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Avoiding leadership missteps in mergers and acquisitions

Co-authors: Dr Ty Wiggins and Aimee Williamson

Mergers and acquisitions activity is up 23 per cent in 2021 and is expected to continue into 2022. Dr Ty Wiggins, a global expert in leadership transition, warns that critical and avoidable missteps can quickly unravel while organisations are keen to make the most of the market. 

In 2021, M&A activity in Australia hit a record high, totalling nearly AUD 120 billion in value, according to Refinitiv Intelligence. In such a hot market, it’s easy for leaders to get carried away with deals that look great on paper without considering the people behind the organisations that make a merger reality. 

Failure of leadership to consider the challenges beyond just the numbers often precedes unsuccessful mergers. A study conducted by law firm Baker McKenzie demonstrates that a massive 44 per cent of mergers fail due to poor leadership around the integration.

It’s impossible to understate the active role that leaders must play in successful M&As, which is why it’s critical to be one step ahead and in control throughout.

The good news? Leaders can de-risk and de-stress mergers by pinpointing blindspots and addressing areas of misalignment upfront to arm their teams with the ability to solve problems quickly and efficiently.  

Below are four lessons to keep in mind when managing a merger to ensure the new company’s (NewCo) success.

Build Your Talent Bench for Today’s Challenges and Tomorrow’s Opportunities

Make leadership a priority during your diligence process by identifying individuals at a senior level who will champion the desired mindset of the NewCo. Activating them as positive agents of change in establishing new cultural benchmarks will help executive teams drive a more cohesive merge. 

Don’t forget; there’s a balancing act between successful integration and long-term success. Choosing talent based solely on the needs of a merger may mean risking the organisation’s longer-term success. Still, a successful integration will be key to laying the foundation for the company’s future. 

Understand and Manage the Risks

Failure to successfully transition executive teams into new roles can significantly impact the integration’s success, and it’s often due to a failure or unwillingness of management to identify risk areas that put both organisations in jeopardy.  

40 per cent of senior executives fail within the first 18 months of starting a new position, and 87 per cent of HR professionals rate leadership transitions as one of the most challenging processes leaders face in their careers.

Leaders must put in place transition plans that identify all challenges before them to understand the risks and meet them head-on, even the ones that aren’t always immediately apparent.

Diversity and culture are two often overlooked risk areas that can also present significant challenges for the organisation if not given appropriate attention. These challenges can include not adequately prioritising diversity, equity and inclusion (DE&I) investments and failure to create a culture where differing opinions are welcome. 

Solve these challenges by identifying problem areas early, and ensuring teams are adequately prepared to manage them throughout a merge.

Communication is critical

In times of uncertainty, under-communicating can be a pitfall. An end-to-end communication plan is a great way to combat this. It can provide transparency into the entire merger and provide efficiency and build trust in the executive team.

Develop your communication plan early and revisit it often. Be sure to convey how decisions are being made and what is being done to ensure equity and objectivity throughout the entire process. Most of all, be prepared to reiterate these messages and have them reflect your overarching vision. 

Prioritise Company Culture

Companies with aligned and mature cultures are seven times more profitable, according to research from Russell Reynolds. 

Meanwhile, research from Baker McKenzie found 47 per cent of executives cite ‘culture’ as a critical factor in failed M&As.

Great leaders know culture is tangible, measurable and requires consistent strategic interventions to boost performance and drive growth, particularly in times of great change like a merger. 

Ensure appropriate attention is given to understanding existing business cultures in an M&A and cultivating a new culture in the NewCo. This will be a foundation for value creation, innovation, reputation and financial returns in the long run and is an important consideration in any integration.

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Co-author Dr. Ty Wiggins

Ty advises organisations on leadership transitions and executive onboarding to ensure more expedient paths to effectiveness. He leverages his academic and consulting backgrounds to provide CEOs, boards and senior leadership across industries with the skill and advice needed to enact transformational change. He also spent 10 years working in the financial services industry after starting his career as a professional basketball coach, giving him a unique insight into how lessons from leadership in sport can be brought into the boardroom.

Aimee Williamson

Aimee Williamson

With more than 20 years of leadership assessment and talent consulting experience, Aimee works with boards, CEOs and their teams to build leaders who are well equipped to deliver on a strategic agenda. Prior to joining Russell Reynolds Associates in 2014, Aimee ran her own consulting firm. Before that, Aimee spent seven years with SHL, where she started as a consultant in Australia before moving to Singapore as Vice President, Products for Asia Pacific and later Managing Director, Asia. Aimee began her career in human resources, working with UBS and the Australian Federal Government. Aimee is a registered psychologist and holds a BA (Hons) in Psychology and Master of Organisational Psychology from Macquarie University. She also holds an MBA from the Australian Graduate School of Management.

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