your new company may offer better opportunities, greater transparency about leadership, and a more positive working environment.
Robert Logemann.
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