Virtual M&A – Four Key Capabilities for Leading Integration in the Post COVID-19 World

Virtual M&A – Four Key Capabilities for Leading Integration in the Post COVID-19 World - M&A Partners
John Bender of M&A Partners
By John Bender, President
Mar 26, 2020

By John Bender, President, and Christian Pape, Senior Partner, M&A Partners

Achieving expected value from any merger, acquisition, or divestiture is challenging under the best of circumstances.  The time-bound nature of M&A deals, significant changes for employees, customers, and other constituencies, and abundant opportunities for organizational and personal conflict test even the most experienced acquirers.  When an event like the current COVID-19 epidemic makes your M&A success contingent on your company’s ability to execute a deal in a nearly 100% virtual environment, it’s time to take stock of your M&A capabilities.  Now is the time to define or update a comprehensive M&A lifecycle framework; overhaul known gaps and deficiencies in your processes and playbooks; and upgrade your skill sets and tools in critically important “litmus test” capabilities such as governance, change management and culture alignment, that otherwise, will almost certainly erode deal value. 

Given the rapid escalation in government mandated quarantines and social distancing policies, corporate or agency-mandated travel bans, social distancing policies, and other steps recommended for containing the spread of COVID-19, “virtual M&A” is the current reality.  Want some good news?  What has always been essential to deliver your deal’s business case—a laser-focus on value-driven M&A operations—remains in play.  The challenge?  Your M&A processes must be tuned and optimized to work effectively in a virtual environment.  In this article, we briefly examine four critical deal competencies requiring adaptation and additional focus in a virtual M&A environment. 

Leadership – The principles of good leadership don’t change just because you’re not co-located with your teams and other stakeholders.  Leaders must be even more purposeful and articulate about how the deal will be led, planned, and executed—ensuring clarity about the steps to be taken while the organization is weathering the disruption.  Role modeling becomes more dependent on video-enabled Town Halls, regular, pre-recorded audio and/or video messaging, and regular, consistent emails emphasizing the deal’s strategic benefits, value drivers, decisions made, and integration strategy.  These messages are also opportunities to create and reinforce an environment for clear, candid and empathetic communication, appropriate innovation and risk taking, and data-driven decision-making to help the program make forward progress.  Leaders should amp other M&A key success factors to further stack the odds in their favor in a virtual M&A environment, including:

  • Build the right team – In the best of circumstances, a deal is more likely to succeed when the best and brightest leaders, program and project managers, and subject matter experts are assigned to the effort.  In a virtual M&A situation, this is even more important.  Your team’s successful navigation of choppy waters requires even more of each person on the team—virtual deals are no time to train new employees or count on marginal contributors.  Supercharge your team with resources who are proven formal and informal leaders, influencers and advocates, tolerate ambiguity well, and are outstanding communicators.  Augment your M&A team selection criteria to include emotional intelligence (EQ), first-rate problem-solving skills, and data-driven decision-making.   
  • Foster Trust – Until there is trust, there is no high performing team.  In a virtual M&A deal, leaders need to work much harder to establish a climate for trust.  Senior leaders must remain more actively involved after announcement and Day 1, visibly taking part in and “owning” the hard decisions, fully embracing the associated risks, monitoring outcomes, and being available for constituents to speak with them about opportunities and concerns.  Additionally, leaders need to be clear about performance expectations, how conflicting points of view will be resolved through the governance model, and actions to be taken to maintain the team’s sense of community and camaraderie.
  • Model Behavior – By “walking the talk,” leaders model the norms expected from the team.  Leverage the “program equivalent” of the Golden Rule—treat the program the way you want team members to treat it.  To the extent that virtual tools and practices are still relatively new to the team, your demonstration of their use in your work makes the team’s adoption more likely
  • Empower your team – Hierarchically driven behaviors, dependencies, and policies kill productivity in virtual teams.   Virtual M&A programs are no different:  teams function more fluidly and productively when an explicitly communicated set of guiding principles—aligned with the deal’s value drivers—structures and guides independent work without heavy-handed bureaucracy.  These principles empower the team to maintain a bias toward action and informed risk taking.  Spend time up-front explaining the strategic rationale for the deal, where tradeoffs can and cannot be made, communicating the integration ‘givens,’ decisions already made, and other mandates that clearly and unambiguously enable far-flung team members to plan and execute in an aligned fashion. 

