How to Lose a Championship

It’s SuperBowl Weekend (woohoooo!) … that magical time of the year when all of life can be distilled down to sports maxims and 100-yard metaphors.

-evolution-of-kickoff-poster copy

The Merger Verger’s favorite? This one:

Defense Wins Championships

Now, we get the universality of many sports maxims but as business guidance that one is a disaster, particularly in the context of M&A.

As every successful acquirer knows, good deals begin with good strategies. A good strategy gives rise to solid value drivers, which enable sharper focus and clearer future goals. It paves the way for asking more action-empowering questions in due diligence, which results in more effective solutions. And all that tends to lead to a more successful outcome for your acquisitions.

That part of M&A is as basic as it gets.


Defense is Not a Strategy

Defense is an awareness, a tool for protecting your flanks (and your backside). It cannot and will not ever power you forward.

If the reason to do a deal is primarily defensive – to react impulsively to some competitor’s move or prevent The Other Guy from buying some company – what, pray tell, do you do with the target once you’ve got it? On what basis do you make future decisions when in the mere act of closing you accomplish the only strategic objective that your action permits: allowing you to say, “We won?”

Defense may shape the outcome of Sunday’s game. But its value in doing deals is basically nil.

If your primary strategic objective is -super bowl trophy gto keep a target out of someone else’s hands, “man up” and walk away. The truth is that too many good deals go bad. A bad deal (meaning one based on a bad strategy)? That is one trophy you can enjoy watching The Other Guy win.

Role Models:

Success:      P&G acquiring Gillette

Failure:        eBay acquiring Skype

TBD:             CVS acquiring Aetna

Gunslinger Wisdom – 2

The quote below comes from PRITCHET, LP, a post-merger integration consulting firm based in Dallas. They use the metaphor of a gunslinger to describe those who would succeed at managing mergers.  (The Merger Verger likes the metaphor and has used it previously here: Gunslinger Wisdom.)

During a merger, you need to become a bit of a gunslinger. There is real danger in waiting from problems to “draw first” … and you don’t have the luxury of taking time to aim perfectly. Colt 44 Doc Holliday
We’re not advocating that you proceed with wild abandon,
but we do want to emphasize that the conservative, slow, methodical approach typically doesn’t cut it in a merger environment. That can be the most reckless strategy of all.

The Verger agrees with the good folks at PRITCHETT; they are correct that too much can go too badly wrong with a wait-and-see attitude. The idea of taking one’s time “to get it right” is yet another one of those areas where merging companies and running them are two completely different arts.

That said, it is equally important to note one element of their observation that is tucked neatly right in the middle: “We’re not advocating that you proceed with wild abandon….”

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CEOs: Ask These Questions First

Some while ago Forbes published a very useful little piece aimed at making sure companies were asking the right questions before they embarked on a new acquisition.  It’s short and very pithy … so worth bringing back to people’s attention.  The article is entitled Why Deals Fail and What You Can Do About It.  Highly recommended.

Cadillac Ranch BW

About the Art: Cadillac Ranch, conceived and constructed by Ant Farm, 1974.

All Quiet on the Working Front

The Merger Verger spent some time earlier this week in the office of an executive whose company had announced its sale only 15 minutes before. We had the privilege to eavesdrop on two conference calls, one hosted AllQuietOnTheWesternFrontby the two CEOs to introduce the sale to their staffs and the other with the sales teams to go into details directly focused at them.

Both of these calls are part of Acquisition Integration SOP and they included all the usual Rah Rah stuff about how well the merged companies will perform in their new togetherness. But two interesting observations did surface – one simple, the other subtle – to which we draw readers’ attention. In this posting, we’ll look at the Subtle observation. Subtle but corrosive.

Now, our contact at the seller is a very busy guy. We’ve been in his office when he had multiple conference calls, emails and texts all actively going at once (to what effect we cannot say). But on this day – in the two hours immediately following announcement of the deal – his phone did not ring.

Silence. The breath of God. What’s up with that?

Answer: nothing. That is, no business was getting done … that kind of nothing.

If you’re a executive who’s closely involved with the mechanics of a deal or are charged with making sure the trains run on time during the period of post-announcement transition, you’d serve yourself well to remember that people think first, long and hard about themselves. Themselves; not you, not your wonderful deal. They will do little or nothing but wander mentally around that topic shell-shocked until they get answers, satisfactory ones. If they get no answers or the answers they get are lame, you will get no work or the work you get will be lame.

All Quiet on the Western FrontThe Merger Verger in Words of Two Syllables or Less:

On the spectrum of Satisfactory versus Lame, no one gives a hot damn whether you think an explanation is satisfactory. If your audience thinks it’s lame, it’s lame. So do yourself a favor: set aside the rah-rah, strap on the boots of your audience and only then start crafting your message.

About the Art:

Top: the cover of the first English language edition (1929) of All Quiet on the Western Front, written by Erich Maria Remarque and considered by many to be the greatest war novel of all time. The cover design is based upon a 1917 German war bonds poster by the artist Fritz Erler. Bottom: a transitional scene from the original 1930 movie version of Remarque’s book.

Higher ROI … Guaranteed!

Ha! Did The Merger Verger get your attention with that one? No, sadly, we’re not offering 1-year CDs paying 1.66666%. This is an acquisition integration forum. We’re offering wisdom here, of the stunning variety.

This one of the stunningly simple variety:

The single-most important step that a company doing an acquisition can take to make it succeed is this:

Acknowledge that merging two companies is not the same as running two companies… or even running one bigger company. It’s just not.

