Mergers and Acquisitions, they’re all about growing your business and rapidly increasing its value. Right? It’s a sure fire way of buying market share or increasing the range of products you can sell to your existing customers. As long as you can get the price right and can arrange sufficiently attractive financing, you can’t fail.

Sadly no. Many experts give M&A activity just a 50% chance of being successful. A recent Deloitte and Touche survey suggests that almost 70% of companies that undertake a merger or acquisition fail to achieve their stated goals. Another report in the

US

found that only half of surveyed executives perceive that their recent M&A activity had been successful. And a survey by Watson Wyatt covering 1,000 companies found that less than 33% attained their profit goals, only 46% met their cost reduction targets and that mergers failed to produce their expected benefits 64% of the time. So where do problems arise?

The problems tend to lie in one of four areas - a clash of leadership styles; conflicting management systems; different approaches to decision making; or failures in communications. It’s worth noting that these aren’t financial issues per se, but that are more about culture, practices and communications – “branding” in fact.

In modern business what differentiates one business from another is less about the products or services you provide and more about how you deliver them - the customer experience. This is in turn is dictated by the culture, the practices, attitudes and behaviour, and communications - all elements of the brand. We may usually refer to them in brand speak as Brand Assets – the things that your business does particularly well, the Brand Promise – the thing that is most compelling about the customer experience you provide, Brand Personality and so on, but what we’re talking about is the promise of and the delivery of a consistent and valued customer experience.

However, in our experience, branding issues are rarely considered prior to a merger or acquisition and usually inadequately dealt with afterwards. The consequences both internally and externally can be catastrophic. Internally the effect on employees in both organisations can be confusion, a loss of purpose and pride, and a dramatic fall in trust and motivation. Externally the effects are similar. But what can you do to avoid this happening?

Here’s six things that will help:

Investigate the target

Make sure that in your investigations of potential acquisition targets you develop a clear understanding of their assets, practices, cultures and the resultant customer experiences even before you look at the financials.

Assess conflicts

Having decided that the brand is attractive make an assessment of whether or not this represents added value to your current and potential customers. It’s all very well them having a need for these additional products or services, but are the practices needed to deliver them successfully consistent with those needed to deliver your existing products or services. Do they, by their very nature, require a different culture to be effective.

Management Buy-in

Make sure that the senior management that will be responsible for running the combined business understand and buy into the goal and understand the strategy for assimilating the acquired business. Not how much money will we make out of this deal, but, how will this deal help us to achieve sustainable profitability

Design the culture

Literally, design the new culture. It may sound perverse to look to create a culture but no two cultures are the same and it is critical that the combined business has a single culture. You have three options:

1.      Assimilation – to impose one of the existing cultures onto the other organisation

2.      Hybrid – identify which cultural norms are shared and which ones have to change in each organisation

3.      Integrated – create a distinctly new culture based on the good points from each

Identify Assets

Be clear about what the Brand Assets of the combined business will be. Identify what it is that your business is going to be good at and which elements are most important in making that a reality. This may mean adopting some practices and assets from the acquired business throughout the organisation.

Align Communications

Review what each of the businesses have been saying about themselves in the past. How aligned are they? How contradictory are they? What needs to change in each so that they reflect the new Brand Promise.

It’s worth noting that communications comes last and this is because what you say about your Brand must reflect the reality of what you are going to deliver and how you are going to deliver it. Whilst it may be seen as the sexy side of branding it only has meaning and will only have the desired effect internally and externally if the experience is as you say it will be.

Obviously, the finances have to add-up, but I would argue that they should be secondary to the branding issues. If the resultant “brand” is stronger and more attractive than the two constituent brands then there is usually a way to finance the deal. If, however, the “brand” does not create value for the customer because of a clash of cultures, contradicting communications, an unclear promise or indistinct points of difference, then, no matter how you structure the deal you will end with a less than 50% chance of success.