(or is it MERGING & ACQUIRING?)
Mergers & Acquisitions gives a sense of solid things (noun).
Merging & Acquiring gives a sense of uncertain fluidity (verb).
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They’re both M&A, but the morphed version of merging and acquiring might better reflect the reality of parties trying to get together before and after the merger.
Beyond Due Diligence
Sometimes, relatively equal parties see the benefits of coming together. Or, a big company brings strong infrastructure, established processes—and money. A small company may lack that organizational heft but offers agility, entrepreneurial spirit, and a business model or potential that the other party finds attractive. Instead of deep pockets, it may have (personal) debt it hopes to merge away. Whatever the parties’ strengths and weaknesses, they need to take a good look at each other.
We expect both sides to engage skilled lawyers, accountants, and valuation experts needed to conduct rigorous due diligence. Even if deeply engaged in checkoff-the-list inquiries, do the key players spend enough time together in unfiltered, day-to-day interactions? That’s different from participating in polished presentations, technical negotiations – and feeling pressures to close the deal. As a result, personality clashes and cultural mismatches—the very things that can make or break an integration—may go unnoticed or under-investigated.
After the Courting
During the courting process (excluding hostile takeovers), everyone is typically on their best behavior. Personality quirks and cultural differences that later become major friction points rarely appear in full force. A blissful honeymoon, but there can be a jarring awakening once it’s over.
A revamped leadership structure emerges, and one party inevitably loses some control. This can prove far more difficult in practice than anticipated. The new reality could bring unexpected constraints: stricter regulatory compliance, financial limitations (goodbye to unchecked draws and petty cash), dual sign offs on checks above nominal amounts, and rigid budget adherence. Plus, the parties may have very different but impactful ideas about minor matters: keeping office hours, working virtually, (unofficial) dress code: no shorts or flip flops welcomed, etc. The trivial can drive us to distraction.
Immeasurables
I’m not an M&A expert, but I’ve seen firsthand how even the most well-intentioned and well-matched deals can stumble after the honeymoon phase largely due to “minor” but ingrained differences. Notwithstanding solid due diligence, there are immeasurables in making a merger or acquisition work well: psychological power shifts, personalities, cultures, and all the “trivial” things that we might overlook.
To consider the post-integration – and very personal – reality for M&A participants (especially those losing control), we need only look at marriages where similar frustrations can unfold. The human element exists in every system—whether in the boardroom or the bedroom. It will enhance the prospect for success if such dynamics are acknowledged during the M&A courtship. Otherwise, seemingly non-business factors may end up being the silent wrecking ball that contaminates the deal.
Changing Mindstates
M&As require more than structural adjustment; they demand mindset shifts.
The executive committee of a mid-market company grew frustrated when a newly acquired subsidiary struggled to integrate. The issue stemmed from sub’s previous owners: Partner A (majority) and Partner B (minority), who quickly became a point of contention for the firm’s ExComm. I was asked to work with them to help shift their thinking to align with the firm’s way of operating. I describe the situation in The Pinball Theory of Business & Life, but it boils down to this.
The ExComm repeatedly told me the deal seemed like a no-brainer—the advantages were so obvious, but then came the personalities. As thorough as their due diligence had been, they hadn’t factored in the human element—the fundamental mindshifts required for Partners A and B to succeed in a new environment. This is the reality of many deals.
Dr. Frederik G. Pferdt, Stanford professor and founder of Google’s Innovation Lab, acknowledges the difficulty of changing mindsets. His work shows us how to establish future-ready mindstates – how we want to be in the future. Pursuing that from the outset can help establish a smoother integration of the players.
Beyond equity control and power, patience might do the trick. That’s what it took for Partner A and Partner B to finally come around and figure out how to fit in with the mothership. The process was slow, but ultimately, the acquisition stabilized and succeeded.
Big company, small company—it doesn’t matter. No matter how logical a merger or acquisition appears on paper, the immeasurables can make or break it. We humans are complicated.
