There's no doubt about it, mergers are frightening things. A full 83% of them fail to boost shareholder wealth. In fact, more than half, 53%, actually reduce it. Yet Thomas Grubb and Robert Lamb tackle this complex subject well in explaining how to get a merger right.
Their book also suggests ways to exploit a rival's merger and offers commonsense advice and pertinent case studies for any manager involved in or contemplating a merger. What I didn't enjoy was the book's emphasis on integration. My experience of the Wal-Mart merger was that it was far more than just integrating one business into another. But more of that later.
Refreshingly, the book questions whether a company should merge in the first place. It examines conventional reasons for a merger, such as fear, a lack of succession planning or a need for more people, and concludes that merging is not the only solution. There are other options, such as strategic partnerships or joint ventures - let others suffer from merger pains.
The book then presents some interesting merger strategies. The first is the 'Magnet strategy', which tallies with my experience. It stresses the importance of maintaining your key people in both merger organisations.
The problem with any merger is that people feel they've been let down, yet often the reasoning behind a merger is people-driven. Talent management and communication are crucial, particularly as unsettled people can put merging companies into a very vulnerable state.
The positive spin on this is contained in the book's advice to 'attack when competitors are distracted'. The time your rivals are busy integrating their merger is the time you should be going after their staff. It's the ideal opportunity for a third party to pick off unhappy employees, or, as the book terms it, 'fishing in troubled waters'.
These two strategies are followed by 'jump-starting internal change'.
The classic merger mistake is to pretend that everything will continue as normal. And yet the whole point of a merger is to instigate change. My view, upheld by the book's authors, is that the relevant changes should be made quickly and cleanly after the merger.
The main lesson is that you have to think very hard about how you're going to bring two businesses together. I believe that if you align rather than integrate them you retain the best qualities of the two. This works better than a flat integration, where you end up with one party winning and the other losing out. The authors, however, take the integration approach - smashing two organisations together and ending up with a new whole. In my experience with Wal-Mart this is not what makes mergers successful.
For me, there are really only three things that matter. These are what the new business will be called, where it's going to be based, and who's going to run it.
Mergers don't work unless these three essentials have been worked out.
A merger can be likened to a human relationship; the courtship is followed by the engagement, the public announcement of the engagement, and then the marriage. It's when you get married that things must change. You have to work out the differences between you and start bridging those differences.
How well you manage this determines whether or not the marriage works.
Both parties have to accommodate - there can't be a winner and a loser.
And this is what I mean about the difference between integration and alignment. Alignment is best because effective change is something you do with people, not to them. It could be seen as nit-picking, but my view is that the book concentrates too much on integration. Don't let this put you off. There are some great strategies and overall the book has my thumbs-up because it's a thought-provoking book. And the marvellous thing about such books is that you don't have to agree with all of what they say; they inspire you to examine the subject from new angles.