M&A issues

What No One Talks About in M&A: Culture Integration and How to Deal With It

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We’ve talked about M&A before—the pros, the cons, where deals can go off the rails—but now let’s talk about what happens after the deal is closed. What comes next and what M&A issues come up?

Once your deal closes and the dust settles, it’s time for the real work to begin: integration. With any luck, you’ve already done some focused thinking about integrating the two firms. You’ve looked at M&A issues such as aligning billing systems, benefits plans, compensation strategies, etc. and you have strategies for each.

But what about culture? What’s your strategy for culture integration? If your reaction here is anything like, “A strategy for culture integration? Oh, the department heads will handle all of that,” you will probably want to keep reading.

Love and M&A Integration

M&A deals that work well are actually a lot like happy marriages. Yes, there will be some upfront work to do on both sides. But once you’ve skipped down the aisle after saying “I do,” you begin a new phase with its own set of challenges. This is the work of meshing together two lives into a cohesive, long term, happy union.

An M&A transaction can be a bit like courtship (ah, and you thought chivalry was dead): You date around for a bit, decide that you’ve found “the one,” get engaged, and then, you throw a heckuva wedding. And when you wake up after the honeymoon, reality sinks in…the thoughts start flying.

  • Thought Bubble #1: For better or for worse…wait, you didn’t tell me about that billing issue!
  • Thought Bubble #2: For richer or for poorer…what happened to the sales pipeline we reviewed?
  • Thought Bubble #3: ‘Til death do us part…why are all the employees leaving?

And as with any new marriage, there are logistical M&A issues that no one really considers before they sign on the dotted line:

  • How are we going to celebrate holidays? (Is everyone onboard and motivated by how we recognize and celebrate success?)
  • How should we handle joint finances? (Do both parts of this new mixed organization share the same fiscal priorities?)
  • How often do I have to see your family and friends? (What’s our customer relationship strategy?)

I’m not suggesting that the key to successful M&A integration is scheduling time for employees to do a bunch of trust falls and escape room activities. What I’m suggesting is that you consider how culture impacts any business transaction in the same way you consider how to maximize earning potential for shareholders.

Lessons from a Culture Integration Fail

Early on in my career, I worked for a multi-billion dollar firm. With much fanfare, we acquired a smaller firm that was highly respected and well-known in the industry for its creativity in “getting things done” for customers.

Within a year of acquiring the firm, the larger company had overlayed all of their big company processes and requirements onto the smaller firm—squashing the very flexibility and creativity for which they had been known (and for which we had acquired them!). Unsurprisingly, half of the employees were gone within 2 years…as were the customers.

While it’s easy to see the internal (e.g., from the employees’ perspective) impact of cultural M&A issues, we don’t often think about the external (e.g., from the customers’ perspective) impact. However, culture certainly does impact customer experience and this is especially true after a merger. For a case study in how NOT to complete a successful integration, check out the Starwood / Marriott merger. Yikes!

The hard lesson learned here: The reality is that human challenges are often harder to smooth over than system challenges. If you don’t anticipate the cultural challenges, it doesn’t matter how prepared you are on the business side. So, how do savvy M&A dealmakers address the human side?

1. Start early.

By early, I mean during due diligence. Yes, cultural fit is a deal maker or breaker! The very things that make an acquisition target attractive may also be the most fundamental to their culture…and the most different from your organization’s current culture.

Make sure that someone on your team is putting together a culture strategy prior to the close of the transaction. At a minimum, this strategy should include:

  • Key metrics for competitive landscape, demographic, and market trends to discuss with leadership.
  • Outlines for any necessary cultural change initiatives (Tip: stick with no more than 2 major change initiatives during the first year).
  • Ideas for creating employee buy-in and a sense of community.

2. Know thyself.

What is your vision for the joint culture? What changes after the deal? What stays the same?

Keep in mind that this doesn’t have to be all or nothing. There are no rules that say that everyone must conform to a single culture or that culture is immutable. In fact, allowing room for the culture to adapt is crucial for long-term viability.

