Eight ways to lower the risk with mergers and acquisitions
83% of mergers and acquisitions fail to create a competitive sustainable advantage. Hoshin Kanri has a healthy track record of greatly reducing the failure rate typical of this high-risk strategy.
The evidence shows that despite their obvious allure, mergers and acquisitions are high-risk endeavours. In fact trying to integrate two previously separate organisations is one of the most daunting challenges to face any CEO. The underlying reason for this high level of risk is of course the different dynamics between the two groups. In addition, without an exhaustive understanding of both organisations it is so easy to underestimate the post integration difficulties and be over optimistic about the benefits.
To get it right you need sensitivity, focus and above all speedy handling of the situation. If you are slack in this respect, then the pre-existing cultures, political divides and technical systems will fail to connect meaningfully. As a result, a clash becomes inevitable. The consequent disharmony and disunity then obstructs progress and productivity slumps.
This is not to pour cold water on the upside. Mergers and Acquisitions often present themselves as golden opportunities for a step change in market penetration, technology acquisition, efficiency savings and so on. But our point is, that these opportunities are only realised if the M & A is handled correctly.
In this context, Hoshin Kanri has a healthy track record of upping the success rate for this type of high-risk strategy. Let’s look at why:
1. Helps ease the culture shock
Perhaps first and foremost, the pre-acquisition Reality Check exposes the likely cultural shock as well as the impact of a multitude of mundane operational factors (good or bad). An important advantage here is that you can sometimes get ‘game changing’ information before the takeover kicks off, not afterwards. This sort of invaluable data gives you the chance to pull out before it is too late or at least adjust the price.
2. Identifies hidden strategic opportunities
The company wide Reality Check makes another vital contribution to success. What is supposed to happen is that strategic opportunities emerge from the new synergy created by the melding of two into one. But in many cases these opportunities remain well concealed from view until much later on. The Reality Check gives you a more realistic chance of identifying these hidden opportunities and so enables their early exploitation.
3. Eases Post Merger Integration
Hoshin Kanri rapidly synthesizes the differing management styles and methods adopted in the former independent systems. This synthesis creates a common means to ease the Post Merger Integration (PMI) process.
4. Avoids wasteful overlaps and conflict
The unified planning platform, provided by Hoshin Kanri, helps avoid waste often inherent in the merging of two entities. This unified system helps you remove overlapping functions, duplication of effort, confusion and conflicting priorities, common to M & As.
5. Engenders early buy-in to the new entity
Wide participation in the HK process enables greater sensitivity towards the different areas of activity. This sensitivity helps meet a number of psychological needs that reduce the stress of the situation. In other words people feel more in control of their destiny. As a direct result they become engaged with the merger process. This better engagement engenders commitment to the merged organisation. Likewise defensiveness and resistance to change tend to subside.
6. Faster exploitation of operational opportunities
Double feedback loops built into the Hoshin Kanri system identify existing operational weaknesses and strengths early on in the process. This data enables early implementation of the business improvements necessary to exploit the M & A. There is no need to delay for a year or two while ‘things settle down a bit’.
7. Minimizes the attrition of key personnel
Two important factors help to clear up confusion, anxiety and doubt among key stakeholders. Firstly there is the sheer speed with which change can be planned in detail and then implemented. Secondly HK provides a refreshing openness and transparency. Apart from other benefits, these two factors minimize the attrition of key personnel who otherwise tend to leave in an atmosphere of doubt and uncertainty.
8. Minimizes disruption to operational routines
Last but by no means least, there is always a danger that the clash of two different cultures and systems will disrupt operational routines and processes. This disruption can easily send performance on a downward spiral. Here again, Hoshin Kanri’s cross-functional planning really helps the flow of practical and relevant information. In turn, the improved information helps people in different areas comprehend and empathize with one another’s problems. With such a supportive environment, it then becomes much easier to arrive at mutually satisfying solutions to problems. The result is a minimising of disruption.
Are you contemplating either a merger or acquisition? Before you take the plunge find out more about improving your chances of success: click here to download our white paper on Hoshin Kanri. Or contact Jeremy Old on 0845 0945 819 for a no obligation chat.
You are in safe hands
Jeremy has twenty-five years experience as an independent management coach to small and mid-sized enterprises and non-profit organisations. This has included facilitating 54, strategic change or business improvement assignments across a wide range of industry sectors. On average these techniques yield an estimated 30 : 1 ROI for clients. In addition, Jeremy is qualified to MBA level, with a post-graduate diploma in psychotherapy.
Jeremy is also author of ‘Reinventing Management Thinking; using science to liberate the human spirit’. This groundbreaking management manual focuses on the role stress plays in reducing productivity and profits in the workplace.