TITLE : MAKING MERGERS WORK: A GUIDE TO MANAGING MERGERS AND ACQUISITIONS.

PREFACE

A merger is a process, not an event.

The integration period for an acquisition will be measured by months and perhaps years, rather than days or weeks. Many factors come into play in determining what the time frame will be:

1. Whether the merger/acquisition event is a Rescue, Collaboration, Contested Situation, or Raid.

2. The extent to which the two organizations will be merged and integrated.

3. Managerial competency and experience base of the people in charge.

4. Cultural differences of the two organizations.

5. External events in the economy or business world at large.

6. The degree to which the integration program proceeds in a strategic, informed manner.

Companies need to be as willing to spend money on fighting to make a merger work as they are on (a) fighting to keep it from happening or (b) fighting to make it happen. It's time for post-merger management to become as sophisticated as today's take-over plans and merger defenses.

Invariably companies spend a great deal of money in swinging the deal. For example, there are investment bankers to pay, lawyers' fees, expenses incurred in public relations activities, and 60 on. But after the papers have been signed, companies frequently quit spending money on expert help, relying instead on incumbent managers and executives who have not been trained for the complicated task of merger integration.

Often more money is spent changing the company stationery and putting up a new sign out front than is invested in bringing state-of-the-art management techniques to the merger. A large corporation wouldn't think of spending $50 million or $200 million, maybe even a billion dollars, buying new machinery and putting it in the hands of people who'd never operated that kind of equipment. Obviously, too much would be at stake. Specialized and in-depth training would be given to the persons responsible for making the machines produce.

But every day companies spend that much money and more on an acquisition-sometimes in an unrelated field-and then dump it on executives who have never run that type of operation or that large an organization.

On-the-job training is great, but not for mergers. It gets very expensive when managers take a trial-and-error approach in their efforts to integrate an acquisition.

Managers and executives will be well intentioned and will give it their best shot, but it takes more than the "old college try." It takes insight into the complicated dynamics of mergers.

Mergers call for many "counterintuitive" moves, such that the people in charge must be very leery of trusting their instincts. Too often the people in charge take the obvious, commonsense steps . . . that just happen to be dead wrong.

Since mergers represent unconventional growth, they call for unconventional solutions.

Mergers are very destabilizing events, and they create a phe- nomenal opportunity for change and performance improvement in organizations. But the upheaval must be managed astutely.

Employees need to understand what the predictable merger dynamics are so they can flow with them. Managers at all levels need to know what's happening, what top executives have as a game plan, so they can manage the situation. Finally, everyone needs to know how they personally will be affected so they can begin to adjust as quickly as possible.

This implies that all the acquired employees, possibly those in the parent company as well, need to be informed about merger dynamics. They need to be trained and coached on what's coming at them.

The managers must be kept informed. Nobody does a good job of managing when they have to do it in the dark.

Finally, since people need personal closure on job-oriented issues, personnel decisions should be made and communicated as rapidly as possible. At the risk of oversimplifying things, there are three basic laws for successful mergers:

1. Give the people good reasons for wanting it to work. If the people who still have jobs want the merger to work, there's a good chance it will. If they don't want it to work or don't care, the odds change dramatically. The issue here is motivation.

2. Show the people how to make it work. Employees at all levels need training and coaching, from top executives struggling to manage transition and change, to the rank-and-file employees confused by cultural differences and new procedures. They will be asking, "What do I need to do? How do I handle this?"

3. Check to see if it is working. Mergers need to be moni- tored. There is always some fine-tuning that is needed, some calibrating and correcting of problems. Expect it. There will be breakdowns. Problems will develop. That's acceptable. What's not acceptable is not knowing there are problems or not taking care of them.

When these laws are violated, it tears organizations apart. They get "mergerized"-run through the corporate blender where the value of the deal gets chewed to bits.

It seems impossible that everyone involved can remain completely satisfied when firms are being acquired and merged. But neither does it seem that job stress should measure a 10 on the Richter scale. Surely mergers can be achieved without bankrupting morale, destroying so many careers, or causing so much damage to corporate momentum.

Some of the answer lies in knowing, and respecting, the out- rageous costs associated with mergers that are poorly managed. Another part of the answer lies in knowing the problems that must be faced, and the most common management traps. Finally, the last part of the answer lies in knowing the things that do work, and the timing for making them work.

This book is aimed at providing the answer.

Price Pritchett