Why are these firms merging? What is valued in each and how can we take the best pieces of our cultures and bring them together respectfully?

3. Focus on building credibility.

In most cases, there is a fairly steep learning curve that happens after a merger. Like moving from dating to marriage, we need to adapt to daily life and its new rhythms. How can we put in place mechanisms to better understand each other? How do we establish trust?

Remember that credibility is earned, not given. When a large firm acquires a smaller firm (especially if the smaller firm was once a competitor), there can be some apprehension. It’s important to warn employees of the large firm that taking a victory lap is not appropriate.

Past is not prologue. So the acquiring firm should look to create the right environment to nurture a bright future and bring the new acquisition into the fold. This will require transparency in sharing plans, following through, listening when challenges are raised, and addressing the concerns of everyone.

This is a key building block for #4.

4. Communicate.

Communicate early and often. Key leadership (ideally those with credibility) should share the aspirations for the combined entity in a clear, straightforward manner and acknowledge that integration won’t be easy. When talking about challenges, be specific. Show everyone that you are committed to making this work and addressing all M&A issues together.

Employees need to know what’s changing, why, when, and what will happen, both in the overall big picture, as well as on a day-to-day basis. They need to understand what the merger means for them and what the new expectations will be.

Communicating is about way more than printing off new motivational posters with the company’s core values and firing off a few “rah-rah” emails. (GAH!!) Cultural integration requires a change management focus, leadership commitment, transparency, a willingness to listen (and integrate) feedback, and continued communication via as many channels as possible…even when you think you’re done, you’re not. Keep going. Like a marriage, you’re in this for the long haul.

Preparing for a big M&A deal in 2019? Check out our guide for working with a Communications Specialist.

The team at Audacia Strategies is ready to stand shoulder-to-shoulder with you as you make a smooth integration, both in terms of systems and culture. Contact us to learn more about how we can enable your transformation and help you avoid serious M&A issues!

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building business relationships

4 Powerful Tactics for Building Business Relationships with Real ROI

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There are lots of useful articles out there about building external relationships in business. There’s this one about building strong customer relationships by being authentic. And this one about how you’ve got to give to get. And this one reminding us that mutual trust is key to building business relationships.  

This is all to the good. Cultivating strong relationships outside of your organization is certainly part of a solid communications strategy. And don’t get me wrong—I love talking strategy over a cup of coffee with experienced professionals!

But with all of this focus on building business relationships outside of your organization, the importance of building strong internal relationships gets lost. So let’s talk about how building business relationships within your company can have real ROI and tactics for building these relationships across your organization.

Why Tactics for Building Internal Business Relationships?

At first glance, it might not be immediately obvious how building business relationships within your organization can contribute to developing messaging aimed at customers, investors, and other stakeholders. Isn’t communications the marketing department’s territory? But if we continue to think about external communications as belonging exclusively to marketing or PR departments, we miss out on a lot.

On a practical level, all employees are an important piece of your PR strategy. Strong, transparent internal communications tends to produce happier employees who are more likely to paint their employers in a positive light when talking to those outside of your organization.

powerful tacticsHow many times have you listened to a friend complain about not feeling heard at work? Or a family member express frustration about a supervisor not taking the time to ask for his team’s perspective on a project? How does it make you feel about the company he or she works for?

Not only can strong internal communication help keep employees satisfied and speaking positively about your brand, but it also supports short- and long-term crisis management. When you make a conscious effort to develop a culture of open communication, everyone, not just c-level executives, feel empowered and motivated to contribute to managing any crisis that could arise.

In addition, there is so much institutional knowledge within our own organizations that not promoting stronger internal relationships is like leaving money on the table. This really is one of the saddest aspects of the kind of siloing I see in many firms. The next time your department faces a seemingly intractable challenge, why not bring it up with others outside of your department. You might be surprised by the insights you gain from introducing a new perspective.

