Jabian Consulting recently completed a survey of 159 North American M&A professionals to gain insight into the stumbling blocks as well as paths to success to completing the merger and acquisition process effectively. The survey results painted an interesting picture about self-perception; when asked to assess their performance in key areas like planning, cultural integration and HR planning, everyone surveyed ranked themselves way better than they said everyone else was doing. Brian Betkowski, co-founder and partner at Jabian, sat down with Consulting to discuss the survey’s findings and the ironic disconnect that sometimes exists between what needs to get done and how to get there.
Consulting: What were you looking for with this survey?
Betkowski: We were trying to take a bit of a unique perspective; trying to get people to articulate what works and what doesn’t. Not only hands down did everybody we surveyed say culture and communications was the most important aspect to success, they also said that’s where they spend the least amount of time in due diligence. They also said, ironically, it was where they’re investing the least even going forward post- merger and integration.
M&A is a fuzzy topic, and it’s hard to actually pin money to it. You can print a spreadsheet for almost anything tangible, and even some of the intangibles around business, but for some reason it’s really hard to determine that they are going to invest in it and be sure it will return an investment. They all said that’s the most important thing, yet they all have a hard time investing in it. That could come down to having a financial view of the world versus an operational outcome view. Sometimes the groups involved are more focused on getting the deal done as opposed to the groups doing the implementation who are focused on actually making it work and the people. We had a client tell us that during due diligence the people are like lines on a spreadsheet. Then after the deal is done they’re actual people and you need to actually figure out how to talk to them and deal with them as human beings.
Consulting: What are some of the big pitfalls to avoid?
Betkowski: Part of the survey was built around this concept of what we call the “M&A Rollercoaster.” We have 11 traps between due diligence through after the merger. One of the biggest traps is the hand-off between the due diligence team and the integration team, which is quite often a different team. There are ways to do that right. We had survey respondents rank the kind of information they communicate when handing off a due diligence to the integration team. What they ranked last was the decision making framework; when the team actually has to get into the trenches and make decisions they have a really hard time translating the reasons why you bought the company to how you should make those decisions.
Consulting: Important factors to ensuring a successful M&A process?
Betkowski: Communication on lots of different levels. When people say communication they forget one of the most important aspects of communicating is listening. When it comes to mergers and acquisitions, quite often people say they need to announce it and tell what it’s going to be. We found that really listening to people and letting them voice their concerns and opinions, having people involved in the decision making and having representation from different levels of the organization involved in working teams so people think they have a voice—that dual-sided communication is so important.
We call our offering the value and integration management office, not just the integration management office, which is what most people call their post-merger and integration stuff. We found during due diligence, people had a laser focus on valuation. And during the post-merger integration process when you bring the companies together, you lose a little bit of focus on the “why.” I would say really focusing on measuring, truly measuring all the dimensions of what success really means during the integration and tying that back to the reasons why you bought the company.
Consulting: What are some of the big drivers for all the M&A activity we’ve been seeing?
Betkowski: Valuations are really starting to get high. You could say this whole thing is feeding itself, so demand drives pricing but also supply. There are a lot of companies in the market paying big money for innovation, which is driving more innovation. It’s not like when M&A started to come back after the downturn where people were picking off deals; valuations were so low early on, people were selling because they had to not because they wanted to. And that’s really changed.
Consulting: What was the most surprising finding?
Betkowski: When you do surveys and have people rank things, what ends up being first and last is usually all the way at the extremes. It was just so interesting that by far the absolute most important thing (culture and communication) was by far the number one thing they ranked that they do the least. And it was absolutely at the bottom of the list of things they want to invest in and stuff that they do during due diligence. Rarely do you do a survey where the findings are that clear. And it wasn’t like we set up this survey to show how human capital is the most important part—so it was really interesting that it came out so clear.