Why Every Acquirer Must Get Good at Change

Mark Herndon headshot
By Mark Herndon
Chairman, M&A Leadership Council
Sep 28, 2016

At its core, M&A integration is about leading organizations and people through change. The better you are at leading change, the more effective you will be at M&A. Don’t believe me? Check out Change Management Effectiveness Drives Results, which references three highly credible studies that clearly and convincingly demonstrate this key point. Namely, if you are going to do M&A as a growth strategy, you simply must get good at change.

".....organizations with highly effective change and communications practices are 3.5 times as likely to significantly outperform their peers."

To support you in this essential task, we'll devote the next few weeks to a mini-series that will spotlight these key topics:

  • The business case for change management
  • Change dynamics every leader must understand
  • M&A – the “perfect storm” of change
  • The ultimate strategic objectives of change – what leaders must achieve, and why
  • And finally, key tactics proven to drive successful change

Exhibit 1: Change Management Effectiveness Drives Project Results

Founded in 1994, Prosci, Inc. is a world leader in research and content creation in the field of change management. Prosci’s core research competency has facilitated the development of the industry’s most comprehensive set of common language, customized tools and training programs to meet the global needs of change management planning and execution for individuals and organizations at every level. Prosci’s most recent Best Practices in Change Management Report, 2016 Edition, represents one of the largest bodies of knowledge on change management in the world, and comprises data, inputs and lessons learned from hundreds of study participants representing a diverse mix of industries, global regions and employer size.

This important study found that projects with excellent change management effectiveness were significantly more likely to achieve project objectives than those with poor change management effectiveness. In addition, excellent change management was also correlated directly with staying on schedule and on budget.

Exhibit 2: Change Management Effectiveness Drives Superior Financial Performance Relative to Peers

For the last 10 years, Willis Towers Watson has examined the role of change management and communications to business success. The organization's 2013-2014 Change and Communication ROI Study once again demonstrates the consistent linkage of change and communications to financial performance and overall business results. With approximately 650 organizations participating in the most recent study, response data from each organization was segmented into categories of specific change and communications practices proven to be highly effective, average or not effective (low).

These responses were then correlated to self-reported financial performance relative to peers, and validated when possible with direct financial and performance data. This study found that organizations with highly effective change and communications practices are 3.5 times as likely to significantly outperform their peers.

Exhibit 3: Poorly Managed People and Cultural Integration Destroys Value

A recent study by the Storytellers and Mergermarket, The Missing Chapter: Why Emotional Buy-in is Critical for Successful M&A, focuses on the essential aspects of getting people and cultural integration right during M&A. Based on the qualitative and quantitative inputs of over 100 executives, this study found that of those organizations reporting poorly managed integration of people and culture, the following consequences ensued: 61% reported a reduction in productivity; 58% reported lower than expected synergies; 55% reported high levels of employee resistance; 50% reported low employee engagement; and 45% reported a negative impact on share price.

Incredibly compelling stuff! But now a word of caution... In spite of the convenient label of change “management,” producing these kinds of results (or not) can be directly attributed to you as a change leader, much more so than any tactics or practices. My friend, colleague and M&A Partners’ consulting resource Donna Brighton, put this important point into perspective recently. Let me tell you why her opinion matters. Donna is one of the truly remarkable change management experts. A change management industry veteran with a proven ability to get results; a former ERP solution practice leader; and current President and Board Member of the Association of Change Management Professionals, Donna she knows and lives these principles daily! As Donna reminds us, “More change and more highly complex change [such as M&A] always demands more effective change leadership first and foremost.”

Thank you, Donna, and that’s why I hope you’ll continue to follow us as we drill into M&A specific change competencies.

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