One word of caution though, if you pay lip service to the idea of building business relationships internally simply to make others “feel heard,” your employees will see right through to your true motives. Instead, you’ll want to develop an authentic internal communications strategy.

Here are 4 powerful tactics for authentically connecting across your organization:

1. Get out.

Get out of the office and get into the field. Yes, even if you are the VP of finance. Why? Building relationships across and down in the organization helps you better understand how your business works, key drivers, customer relationships, and competitive sensitivities from those who know it most closely.

Even if you feel that you have been doing well enough communicating with your immediate team and meeting benchmarks, there’s no substitute for getting your hands dirty. So plan to visit your main supplier and learn about their process. Sit in on a sales meeting. Schedule a tour of your top distribution facility and talk to the men and women who do the physical work to bring your product to market.

While you may be receiving feedback now from some of these individuals through other channels, how sure are you that the information isn’t distilled or even distorted by those serving as gatekeepers? Valuable information that can increase productivity and increase customer loyalty may be just a conversation away. So, get out into the field!

2. Bring gifts.

When you get out into the field, bring gifts. I’m not talking about corporate swag here. By gifts, I mean information and insight. Put yourself in the shoes of employees on the frontlines. Why should they care about what you do?

Remember that often those you need to connect with view the corporate office as the “ivory tower.” They see corporate as not being directly responsible for driving revenue and profit. Whether these perceptions are accurate or not, there is no doubt that the pressures they face are very different from the pressures you face. Showing sensitivity to these differences will be well received.

Here are some specific insights I’ve found useful:

  • If you’re publicly traded, give a presentation about how the market views your firm and how what they (the field team) do makes a difference to that perception. Tell them about how the corporate financials come together, why it’s important to have accurate financial planning, and how each business unit can play a role in the planning process.
  • If your firm is not publicly traded, bring competitive intelligence. Give a review of current corporate positioning and key market drivers. Often at the field level you have specialists and employees working shoulder to shoulder with the customer. They don’t see the forest. They are in the trees. So, bring the “forest” to them.

3. Tag Team/shadow.

In addition to sending executives out into the field, consider informally or formally bringing in others from across the organization to participate in traditional “corporate” activities. Pitch these as invitations to work on special projects and opportunities to learn a new side of the business.

For instance, either informally or formally, bring in someone different to shadow and participate in the development of your quarterly earnings process or the preparation for a large event. Ideally, they would be a part of the information gathering, materials development, executive prep, and final event (e.g., sitting in on an earnings call, traveling to an investor conference with you and your executive team, or attending the corporate event/trade show/etc.).

4. Widen the circle.

Develop relationships across the organization, for example, in other offices, sites, and functional areas. By the way, this tactic applies to all sizes of businesses in any industry. Open lines of internal communication by reaching out and offering to speak with their teams about your role or share what you see from the investor relations side.

To be a valued advisor in your role, no matter where you sit in the organization, it’s critical to understand how your organization works. This means having a sense for how the numbers come together; how services and products are delivered; how you, as an organization, engage with potential and current customers; how you manage the external view of the company, etc.

If you approach the above tactics with the goal of better understanding your organization and how the various moving parts come together to deliver high-quality results, you will come across as genuine. Your employees will respond to you in kind and your brand identity will come across as more cohesive.

At Audacia Strategies, we love the art and science of building business relationships. We know how to build a comprehensive communications strategy that combines external communications, such as grassroots social media efforts, with internal communications that lay the foundation for long lasting customer and employee loyalty. Our philosophy is that companies shouldn’t let any valuable resources go to waste.

Let our team help your organization with a strategy for building winning relationships that reward your time and effort. Schedule a mutually beneficial consultation today and let’s start building this relationship!

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corporate finance

6 Easy Ways to Empower Everyone on Your Team to Talk About Corporate Finance

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We’ve discussed the issue of silo’d departments on the blog before. Most recently, we talked about tearing down the wall that divides sales and marketing. Another area where I see walls being built is around corporate finance. Smart executives know how important it is for all departments to stay on top of finances, but they often run up against resistance.

