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Mergers: Making it work

We took an in-depth look at recent retail mergers. Jai Breitnauer compiled all the advice from the feature into this handy guide on how to get one right.

The data shows that more corporate marriages fail than go the distance, so it’s important to get it right.

Culture:Colleen Ryan from insights agency TRA believes that one of the main reasons just one in four mergers work is because buyers spend too long looking at the balance sheet instead of thinking about the company culture. 

“Most reports show between 60 and 80 percent of mergers fail,” Ryan told me in an email. “Failing is defined in regard to delivering value to shareholders… more than a quarter of mergers actually erode the shareholder value of both companies.”

Culture, she says, is the culprit. “Or more specifically, two cultures, and the failure to leverage the value of two businesses because of cultural differences.”

Going in all guns blazing and imposing your existing company culture on an established brand could be a recipe for disaster. Equally, trying to preserve two separate cultures can lead to confusion and misunderstanding. Looking at company culture using discourse analysis (looking at the language used in a company by analysing emails, notices, contracts etc.) can be a useful way to see what underpins the culture of both companies, and then you can make clear decisions about how to lock the two together.

Relationships: It is important to do your due diligence when looking at buying a business. The tangibles of the balance sheet are important. 

“A good deal means no surprises,” Neil Miller, from Minster Ellison Rudd Watts told the NZ Herald. “It means that the seller engages specialists well ahead of its exit so that the business is prepped for sale when the time comes. The buyer does its homework and builds a strong relationship with the seller.”

Miller reminds potential buyers that due diligence can be time consuming and frustrating for the seller. Your role is to manage expectations and make sure key parties are working together effectively. Get to know the sellers and build a good working relationship – their knowledge and support will be key to an effective marriage. 

Vision: “The most successful merger or acquisition has full buy-in from all parties. This includes not only the owners and stockholders, but the employees and customers,” says entrepreneur Bill Rader, writing for Forbes. “All parties need to understand the vision of the merged companies and see the upside. They have to understand why a merger is necessary or desirable and in their best interest.”

Good communication strategies here are key, as is good leadership from senior management. 

“I have seen cases where the employees are not in line with the company mission years later, and this is a very bad thing,” says Rader. “In a merger, the employees are key to the success, more so than the owners or senior management. However, it takes the senior management’s leadership to successfully implement the merger.”

This story originally appeared in NZ Retail issue 762 June/July 2019.

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