[Michael Fortunato]

In my experience companies and leadership within companies have a tendency to overestimate how much change that their organization can accommodate, or how much they will actually be willing to support. Maybe this is because they really don’t know what the impacts will be. In any case, many assumptions are made that very often turn out to be inaccurate. This appears to be no different in an M & A situation. Mergers and acquisition decision are not ultimately made based on the capacity for change of either organization, but the appetite for change becomes a factor nonetheless.I guess I am curious to know how other practitioners begin to sense and shape appetite for change in M & A, how soon you actually can get started in most cases. Thanks for your feedback!

[Ian Smith]

I may be at an advantage/lucky position in this sense as I take part in deal origination at the business. knowing that I will need to integrate one of the businesses after many steps have been taken (long list, short list, target approach, NDA, share of info, LOI etc etc) – for me the appetite for change / capacity for change comes down to the parameters we set when selecting a business to acquire – this gives us the indication of what it will take to go through the process E2E. i.e. do the people currently in the business have capacity to handle this 50%- 90% of their time? if the answers is no then it must be factored in what extra internal / external support is needed to support the teams and workstreams.

[Daniel Nur Hakim Ismail]

To shape the appetite for change in M&A, practitioners should engage with stakeholders from both organizations early and often, and gather feedback on potential changes. Understanding the culture and values of each organization is important in predicting their willingness to support change. Practitioners should also communicate a clear and compelling vision for the future state of the merged organization.

[Craig Hasler]

Hi Michael,

Thanks for the prompt… this is a very interesting topic of discussion!
I agree with your comment in the sense that organization leaders do typically overestimate the ability of their organizations to navigate/support/adjust to change. Ian also made a great comment about having a solid understanding of deal parameters prior to embarking on target identification/assessment (M&A strategy). This should help to ensure that the acquiring company is confident in its ability to manage risk and adjust to change required for the merger ahead. If extra support is needed, this can be done, but it will factor into costs/value creation generated by the merger.

All the best!

Craig

[GerhardPrinsloo]

Interesting thread. I often encounter the opposite of having too large an appetite for change! How do you go about getting leadership to sign up for more change, rather than less, especially if the pace of benefits/synergy extraction does not correspond to the initial ambitious aspirations (well knowing that targets will be missed at that pace)?

[Erin]

In my experiences, people are often biting off more than they can chew! They want to enact change, but lack the proper resources in order to enforce the change in an efficient and functional way. I think this must occur prior to deal closing, much as Ian stated. Determining how much the individuals can truly dedicate in addition to their day-to-day “business as usual” activities via a percentage. If they do not have at least 75% of their time to devote to enacting the change, things will fall by the wayside and cause failure of full integration.

[Pamala Paschal-Sturhan]

I too agree that companies, especially senior leadership, underestimate the costs and overestimate the value of an M&A activity. How do you valuate risk or potential costs during a PMI process? It obviously costs a company more than the purchase price.

[Author]

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