According to Harvard Business Review, most mergers fail to achieve their ideal results. The statistics are even worse in the professional services and technology sectors, where as many as 90% of mergers can be considered failures.
There are two reasons why this is the case. First, poor diligence combined with insufficient strategic and tactical planning is to blame, ultimately hindering success. Second, it is a matter of implementation failures due to weak branding and communication and insufficient cultural integration and customer engagement, all of which create unexpected obstacles that prevent the realization of integration goals.
In my experience, it’s the latter that businesses need to be most wary of – an iceberg of sorts. As only one piece can be seen at a time, your ship can sink, fast. Navigating around and through these obstacles has many positive effects on the success of the merger. And by carefully examining these “possible points of failure,” we can solve them and avoid them altogether.
To do that, you need to consider everything related to your integration through three progressive lenses.
Editor’s note: This is part one of a two-part series from David Martin. The second part will be published tomorrow, November 28.
Lens 1: Business strategy
When companies merge, there is no shortage of consultants ready and willing to offer advice. Unfortunately, most will naturally focus on supply-side issues such as structure, cost synergies, and talent rationalization. Few concentrate on the demand side of the equation, which is one of the most critical points of failure.
Big mistakes have been made over the years in the name of realizing cost savings by moving too quickly to unveil a new integrated brand without carefully transferring existing brand equities.
Through this first lens, leadership must understand where there are synergies with the demand side. Identifying and understanding vertical synergies – that is, the benefits of linking business units to a new, better, more powerful parent – is always step No. with business unit A in business unit B? What are the possible opportunities to bring new capabilities to market that help clients/consumers do things they have never been able to do before? Or how combining units A and B opens the door to creating a true end-to-end solution that can turn the market to our advantage?
The voice of customer interviews is versatile as it helps in this case, and by talking to friendly clients, you get a clear sense of the opportunities they expect to provide the combined entity without a partner will have. It also creates a unique opportunity for businesses to engage with their current clients as partners and integrate them into the integration in a productive way. I have seen firsthand how customers change their allegiances at this stage because they feel they have a stake in the future of the new company and feel invested in its success.
By focusing first on business strategy, you can gain input and insights into what the new combined brand should be able to achieve, including how the product and service portfolio should be organized to demand synergies will be realized.