| A
Living System Approach to MERGERS & ACQUISITIONS - PART
I
This
chapter focuses on a systems view of leadership, strategy,
structure and culture and the dynamic nature of the relationships
between them and how these relationships could impact the
outcomes in mergers, acquisitions and joint ventures.
By
Prasad Kaipa, Ph. D.
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this article ( PDF file, 164 KB ) ( PDF
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Overview
The
human aspect of the system (in this case an organization)
is at the heart of this chapter. As such, market and technical
analysts, financial strategists, the local and global nature
of the products or services involved, and myriad other critical
features involved with merger and acquisition will not be
considered here. It is important to see the larger picture
of which all these elements are parts and the system is
alive because of the human element. The greatest financial
strategy combined with market readiness and the technical
expertise to deliver can languish for lack of the human
side of the equation. It is just that side of the equation
that will be considered in the following pages.
The
chapter will begin with a case in which one of the authors
was the consultant (PK). Many aspects of the systems model
that will be outlined later are represented in the case.
Following the case will be the explanation of the model
including a description of how one's perceptions of the
model evolve with experience.
The
goal of the chapter is to introduce a process for assessing
the human aspects of the organization such that the outcome
will contribute in a very real and meaningful way to the
consideration of a corporate merger or acquisition.
The
Case
Company
X –- A large technology company made the decision
to grow rapidly. The leadership decided that the strategy
for growth was through acquisition of Company Y with the
technology that they wanted to grow into. At the time, Company
X did not feel that it had the time to internally develop
the technology. It did not want to create a joint venture
partnership with another company because the returns appeared
to be greater by outright acquiring a company with appropriate
technology.
Company
X bought the Company Y, focusing primarily on technology
and not on people (though they all became part of Company
X). Company X incorporated the technology into new products
that could be sold to its market (through its ecosystem
partners). The Company X organization was structured in
partnership with external implementation companies and their
structure led to win-win-win situation for the company,
partners and customers so far.
When
the Company X presented the new technology and new strategic
direction to its external partners, there was unusually
low interest (less than 20%). The external partners did
not see Company X to be a credible leader in this new domain.
As a result, the partners rejected the invitation to become
advance partners investing in the growth of this new market
with Company X.
Then
Company X then hired external consultants to work with problems
that had emerged. At the initial meeting, the consultants
and Company X revisited the goals of the company, its reasons
for acquisition, and its vision. Out of that meeting, all
agreed that creating a new knowledge business model consistent
with the “"genetic code"” of Company
X would be the outcome of the consulting project. The list
of goals enumerated at this meeting included:
-
Developing
widespread use of this business model across the company
to help catalyze
cross-functional efforts
-
Accelerating
new technology absorption inside and among the ecosystem
partners
-
Reducing
cycle time to competency
-
Supporting partner strategies
-
Influencing
new business directions
-
Fostering
improved customer value
-
Advancing
the Company X goal of leading the industry
In
establishing the process for creating the new business model,
the consultants took into account the difficulties Company
X was having internally in integrating both the technology
and working styles of different divisions within the company
including the new division. These internal difficulties
as well as the external challenges in communicating and
convincing the ecosystem partners are examples of cultural
and structural issues that can be critical to the success
of any merger or acquisition. The consultants paid attention
to other acquisitions that worked well for Company X and
looked for understand what is different in the current scenario.
Schein advises that culture be taken seriously; that knowledge
allows the company to work with a more complete picture
of the consequences of its proposed actions. In this case,
by paying attention to culture, we understand the assumptions,
reward structures and people motivations behind what works
and what does not in the partner model that Company X works
with.
Once
the potential outcomes were identified, the team identified
different functions and people who need to become part of
the consulting effort. The consultants identified heads
of product development, channels marketing, IT, customer
relations, and technical support divisions connected with
this product/technology. They met with each of the heads
one at a time sharing the vision and goals for the project
and validating the assumptions and understanding different
perspectives. Enrollment in the project was extremely important
as many of the executives were very busy; and they were
unavailable unless what was being offered directly relieved
their pain or added to their successes. The consultants
gave the leaders a choice regarding participation: they
themselves could become part of this team or nominate a
person in their division who could represent them and make
the decisions for that division. Through these meetings,
it was possible to get some understanding of how the leadership
functions in Company X, the structures that facilitate collaboration
and prevent working together, the cultural enablers and
impediments that could potentially affect the project. In
addition, the strategy that Company X uses in developing,
marketing, selling, supporting its products was partially
elaborated by some of the executives.
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