The Good, the Bad, and the Ugly - StreamLine: The ABC of a Merger (A) (B) (C)

The actual facts are hard to come by. A figure often cited in the press states that roughly two-thirds of all mergers and acquisitions do not pay off. A less pessimistic figure, attributed to Mercer Management Consulting, reveals that of 152 M&As that took place between 1994 and 1999, 70 under-performed while the remaining 82 outperformed. Still, the odds of success are not good. So why do companies forge ahead with M&As despite these warnings, and how do the companies that do succeed escape becoming yet another statistic? In this new series of cases, Professor Quy Huy and Ramina Samii provide a step-by-step analysis of a technology merger, showing how company managers successfully navigated the treacherous waters of culture clash, relocation, and internal power struggles by managing employees’ emotions.

by Quy Huy, Ramina Samii
Last Updated: 23 Jul 2013

To get real insights into a corporate merger, it’s best to go directly to the source. In this new case, Quy N. Huy, Associate Professor of Strategy and Management at INSEAD, and Ramina Samii, Research Associate, tell the story of the January 2000 merger of UK-based companies Stream and Line to create StreamLine, UK, providing an in-depth look into how management of emotions can facilitate the speed and success of a corporate merger.

The story is told from the perspective of new Sales Organization President, Anne Wright, who was an unexpected choice for the position. Wright faces the daunting challenge of bringing together two organizations with polar opposite cultures. Stream’s culture was reputedly cold, heartless, focused, committed, dynamic, and results/sales-oriented, while Line was known as a strong, friendly, community-focused company, profit-driven with process and career progression well developed, and rather gentlemanly in its approach. Even more telling were field sales force turnover statistics: 31% at Stream and 4.8% at Line compared to an industry average of 18%.

The authors follow Wright for a full year following the merger (which created one of the world’s largest high technology companies), recounting both the missteps and successes. Beyond culture differences Wright must deal with layoffs and office closures. (It was expected that the merger would eliminate some 7,200 jobs globally, 11% of the companies’ combined payroll of 64,800 employees.) Site selection for a new combined UK headquarters only added to the stress and mistrust amongst the two organizations.

With the site selection over, Wright reflects on the challenges ahead. In Part B, we see her efforts to shift the new company’s culture away from the dominance once found in Stream to a more open culture somewhere between the two. By February 2001 (roughly one year after the merger), Wright conducts interviews with the top 40 senior managers in order to identify areas of focus for the next phase of the integration. By and large the feedback is positive, with Line heritage people expressing appreciation for the clarity and focus brought to the table by the former Stream people, and the Stream people appreciating the more relaxed, friendly, open style brought forth by the Line culture.

Unfortunately this success is not without problems, as we see in Part C of the case. Like other mergers, steps forward are often accompanied by steps back. Caught completely unaware, Wright is confronted by complaints from middle managers who claim that many of their colleagues feel unsafe expressing criticism within the organization. Their concerns range from unresolved salary and benefits terms to a field sales force still not linked electronically. Were these just issues of communication or something more?

The case continues at the 18-month mark, with the good news that the UK sales organization performed better than global StreamLine, despite having gone through one of the toughest mergers. By August 2002, the news continued to be good, with the organization being selected by its peers as among the top 10 most respected companies in the UK.

This three-part case is particularly useful in MBA and executive education courses focusing on change and innovation and corporate development, including the skilful use of emotion management actions in making strategy work in large organizations.

For further reading on these concepts, consult Professor’s Huy’s article, “Emotional capability, emotional intelligence, and radical change,” in the Academy of Management Review, April 1999, vol. 24, 2, pp. 325-345.

INSEAD 2002

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