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in 2021, 21,107 mergers and acquisitions took place, with 676 of these companies valued at more than $1 billion dollars. I have worked with a number of founders to determine which soft skills will have the most impact during the acquisition process.
Mergers and acquisitions happen across all industries for a variety of reasons, from horizontal scalability to inorganic growth. Whatever the rationale behind your mergers and acquisitions, finding an acquisition company is difficult and requires talent, but soft skills close the deal and promote long-term growth.
The integration of the staff of an acquisition company is a delicate matter. You want to retain key employees to keep operations running smoothly, but also successfully combine the two companies to avoid operational silos, seeking a strategic approach to company culture, pay and work environment through the deployment of soft skills – and all that while planning for surprises throughout the process.
Every company has a culture. This is how you do what you do in the workplace. From formal and informal systems to behavior and values, your acquisition company will undoubtedly have a specific corporate culture that flows through the work process.
You need to determine which corporate cultures you want to keep, change or eliminate. Improper attention to culture can lead to lawsuits against discrimination, poor productivity and high employee turnover. The Society for Human Resource Management (SHRM) outlines three broad culture categories pay attention to:
Social culture: This category refers to the roles and responsibilities within the organization, including power distinctions.
Materialistic culture: This category includes everything that people in the group create, develop or achieve, and how the employees function and support each other.
ideological culture: This category focuses on the values, ideals and beliefs of the group and emphasizes the emotional and intellectual guidelines employees follow.
Discovering similarities and differences in these cultural categories is critical when acquiring a business. Similar attributes between the acquiree and the acquirer must be communicated in order to intertwine the corporate culture. However, if changes are unavoidable, you should convene employees from both companies and have a clear and open discussion about future expectations.
Related: Cultural Fit Can Make or Break an M&A Deal
salary of the employee
M&A is associated with a large upfront financial burden after the purchase. Day 1 of merging companies should not come with pay cuts or employee layoffs. Keep everyone’s pay consistent for a few months to evaluate who the key staff are and where changes are needed.
I’ve seen too many founders focus on the bottom line and neglect to look at the value key employees provide in the acquiring company. This is detrimental to the long-term growth and integration of the acquisition company.
There’s no doubt that some features become obsolete if you merge with a company in the same industry. In fact, a Harvard University study found that nearly… 30% of the positions can be eliminated. If termination is unavoidable, make sure you give enough time for employees to find a new job.
We’ve all seen the power of social media when layoffs happen. Take Better.com for example. The CEO fired more than 900 employees via a Zoom call just before the holidays, negatively affecting the brand image before their IPO.
Each employee in the takeover company will have to be reconsidered on their salary, benefits and employment status. The amount of hard cash you bring to the table will determine how long you can hold redundant positions, how the salary will change, and what benefits you can offer. The benefits and remuneration in your company should not differ much from the acquisition company.
Related: Why Integration Is Essential for Seamless Transition in a M&A Agreement
You care about your team and you like to show it. So, what work environment are you going to instill in the operations and your employees? You want to avoid the “my way or the highway” approach and implement a team approach to all problems. A Gallup survey found that engaged employees lead to a: 17% increase in productivity, increasing your profits. SHRM outlines six steps to promote inclusiveness in the workplace:
Create an Inclusion Council.
Remember differences between employees.
Listen to your employees.
Communicate goals clearly and assess progress consistently.
These steps should be present in your current business as well as in your acquisition. The work environment must be uniform throughout your company to see the most success.
The M&A process will not be smooth sailing. Nobody likes to blow out their dirty laundry, so it’s important to expect surprises. Extensive due diligence and clear terms can help avoid costly surprises; however, you may still be in for the following unpleasant surprises:
Cross-border consequences: This happens when you underestimate the impact of buying a business with a different home location. Language barriers, time zone differences and currency risk all occur.
Compensation Agreements: Companies generally have agreements for high-paid executives that span several years. You may be required to adhere to these agreements when acquiring a business, which comes at the cost of profitability.
Inadequacies in the due diligence: Due diligence becomes more difficult when travel is involved. Reports may not be up to date, employee numbers may be incorrect and there may be operational shortcomings.
By using hard cash and soft skills, you can counteract these surprises so that your acquisition company can start operating at the level you expect.
Related: Successful M&A Strategies for Startups
Would you be surprised to know that 70% to 90% of the acquisitions fail, according to a Harvard study? People are not boxes. You cannot expect an acquisition company and its employees to work exactly the way you want from day one. Failed acquisitions lead to loss of investor confidence, lower market share, unprofitable segments and diminishing brand image.
Having advisors on site and completing extensive due diligence prior to purchase increases your chances of a successful acquisition. You want complete transparency about what you are signing up for. Also, don’t just focus on the bottom line. Soft skills outweigh the long-term success of your acquisition company.
Mergers and acquisitions come with a lot of working parts, from figuring out the hard money needed up front to how you’ll use soft skills to effectively manage your new team. I assure you that the growth and merger of your acquisition company requires these resources.