Program Management – Virtual M&A requires companies to “up their program management game.”  Why?  A chief reason is that collaboration time is greatly reduced.  A second is that the quality of integration stakeholder relationships is directly related to team performance. Team members can’t easily take advantage of coffee or lunch breaks, impromptu meetings when a colleague is passed in the hallway, or even grabbing a bite to eat after work to continue dialog on pressing items.  Program management, the engine of any M&A deal, must tune the strategy and tactics to be used for diligence, Announcement, Day 1, integration planning and execution for a virtual M&A environment.

  • Nail the Basics – It is incumbent upon the Diligence and Integration Management Offices (DMO and IMO) to execute program management fundamentals to the highest possible standard to maximize precious collaboration time.  Supercharge the basics: 
    • Explicitly define the program’s work system and processes for each M&A Lifecycle Phase (inputs, work to be done, and outputs) to minimize rework due to misaligned expectations;
    • Increase the value of every meeting by pre-announcing expected outcomes, pre-meeting preparation, formal agendas, drawing out participants’ perspectives, and tracking of decisions, actions, risks, and issues;
    • Drive clarity and expectations for decision-making and governance mechanisms so that the right decisions get made at the right time;
    • Ensure the entire team shoulders the load during complex, multi-location or multi-region deals by overlapping meeting times so that one group doesn’t find itself working the graveyard shift for weeks or months at a time. 
  • Architect for Success – In addition to the basics, program managers must help stakeholders adapt and tune baseline integration plans, content, and metrics to meet the needs of constituents who will engage differently in a virtual M&A situation.  For example, how will Day 1 be accomplished “virtually,” with compelling new employee Welcome and Town Hall events, visits from executives, and appropriate celebrations or recognition?  How will customer outreach programs be adapted given Sales Executives can’t visit their accounts face to face?  How will Marketing, Indirect, and Direct Sales teams be rallied around cross-sell / up-sell opportunities through a virtual Sales Kickoff and training meeting?  How will we gather additional employee and customer experience information given a virtual integration where interactions need to be more purposeful and planned?  How does our change management approach need to evolve?  Bottom line, each and every workstream and milestone needs to be re-examined through the lenses of the deal’s value drivers, constituent needs, and constraints of virtual integration.   DMO and IMO managers position their teams for success by creating a “Can Do” attitude across the virtual team, serving as “conscience of the business case.” 
  • Accelerate Progress – Any complex program requires careful attention to managing information flow, aligning components of critical work systems to meet deadlines within time and budgetary constraints, building trust and authenticity, managing cadence, and leveraging governance effectively.  A virtual M&A deal is no different – but it is harder to accomplish.  Program management must be aware of the critical importance of clear task assignments and socio-emotional processes that bond a team that—when done right—can enable virtual teams to perform as well or better than their co-located peers. 

    Program Management is responsible for accelerating the process—managing the pace, momentum, and team performance required during a virtual M&A deal.  This requires paying attention to where each virtual team is “at” in the overall program planning and deliverable cycle and managing each team accordingly. For example, one consulting mentor of ours frequently used to say, “Sometimes you have to comfort the afflicted, but as an integration program manager, there are far more times you have to afflict the comforted.” 
  • Conflict Management – Resolving inevitable conflicts is more challenging since impromptu hallway chats and other informal, personal interactions are limited. Program managers should consider pre-meeting discussions to smoke out points of contention in advance, ensuring meeting stakeholders and decision-makers have the data necessary in advance of discussions.  Appropriate time should be spent on every call building community, connections, and fostering the respectful interactions and collaboration required once meetings get down to business.  When conflicts do arise, it’s best to address them as early as possible.  That requires team members, and particularly leaders to make the effort to follow-up with their counterparts promptly especially when their last interaction suggests that there are unresolved tensions or issues.   

