M&A Should Be Transformational — Not Transactional

Success in M&A is no longer achieved by following static playbooks; it comes through navigating the dynamic landscape with adaptability. Leaders who embrace uncertainty and adopt an agile approach to M&A integration can achieve the transformative potential that M&A promises.

Businesses have considered merger and acquisition (M&A) deals as a viable growth strategy for more than a century.

For example, General Mills (GM) has evolved its M&A approach over the past decade. “Prior to 2017, General Mills largely pursued more opportunistic deals, expanding its consumer packaged goods offering with strategic acquisitions like Annie’s organic and natural food products,” shared Doug Power, former Global Head of M&A for General Mills. “In 2017, we pursued transformational growth with our acquisition of Blue Buffalo Pet Products, Inc. for $8 billion. The acquisition positioned General Mills as the leader in the Wholesome Natural pet food category and successfully reshaped our product portfolio.”

To unlock the growth potential that transformational M&A can bring, leaders need a shift in thinking and behavior.

They equally underestimate how employees, business partners, and customers will react and adjust to change. To navigate the ambiguity inherent in M&A, leaders need to develop the right mindset — one that adapts and sees uncertainty as an opportunity, not a threat. When leaders think in this way, their behavior shifts as well, enabling the organization to pursue a more agile approach to the integration.

When pursuing mergers and acquisitions for true transformative growth, leaders need to adopt a new approach. Here’s how:

A New Approach to M&A

M is for Mindset

When pursing M&A to transform a business, leadership mindset development must be prioritized. Yet a mindset that doesn’t settle for status quo thinking but asks “What are we not thinking of?” is what leads to true transformational growth.

As one Software-as-a-Service client shared as they were merging with another SaaS company, “Doing a premortem informed our leadership’s thinking going into the deal. We recognized the flaw of certain assumptions and thinking those through gave us greater confidence in the transformation.”

A is for Agile

If Mindset is about where you are going, Agile is about how you get there.

Organizations can apply this same agile approach to manage the external and internal influences present in M&A, adjusting as new data emerges.

Imagine that you’re driving through the city, and your GPS is only as good as yesterday’s traffic report. That’s how too many M&A integrations have been approached — making decisions based on a one-dimensional “map” of static playbooks or checklists, without listening to the live updates of competitive shifts or cultural assimilation challenges. Thanks to advances in navigation technology, GPS systems can now access real-time data, and recalculate a route with every new piece of information received.

An agile approach encourages organizations to be willing to pivot, much like a driver uses live traffic updates to avoid congestion.

Developing the Right Mindset to Be Agile

Beyond cultivating a mindset that embraces uncertainty, to successfully navigate M&A transformation, leaders need to understand from the get-go that plans will change and they’ll need to remain flexible. Prepare to think beyond the old playbook and standard checklist. “When people use a checklist approach to M&A, they tend to stop thinking,” said an integration lead of a technology company I spoke with. “They focus more on getting through the checklist than they do on thinking through what the right next step might be. When identifying possible M&A teammates, I  look for a tolerance for ambiguity and desire for clarity.” Playbooks can be your foundation for guidance, but consider them as fluid.

To embrace a more agile approach for transformation through M&A, consider adopting these principles:

Design the deal, define objectives and key results (OKR), and divide work into sprints. 

View the deal vision as a “thesis”, to be tested and measured by OKR’s your team commits to from the beginning, and divide the work into short and long sprints. “Retaining key talent for two years, minimum, was a critical OKR for a target acquisition,” shared the Integration lead of a technology company I spoke with. “We committed upfront and tailored the integration sprints to meet the objective.

Solicit, assess, iterate, and adjust.

Once the integration launches, cross-functional team leaders should solicit data consistently and assess what’s working and what isn’t. With this knowledge, teams can iterate solutions and adjust as they evaluate the impact of changes. “For acquisitions, we adopted a ‘listening strategy’ including focus groups and pulse surveys,” revealed seasoned M&A executive Klint Kendrick, when he was HR lead at an acquisitive Fortune 500 software company.

Debrief and operationalize where possible. 

Debrief throughout, breaking down the work sprints to identify successful aspects and areas for improvement. Look for patterns across similar situations and consider which practices can be standardized — this can improve processes, mitigate unnecessary costs, and foster teamwork.

Assess key employee metrics.

Throughout this process, assess for key employee metrics tailored to M&A, including:

• Did acquired employees stay beyond the merger?
• Are new employees fitting in well with the organization and its veteran employees?
• Are new and veteran employees sharing know-how and learning from each other?
• Do both new and veteran high-potential employees have pathways to advance in their careers within the new organizational structure?

By monitoring these metrics and following the principles above, you can promote agility, adaptability, and continuous improvement throughout an M&A integration.

In the ever-evolving M&A landscape, Mindset and Agility are the compass points which can guide organizations toward growth and lasting change. Leaders who embrace uncertainty and adopt an agile approach to M&A integration can achieve the transformative potential that M&A promises.

SOURCE HARVARD BUSINESS REVIEW (Jennifer J. Fondrevay is Founder of M&A consultancy Day1 Ready, Human Capital advisor for Virtas Partners)