Why the people side of M&A should not be overlooked

Twenty years ago there was a great deal of talk about the new economy and how it would change everything we do, how we think about business and creating wealth and how we could participate in this new world order. All this was driven by unimaginable technology innovations that fuelled a frenzy of cash being thrown at little more than half-page ideas.


Fear of missing out was the fuel behind this frenzy.


What became of this collective vision?


Well, it didn’t quite happen as we had all hoped. It did however kick off a tsunami of change that resulted in the business world we live in today.


So what changed in the world of Mergers and Acquisitions?

The motivation behind this type of corporate action has remained the same; it might be the economics arising from adding new market segments or territories or perhaps looking for an attractive exit or succession strategy.


I do think the emphasis of the essentials of sound M&A shifted from the excesses of LBO’s in the 1980’s to more holistic views of wealth creation.


While not all businesses are suitable for growth through acquisition, many are. Companies seeking alternatives to organic growth such as exploring opportunities for a joint venture or an acquisition (or to be acquired), it is most often the economics or vertical or horizontal integration that offers a compelling reason to move ahead.


But are there lessons we can learn from the past and apply now? For example look at the pharma industry over the past few decades. Acquisition by large companies was largely driven by the attraction of acquiring the innovation that comes from small, lean and nimble companies that were able to be creative and cheap in their endeavours. The tech world today is similar and is very much in focus now. Where the pharma’s were acquiring a novel molecule and perhaps a small team their focus was very much on relatively inexpensive R&D that someone else incubated. So too in todays tech world.


Beyond tech and very small companies, some industries are notoriously poor at merging even though their product offerings are pretty much homogenous. This is generally reflected in the due diligence and negotiation processes (on both sides) and highlights the importance of going beyond the numbers to the firm’s culture, ethics and values. It is these ‘soft’ elements of the company that can make or break what might seem like a wonderful opportunity on paper.


The negotiation process, allows both sides the opportunity to get to know one another while all the time thinking, ‘are we a good fit; can we work with these people?’ This people side of M&A is really important and can bring a great deal unstuck if not taken seriously or is ill advised.


Mature companies place a lot of stock in their recruitment process, most particularly at senior and board levels. Post acquisition, the acquirer ends up with a significant number of staff on the books that they didn’t have any input into in the recruiting process so they have to rely on their pre-completion conversations to form a view. It is not an afterthought. There are many reasons a merger/takeover/joint venture may eventually fail and mitigating those reasons makes sense. People, culture, different values and ethics can make what looked like a brilliant economic proposition fall on its face.


So what to do?


Get Advice!

To attempt to complete such a complex and delicate transaction without external independent advisors on your side is reckless. There are too many moving parts, which is why the people side of M&A is so important.


Advisors will not only guide you though the funding, tax, accounting , conditions precedent and subsequent and so on, they will also advise you on the people side. Through their network of executive and team coaches and mentors the people side is far more likely to be dealt with optimally.


Boutique firms have built their reputation on delivering; they can deliver because their staff have have built up a network of relationships and knowledge over the years they can draw on. While they are batting for you they are also independent and it’s that independence that is so valuable. Of course, at the end of the day it’s very much up to you, the buyer or the seller, who will make the final call but the resulting business will only prosper if the people, the board, the teams all want to make it happen.


So, the three P’s? People, People and People.

*Paul O’Donnell is a Bluebox Ambassador, Entrepreneur, Mentor, Author and Poet. His recent book ‘Humble Crumbles: Savouring the crumbs of wisdom from the rise and fall of Humble Pie’ is available on Amazon. Paul can be contacted on email at  paul@lisdoonvarna.co.uk