Change Management and Communications – As GE famously instructed its highly effective M&A teams, “M&A is about numbers AND people.” Which means, of course, that no acquirer can fully realize intended deal value unless and until they master the ability to manage the entire universe of fuzzy “people issues.” Frankly, your success or failure with inorganic strategies and deals will be highly correlated to your demonstrated effectiveness in this area.  Virtual M&A, characterized by the absence of direct contact of physical work spaces, increases the potential that constituents will lose or misconstrue messaging or its intent. This is particularly problematic when these messages are about what must be accomplished to realize the deal’s business case.  Estimates suggest up to 80% of face-to-face communications come from non-verbal cues – gestures, tone of voice, body posture and facial expressions.  Email and instant messaging have none of these nuances, and phone meetings offer few beyond tone.  Even during video meetings, picking up on subtleties in reactions can be much more difficult than live interaction, particularly in multi-cultural situations.

Consequently, the change management strategy must be virtualized with particular focus on measuring efficacy and adoption that efforts are having the intended effect.  Organizations that do this best involve not just a change management lead, but have executives, program managers, and stakeholders that are proactively involved creating a climate for engagement and adoption for changes impacting employees, customers, partners, and other constituents. 

  • Plan to Go Fast During Virtual M&A – Decompose your deal’s business case during diligence, and plan your change management strategy early.  Ensure leaders of each key initiative the company will undertake to achieve value drivers are actively involved in developing fit-for-purpose change management activities.  This work should be a natural extension of your program management practices, and can be coordinated by the IMO, Change Management Office, or individual corporate function as long as all constituencies needs are accommodated.  Depending on the distinctives of your deal, journey mapping, harmonizing performance management with the future state operating model, capability and capacity planning, and other change management/organizational development tools may be required.
  • Communicate, Assess, and Optimize – Never, never, never, never under-communicate!  Keep your finger on current state of the organization by regularly using pulse surveys, “voice of the workforce” tools, electronic “Suggestion Boxes,” and other means to understand employee and constituent sentiment.  Triangulating data from multiple methods should be used to develop a ‘heat map’ summarizing common, enterprise-wide issues, challenges specific to a certain region, country, or location, or functional team.  Analyzing this information may also yield insights about best practices used locally that can be leveraged across the entire M&A program. 
  • Match the channel/technology to the task – Select the change and communication tools and methods based on the distinctives of the deal, and communication preferences of stakeholders for receiving and sending information. In addition to the video-enabled collaboration tools consistently listed among virtual team’s preferences, consider: using a collaboration team website where virtual team members can share information, track progress toward objectives and get to know one another; using real-time collaboration tools such as Zoom, Microsoft Teams and the like to simulate a virtual “water cooler” allowing teams to interact with each other and their constituents more spontaneously and in real-time; a “spotlight on success program” to acknowledge and reward team members for accomplishments and celebrate successes in your team’s virtual environment. Finally, get creative and adapt the use of collaboration tools to fit your culture. One recent client recently mandated a weekly virtual happy hour for project team members working (and celebrating) in the safety of their homes. Another recently published a board filled with incredibly cute pictures of project team member’s pets, complete with the pet names, mock “bios,” favorite foods and pastimes, and ran a contest to “name my owner.”  Never forget:  the soft stuff is the hard stuff that drives success.

Collaboration Capabilities and Infrastructure – The effectiveness of your integration efforts in a virtual environment is also a function of the tools you choose and your team’s skills and agility in applying them.  The next best thing to team co-location is telepresence.  Use technology to reproduce—as much as possible—the co-located team experience.  Spend a few moments creating visible team member profiles, including contact information, competency areas, key career accomplishments and highlights, and even photos and interests to help the team bond.