If you accept that premise, you will approach the integration process with more awareness and more thoroughness and your chances of success will soar. Therein lies our guarantee.

But, lo, wise Merger Verger, why is this so?Mobilgas 1960 VietNam

Because running most companies is about maintaining and optimizing existing paradigms. Merging two companies is about changing them. Very different!

M&A execution (as distinct from deal making) is about CHANGE MANAGEMENT.

In that spirit, TMV draws your attention to a fairly useful online resource that outlines and describes 33 different techniques for creating change in an organization. For each technique, the reader is given an overview, an example of the technique in action and a discussion (background, psychology, pitfalls, etc.) and links to more detail. Simple. Good. Check it out.

Change Techniques, courtesy of

About the Art: Today’s illustration is the cover of a 1960 Mobil road map of Viet Nam.

Gunslinger Wisdom

What does a gunslinger/cowhand know about acquisition integration? At least one useful thing in the Merger Verger’s view. The following quote comes from the kids/adult classic western novel Shane by Jack Schaefer:

Don’t let things being quiet fool you. When there’s noise, you know where to look and what’s happening. When things are quiet, you’ve got to be most careful.Shane

That’s a subtle concept in acquisition integration and one that trips up a lot of folks. “Quiet” may mean that troubles are over but – as Shane himself suggests – it may also mean that touchy issues are festering in silence.

Your choices are basically two:

  1. Praise the God of your understanding for a smooth and now-finished integration process; or
  2. Dig deeper and find out what is really going on.

For more thoughts on this important but oft-misunderstood topic in an earlier posting, Click here.Album cover: Shane sountrack

About the Art: Shane was first published in book form 1949.  Cover illustration from the original Dell paperback edition (top) and album cover from the soundtrack of the 1953 Paramount movie (bottom).

Five Questions Before Leaping

Robert Sher, a Forbes contributor and author of the book “The Feel of the Deal,” offers an extremely succinct set of questions for any senior executive considering an acquisition. They should be part of the CSEE (C-Suite Entrance Exam).

Writing in the Forbes cliff jumpingLeadership Forum, Sher sets the stage by asking this simple question:

Why is M&A success such a crap shoot?

To which he answers thus:

The sad fact is that most deals look great on paper but few organizations pay proper attention to the integration process – that is, how the deal will actually work once all the paperwork is signed.

His five key questions address the following critical issues:

  1. Management capacity
  2. Cultural compatibility
  3. Alignment with corporate strategy
  4. Purchase price and integration investment
  5. Alternative uses of the invested capital

Check out the full text of Sher’s piece here. And more on Sher here.



Leadership Counts

A lot of acquisition integration guidance focuses on the people handling the day-to-day grunt work of managing a deal’s integration. But it should come as no surprise that corporate leadership on both sides of the deal plays a large role also. Consultant J. Keith Dunbar has written a short but interesting piece for the September issue of Harvard Business Review that quantifies this effect.

Dr. Dunbar concludes that there are key attributes in a leader that can be predictors of deal success. Jaume PlensaThey differ as between the leadership of the acquirer and the target but not by much. For example, leaders from both sides of the more successful transactions were found to be strong on motivating others, influencing others, and building relationships. Other strengths on the side of the acquiring leadership were the ability to develop others, act with integrity, show adaptability and focus on customer needs.

Let’s pause on these attributes for a moment. What can we learn if we look at Dr. Dunbar’s conclusions from 35,000 feet? The MergerVerger has some thoughts:

The likelihood of deal success increases when acquirer leadership takes an active role. Why? One would hope that leadership is able to keep out of the daily muck of deal administration and make sure that the integration team is keeping their eye on the strategic objectives of the deal. Lose sight of those in the morass of daily details and your team’s way can get lost very quickly. So the skills of motivating others and focusing on customer needs make a key contribution here.

It is also clear that the visibility of acquirer leadership and his or her power to communicate objectives and other deal factors to the newly combined staff is vital. You cannot influence and develop others without these skills and without putting them to priority use often.

And we can see that deals work better when leaders give their subordinates something to look up to. Why else would integrity or adaptability matter? Particularly in the kind of turbulence that an acquisition represents, giving your staff the belief that their company’s leadership will act rightly in the face of new and changing circumstances will help you keep your best people and will motivate your team at large.

That all sounds like a formula for success.

Read Dr. Dunbar’s full HBR article by clicking here.

Today’s artwork is Irma-Maria (2010), a pair of sculptures by Jaume Plensa exhibited in 2011 at the Yorkshire Sculpture Park in Yorkshire, England. You can see more on Plensa, a Catalan artist, here or the sculpture garden here.

Dud Diligence and Integration (Part 1)

This posting is for the C-level executives out there who are doing (or thinking of doing) deals for their small or medium-sized businesses. It is about helping you prevent form from overshadowing substance. It is about details. PS: if details bore you, The Merger Verger humbly recommends your stepping down from the deal business ASAP.

The Merger Verger has seen just a ton of due diligence checklists over the years and found almost all of them wanting … including some that were just pathetic.

Milk Duds! Yippee!Why? Because they are not written by people who run businesses; they are written by people who advise businesses: lawyers and accountants.

Let’s be honest here: due diligence checklists are about the details, where God (or the devil) is. A lawyer can make a fine checklist for matters relating to corporate formation or past board meetings. An accountant likewise within his or her purview.

These lists are fine (essential, in fact) for ensuring that you get what you pay for. But when it comes to understanding whether a product is approaching an inflection in its growth curve or the production manager knows the difference between a kaizan event and a tsunami, they ain’t worth squat.

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