The odds are stacked against you -- most mergers or acquisitions fail to deliver and do not meet expectations. So you might ask why so many companies want to make acquisitions. Phillip Coggan recently quoted "Chief Executives seem no more able to resist their urge to merge, than dogs can resist chasing rabbits". Irwin Stelzer is quoted "when it comes to mergers, hope triumphs over experience".

In this brief article I write about my involvement in the merger of two companies and highlight some of the key issues which faced the management team, with particular focus on the marketing organisation. The real challenge was to capitalise on the strengths of the two companies to give the new entity an advantage to create 'The Power of 2'.

The opportunity and challenge to create the 'Power of 2' happens when two different organisations are brought together by merger or acquisition to create one new single entity. The challenge is to manage two organisations with different cultures, different strategies, different products, different information systems, different policies and procedures, different buildings, different people and management teams and make them, as one, a more powerful and superior performing entity than the previous two organisations. This entails a massive change management programme to improve customer satisfaction, retain customers, motivate and energise staff, reduce costs, improve performance and at the same time achieve the business objectives and satisfy the shareholders.

What was my merger experience?

I was the Marketing Director, part of the management team responsible for the marketing function when Sperry and Burroughs in the U.K. joined together in 1986.

John Perry, who was appointed Managing Director and Chairman of Unisys Ltd led this programme after the merger of Sperry and Burroughs and said "This process is going to be like rewiring the house with the electricity turned on". In other words the bringing together of two organisations has to take place while keeping customers happy, achieving revenue and profit targets and looking after your people. The merger in the UK was a great success, with orders, revenue and profitability growing by 20% plus in the following two years. However the merger was not successful in all countries. In my opinion, our success was due to the strength of leadership, quality of the management team, detailed planning, speed of implementation and ruthless execution of the plan.

John Perry held his first meeting with the Directors from both Sperry and Burroughs to start the process. He introduced the meeting by stating, "We had two choices for completing the merger. We could take 12 months to complete and consider everything to try and prevent mistakes being made or we could take three months and make mistakes." The latter option was selected because we anticipated mistakes anyway and the longer the process took, the more uncertainty and lack of direction we would face. Some other countries took over twelve months to implement the merger and as a result, did not achieve the same success as the U.K.

So what happened?

John Perry set out his stall in relation to the vision, direction and what the merger meant, both for customers and employees and he presented this at many company meetings throughout the country. The two management teams of the previous companies were present at the first meeting so we had two finance directors, two marketing directors etc at all the initial meetings. John informed the directors that he would appoint his new management structure at an agreed date in the future once the blueprint for the merger was agreed and ready for implementation. John was the ex Managing Director of Burroughs so it was clear that the ex Managing Director of Sperry would not get the top job but would be offered another job in the new organisation. An outline plan and programme with milestones was put forward and the directors were appointed to working groups to report back with agreed programmes and plans for implementation. This process meant that the directors of the two companies were able to have input without knowing how or if they would be involved in the new organisation. Although this process created competitiveness, tension, and anxiety with certain individuals, overall it worked well as there was a vast pool of knowledge and ability which ensured a balanced input on the issues facing staff and customers. The directors and senior managers worked exceptionally long hours - at least 12 hours daily, plus weekend working. This lasted for three months and did put a strain on us, but it was a very rewarding process to be part of the team giving birth to the new organisation.

The most difficult part of the process was to manage the redundancy programme of nearly 1000 people and to then get the people from different working cultures to work together in a constructive way. A key part of the process was ensuring the selection process was transparent so everyone understood we were building a new people structure which was based on meritocracy and their ability to do the job. People management was essential to the success of the merger. This was a long-term, ongoing process as many of the staff couldn't help but relate situations back to 'how it used to be' in their previous organisations. We tried to build the new organisation by taking the best from the two previous organisations, which meant the directors had to have an open mind for introducing new working methods. The other difficulty was to ensure that customers were given a high priority and to convince them that their investment in the products, services and technology would be secure in the future. While all this was going on, the competition was spending their time trying to unsettle our customer base.

There are many books that concentrate on mergers and acquisitions (see end of article) so it is not my intention in this short article to cover all the issues. However, in one of the books, 'Capitalise on Merger Chaos', the author suggests that 80% of mergers fail because of culture clashes, mismanagement and the chaos that follows a merger.

The art of M and A Integration. A guide to merging Resources Processes and responsibilities by Alexandra Reed Lajoux. McGraw Hill ISBN 0786311274

Acquisition Strategy and Implementation by Nancy Hubbard Macmillian Business 1999 ISBN 0333736877

Capitalize on Merger Chaos by Thomas M Grubb; Robert B Lamb. Free Press; ISBN: 068486777X

What about the Marketing function?