Frankly, that’s a shame. Effective financial communications are critical even when not speaking to shareholders or other investors. So, whether it’s because of a turf war, lack of discipline, or just plain uncertainty, it pays to remove these obstacles and make sure every key employee has a relative handle on corporate finance.

But “I Don’t Do Numbers”

I’ve heard a lot of otherwise talented marketers and corporate communicators say, “I’m a marketer/writer/communicator, I don’t do numbers.” This statement is frustrating to hear Every. Single. Time.

Here’s why:

1. Whether you work for a start-up, non-profit, government agency, or blue-chip titan of Wall Street, finances matter. If any part of your job involves convincing investors to risk their cold hard cash, you obviously better have those numbers on the tip of your tongue (or at least on the top of your mind).

But even beyond the typical financial stakeholders, media, employees, and customers all view companies through a financial lens. They are thinking: How stable are they? Are they hiring? Are they expanding their footprint in our area? Beyond our area? Understanding this perspective is crucial if you’re going to create a message that resonates with your audience.

2. If you can’t speak confidently about your organization’s business model, you’re missing an opportunity to add long-term value to your employer. Executives understand this point well. This is likely one big reason they have landed the positions they hold. And as a leader charged with mentoring others in the organization, you can’t stress this piece of corporate communications enough.

Organizations NEED communicators “at the table,” but if you can’t speak the language of business (finance) then you won’t be of value at that table. Regardless of what you take to be your primary role in the organization, if you want to rise in the ranks, you need to be on the lookout for places where you can “punch above your weight.” Being able to talk corporate finance is a huge advantage.

3. Financials are the proof points to your broader corporate message. In this context, financials can be revenue, market cap, overhead expenses, membership growth, etc. It is difficult to see how a marketer who doesn’t understand this point could truly understand marketing. Any marketing message that is divorced from a company’s finances risks falling flat, or worse, overpromising and under delivering can be a death knell for sales.

Empower Staff to Be Comfortable Communicating Financials

While it’s easy to say that every key employee should be able to speak about corporate finance, it’s a lot harder to make this goal a reality. How do you empower those within your organization to become comfortable with and effective at communicating financials?

1. If your company is publicly-traded, encourage your employees to read your 10-K, 10-Q, annual report, and proxy statements. You could also ask the finance director to do a short presentation or Q&A for all department heads.

2. Encourage leaders in marketing, sales, and other departments to take your IR lead out for coffee (bonus points if they do the same for your financial planning and analysis (FP&A) lead!). There’s no substitute for hearing about the state of an organization’s financials from the experts themselves. They can provide powerful insights and help in understanding the business model.

3. One great way to help get everyone up to speed is to read and talk about your industry publications (including the WSJ and FT if possible). It’s not important for everyone to read them cover to cover (or top to bottom online), but these articles will provide a general understanding of the impact of market movements on your industry. You could, for example, start a weekly meeting with a discussion of an important shift in the market and its impact on your business.

4. Actively follow your competitors and talk about what they’re doing well and where you have the upperhand. Encourage team members to listen to how peers speak about their business in the press, at events, in their writing, and in their financial filings.

5. Keep learning! This goes for everyone involved with your organization. There are some great FREE corporate finance courses out there (e.g., Finance for Non-Finance Professionals created by Rice University professors and offered through Coursera). Also, professional organizations (e.g., PRSA, IABC, NIRI) have opportunities to gain additional business savvy. Consider incentives for employees who put in the extra effort to gain skills in corporate finance.

6. Hire Audacia (joking… kinda). But seriously, sometimes bringing in communications professionals with an actual background in finance can make all the difference. Corporate finance is our world, let us introduce it to your team. Or, better yet, before you go through the trouble of trying absolutely everything, why not sit down for a consultation and let us steer you in the right direction?

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