Selection criteria for tools should include consideration of what’s already in use, use case needs, compatibility with infrastructure capabilities/capacity, and TargetCo’s capabilities and how quickly it will be integrated into the Buyer’s operating model.  Collaboration tools should include:

  • Remote Meeting Platforms – By now, every organization is proliferating its use of remote meeting platforms such as Zoom, WebEx, and GoToMeeting to provide the best proxy for the interactions of a collocated team.  When augmented with instant messaging tools (e.g. Slack, Microsoft Teams and the like) these platforms provide real-time ready, easy, and inexpensive capabilities that enable productive, personal interaction.  But care must be taken not to over-tax your infrastructure, or that of your community, region or even country.  As lock-downs and work-at-home mandates spread to flatten the Covid-19 impact curve, many organizations in Europe implemented “no video” policies for its remote meetings, for example, in an attempt to save bandwidth and improve platform performance amidst the massive spike in network traffic.  Even so, we suggest that the first few minutes of every meeting be fully video-enabled to support introductions and to renew the personal connections of team members before going audio only for the remainder of the meeting if necessary.
  • Collaboration Tools – These tools provide your virtual team the ability to access, create and modify work product together, even real-time with multiple individuals working on the same documents simultaneously.  For teams that are globally distributed these and other tools create the opportunity for a 24/7 work effort by enabling teams to seamlessly hand off the latest work as the day progresses.  The tools also provide version control and archival of older revisions, vital to program managers who need to leverage the latest project information for metrics reporting, maintaining contact lists, managing integration plans and RAID, and facilitating governance.

These powerful tools must be augmented with sufficient training, usage guidelines, and policies so the team is not only comfortable with their use, but understands when and how each is best used.  This will ultimately enable creation of a virtual space for team members to feel confident communicating with each other, perform their tasks, and meet objectives within budget and deadlines successfully.

Given the choice, there is no substitute for bringing Buyer and Seller stakeholders together at critical points across the M&A lifecycle.  Critical deal events including Announcement, Day 1, integration plan dependency management, and systems cutover are much easier to accommodate when key team members can work together face-to-face.  Additionally, customers, partners, and suppliers benefit from in-person communication, particularly given that competitors will use the uncertainty caused by an MA&D event to try to gain market share.   Teams must also be ready to plan and execute M&A deals virtually, as the Covid-19 pandemic has demonstrated.  While more challenging, M&A deals are still getting done.  Ensuring these deals are strategically and financially accretive requires tuning your M&A operating model and internal capabilities to address the challenges of remote project teams. 

Christian Pape is a leader for operations, program management and innovation whose diverse career has spanned management and executive responsibilities in Corporate Strategy and Development, Supply Chain Management, Research & Development, and IT in North America and Europe.  As a M&A integration and divestiture practitioner, his years of experience includes global program management for planning and executing the go-to-market model transformation essential to the success of a $19B merger.  Christian relishes the opportunity to apply his broad expertise and experience to create synergy while working with executives, line management, and cross-functional teams at all levels to seize on the possibilities that arise whenever organizations set out to achieve strategically-driven change and create new value. 

John Bender has more than 20 years of international and cross-functional leadership experience, including deep expertise in mergers and acquisitions, transformation, and operations. John has been involved in more than 50 acquisitions and divestitures with total enterprise value exceeding $70B, spanning financial services, high-tech, biotech, software, energy, transportation, and manufacturing industry verticals. John is widely recognized for his key role as Executive Director of Merger Integration in Hewlett-Packard’s $19.5 billion acquisition of Compaq Computer. His thought leadership has been cited by notable publications including USA Today, Inc., Global Finance, Chief Executive Magazine, PC World, Computer World, the San Jose Mercury News, Reuters, and others, and he is an active guest lecturer.

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