Have you ever dreamt of having the opportunity to create a new marketing department /organisation, starting with a blank sheet of paper for a business that has been in operation for years? It's an opportunity of a lifetime, to make sensible changes and create an organisation that really meets the needs of the customers. However, the problems of priorities and budgets don't go away. The challenge of creating the new organisation was placed before the Marketing Director of Burroughs and myself. We agreed a headcount and budget with the Managing Director, created the structure of the new organisation and presented this to the other Directors for their input. Although this was time consuming for all concerned, it highlighted issues early and allowed group involvement. We then put a process in place to address how the management roles would be filled. The appointments of the top jobs were announced first, followed by more junior appointments, thus cascading down through the organisation whilst adhering to timescales of announcement notices. In the previous organisations, PR and communications was the responsibility of the marketing department. However, in the new organisation, this function reported into the Managing Director. The rationale for this decision was due to the importance of the communications function to the success of the merger and we felt that these messages would be stronger coming from the Managing Directors' office. This certainly proved to be a good decision at least for the first twelve months until the new company was stable and fully operational in all respects.

The creation of our new marketing organisation required special investigation, attention and implementation in the following areas:

• Create a new identity and confidence for the new marketing organisation. Ensure everyone understands the function, accountabilities and responsibilities.


• Information systems on products, customers, markets, competition, events and duplication where you have common customers. Budgeting systems & forecasting systems.


• A common sales qualification and prospecting process is required that will feed the forecasting and cash flow systems.


• Press information, management and processes to ensure top quality communication to the press, customers and staff.


• Clearly defined pricing, discount and support policies.
  
• Efficient customer satisfaction programmes.


• Customer programmes to ensure senior management is in regular contact with the customers who influence company results - Very important.


• Fast, intensive product training for the sales teams.


• Customer feedback procedures with fast action being taken where required.


• Sales training and sales development to equip the sales teams to represent the new company.


• Account Management training programmes to protect and develop existing accounts.


• The development and communication of the company story. Ensure your employees understand what to tell their friends and customers.


• The war stories from the respective companies need to be told so the new people selling the new products understand the history and how the products benefit the customers.


• Create reference accounts, particularly customers who bought from both the two previous suppliers.


• Sales propositions for all the products highlighting features, advantages and proofs.


• Company strategy. Why the merger? What are the benefits for the customer?


• Product strategy for the whole range. Especially where products overlap and are complementary.


• Product support and a common methodology of measuring quality.


• Product knowledge and expertise on how the total range of products complement or relate to each other.


• Creation of new sales policies.


• Direction programme to ensure targeted marketing and sales effort is channelled at the right industry areas.

So what are the tips and advice I would give to people about to merge two organisations?

• If you haven't got the management talent and commitment tocomplete the merger/acquisition you will fail.


• Only use consultants and third parties who are capable and prepared to be hands-on. Many people can tell you how to play but you need people who can still actually score goals and produce results.


• Understand the financial benefits of the merger/acquisition and know how to deliver them.


• Create and understand the vision, strategy and mission of the new organisation and its benefit to staff, customers and shareholders.


• Communicate to staff, customers and suppliers as you have never done before and keep communicating.


• Remember how important staff and customers are to the success of the merger. If they don't buy in, you will fail.


• Prepare a key list of staff and implement a retention programme for these people as they will be nervous and subject to approaches from headhunters, especially in the first few months when there may be uncertainty as to their future.


• Ensure employees who are made redundant are treated generously and given a support package to find a new position. If you don't, your staff who remain will feel negative about the new organisation.


• Ensure the people who have to produce the results are involved in the decision-making process.


• Strong, positive and proactive leadership with clear direction is a must.


• Move as fast as you can to create and drive the new organisation.


• Don't accept excuses and poor performance. It will kill you. Set your new standards and stick to them.


• Remember that everything will not be perfect on day one, so concentrate on the important issues that give the real return.


• Plan for the management and the key staff to work long hours. Without the extra hours you will not succeed.


• Reward and acknowledge success.


• Ensure people are very busy and energy levels are kept high.


• Crush the rumours - they are usually destructive and mischievous.


• Ensure you have a feedback mechanism for staff and customers that works so when you make mistakes you can take corrective action quickly.


• Remember it is unlikely when introducing new terms and conditions that you will be able to afford to offer the best of the terms of the two previous companies so choose wisely and sell the total package.


• Remember some people will not stand the pressure.


• Be prepared for some bad days.


• Ensure your partner understands what you are trying to achieve and the pressure you will be working under. Explain about the Power of 2.

Leadership and the ability to change are two of the key ingredients for a successful merger so I will close with two quotes:

"Leadership can be felt throughout an organisation. It gives pace and energy to the work and empowers the workforce".

Warren Bennis

"Success in any area requires constantly readjusting"

Tony Buzan

©Quantum Sales & Marketing Services Limited 2003