How to dance an M&A tango

A common feature in many disastrous mergers or acquisitions is a failure on the ‘soft’ side—the imprecise human and motivational aspects. People, more than cash, are a key determinant of success
How to dance an M&A tango
Picture credits: Wikimedia Commons
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4 min read

The title of this article is inspired by an interesting book by Frank Trompenaars, an expert on intercultural management, The Global M&A Tango. The tango is a South American dance with a strong rhythm in which two people hold each other closely—a tough synchronising act like in a merger or acquisition.

I am not a great one for astrology, but I am for astronomy. A few days earlier, six planets—Venus, Mars, Jupiter, Saturn, Uranus, and Neptune—aligned harmoniously in a ‘planetary parade’, a cosmic event visible from India. Such a near-precise alignment is required for success in mergers and acquisitions M&A.

Recently, The New York Times carried an interesting piece on what matters more for human longevity: genes or lifestyle. The short answer: up to age 85 or so, lifestyle matters; beyond that, genes matter more. What about corporate longevity? Lifestyle matters initially; after a certain age, purpose (genes) matters. For companies, lifestyle comprises four factors: business aggression, continuous excellence, innovative adaptations, and mergers/acquisitions. Mergers and acquisitions do stress out a company.

Emeritus professor of the Anglia Ruskin University in the UK, Peter Woolliams, avers in a book’s foreword, “It is well known that most mergers and acquisitions fail to realise the expected benefits… Mergers and acquisitions need to be in the business of marriage and not simply weddings.” 

If the divorce rate among married couples is increasing, the solution is not to avoid marriage. In the same spirit, leaders must learn how to increase the probability that M&A works. I doubt there is sufficient material on what generalisable processes can extract sustainable value from disparate organisational cultures.

During my career, I have been closely involved with or been a close observer of corporate M&As in at least 15 cases over 30 years in multiple countries. Each deal had its own business logic, valuations, regulatory approvals, and the details. As experienced by me, a few were successful (in line with the merger goals), several achieved some success (not quite up to the goals), but a few turned out to be bad or disastrous. I reflect on what was common in the failure cases. The common feature lies in the ‘soft’ side of the acquisition/merger.

What does this mean? It refers to the imprecise human and motivational aspects of the merger. The rational and analytical aspects of the merger are undoubtedly of great importance. Things can go hopelessly awry on the so-called ‘hard’ side. However, when things go wrong on the ‘hard’ aspect, the manifestation is on the ‘soft’ side. After all, people, more than cash, are a key determinant of success. 

During my early career in the late 1960s, M&As were uncommon in India. I got fascinated by the much-publicised merger of the UK’s General Electric Company (GEC), Associated Electrical Industries (AEI), and English Electric (EE). GEC and AEI first merged in 1967 and, one year later in 1968, EE also merged into the combine. In Anatomy of a Merger, a book published in 1970, the hero and genius was Arnold Weinstock, then the British equivalent of a later-day Jack Welch. The book stated, “Weinstock’s style of management is very different from that of other giants… severe problems will arise when Weinstock retires… a man like Weinstock would not work for the real Weinstock for long.” Several years later, Weinstock did retire.

Cut to about 30 years later when Weinstock died. There were comments about his style as observed over three decades. His ruthless, cost-averse management style, holding managers to tough targets, all produced early results but also seeded decline. In 2002, The Guardian observed, “The circumstances of Weinstock’s passing … is a Greek tragedy of management in which its negative elements carry powerful positive morals … Weinstock’s inquisitions and equally abrasive phone calls strengthened his monarchical style … managers ran scared … Weinstock hung on too long. Super bosses should be held to the same statutory retirement as anybody else.” 

Succession planning for the irreplaceable CEO repeats in public life as well as corporations. This playbook has been repeated in later years by, for instance, America’s GE, Du Pont, Boeing and Citibank.

I reflect on my own experience. By the 1990s, Unilever had several independent entities in India—Lipton, Brooke Bond, Ponds, Doom Dooma, Tea Estates, Kissan, Kwality Ice Cream, Milkfoods, Tomco and Lakme included. These arose due to international or domestic acquisitions over 20 years from the 1980s. There was a legitimate ambition to simplify, synergise, and scale by the creation of a single powerful entity, which is today known as Hindustan Unilever.

Here is the brahma mantra that I learned. There is a great deal of judgement involved in implementing mergers and acquisitions on the one hand, and creative destruction on the other. There will be multiple opinions and views at any point of time, all of which have to be reconciled to keep moving forward.

Most significantly, it is important for leaders to realise that they are the carriers of ‘integrative change’. Put simply, leaders carry the responsibility to enable people with different cultural perspectives to engage in meaningful and valuable discussions about the new business. The absence of this leadership trait kills M&A.

(Views are personal)

(rgopal@themindworks.me)

R Gopalakrishnan | Author whose latest book, Jamsetji Tata: Powerful Learnings for Corporate Success, is co-authored with Harish Bhat

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