Leadership in M&A Transition

September 3, 2019
September 3, 2019 Joe Britto

Reading time: about three minutes

Recently, I’ve been thinking about leadership in an M&A environment. Not from the position of the company doing the acquisition – after all to the business being bought out or merged with, the acquiring business holds all the cards.

So this week I’d like to look at the M&A landscape from the position of the company being acquired.

A New World

Imagine it. Your business is about to be sold or merged. Maybe you’ve known about if for months, or maybe it’s news. You’re naturally positive so when the uncertainty creeps in it’s a surprise. But it’s there: What’s going to change? How will it affect your team? Will you still have a job? It’s the uncertainty that gnaws at you. And when the news comes down the pipeline about who’s buying your company it feels like waking up in a new world.

You know that systems will change, of course they will. But what else? What will be the direction of the new entity? You’re a leader now and don’t new companies clear the leadership decks when they arrive?

The Perils of Wait and See

The answer to that question is “yes” and “no”. Not helpful, I know. Not the kind of thing that alleviates fears but it is the truth. The “yes” part is the consequences of a wait and see approach. Maybe “wait and see” is about being respectful; that we can’t plan a direction without input from the new business. We feel stymied and, in that feeling, getting a clear direction from the new parent company is what seems needed to make any decisions.

Take that approach and yes, the buyer will clear the leadership decks. Why? Because waiting for the new company to set its direction and tell us what to do, says something about who we are as leaders. What we’re saying when we wait for direction is that we don’t take initiative. That we don’t have any ideas of our own.

That approach doesn’t smooth the M&A transition. It does the opposite: it creates a spike in the transition. It creates the kind of handover that sees staff leaving because no questions can be answered; where Day 1 of the newly merged business is chaotic with systems and processes being unclear. It prolongs the uncertainty because as each day passes little comes into focus.

Strategy in Uncertainty

The “no” part of the answer to the question “don’t new companies clear the leadership decks when they arrive?” follows a different mindset. In that way of thinking leaders still feel the uncertainty. They might even feel helpless, but it isn’t a bus stop they wait at for long.

Instead, they understand the new company will likely ask two questions of the existing leadership: “Tell me about your operations; and what’s your growth strategy?” If both questions feel like a test, it’s maybe because it is.

What the buying company is doing is taking stock of the merged company’s leadership. An answer like, “We were waiting for you,” helps no one. An answer that expresses a clear strategic direction helps everyone. But how do we make that mindset transition?

Moving From Wait & See

The wait and see mindset hinges on a few assumptions: that developing a strategy for the merged business is in the realm of the buying company. That the existing leadership doesn’t know what the buying company wants to do; or why it bought the company. Or what it plans on doing.

Those are real and valid assumptions but they veer from the point. There’s a reason why the buyers took the leap to buy your company, and in the due diligence stage it did all it could to learn about your company. But what it didn’t have is the organizational knowledge and expertise of the current leadership.

You as a leader can demonstrate both of those. You can do that by developing a growth strategy for the business you know, and combining that with whatever you may know about the buying company.

And more than that you can help create stability for staff by involving them in the process of developing that strategy.

Strategy & Agency

I’ve said before in this blog that involving people does three things: it helps people feel invested in what’s happening; it gives agency; and it creates leaders. For this blog I’d like to focus on creating agency.

Agency is about feeling in control rather than feeling subject to the whims of fate. That’s why developing a growth strategy in the midst of a merger or acquisition is important. Not only does it send a clear message to the buying company that existing leadership is strong and forward looking, it also provides a focus for leadership during a time of uncertainty.

But that isn’t just true for leadership. If we choose to, we can involve the wider team in the development of that strategy. And that sends a clear signal that leadership is at home and on the job. It lets the team and business know that despite the merger or buy-out, the existing company is strong.

Creating agency in an uncertain time maintains motivation. It gives people control and that means they’re more resilient to the changes engulfing them.

I’m not talking about town halls or briefings. I’m talking about action teams comprised of staff that can lead on aspects of developing the strategy; break parties that give staff a chance to hear and poke holes in ideas; and a leadership that is responsive to the holes the wider teams see.

And all that demonstrates leadership during the transition to the new business environment.

A Leadership Mindset

That’s possible when leaders see their role in an M&A environment as more than caretakers waiting to see what will happen. It happens when leaders lead in a times of uncertainty. And by leading do what’s in the best interests of the new business, their staff, and themselves.

That may sound like a tall order. But what company that buys out another doesn’t want to see strong leadership at the helm of their acquisition?


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