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How Change Management Can Unlock and Optimize M&A Value

M&A activity is showing no signs of slowing pace in the new decade. Even with rising geopolitical and economic uncertainty, M&A activity in North America alone surpassed $2 trillion in 2019.[1]  Transactions are premised on value creation, and capturing the promised synergies is fundamental to delivering on commitments made to investors.

Investors have ambitious goals for profitable integrations and revenue growth, frequently committing to lofty targets for cutting costs and growing synergies via cross-selling, upselling, entering new markets, and optimizing the customer experience. These efforts all require significant changes in how organizations operate, from top to bottom. It’s one matter to document these targets on paper when structuring a deal, and an entirely different effort to motivate, align, and accelerate the employee adoption necessary to deliver on these promises.

Executives navigating organizational change spurred by integration can reap tangible benefits from implementing change management, and this can even be the difference between failure and success. In fact, change management can make transformation efforts six times more effective, in large part by impacting the number one value driver in the combined firm: the employees driving the integration effort.[2] By implementing a change management strategy, leaders can drive integration success, unlocking value and optimizing returns.

Learn more: Cultural Integration – The Neglected Foundation of Successful Mergers

An Executive’s Guide to Accelerating Change In M&A Integrations

Executives seeking to drive successful integration through change management must recognize change will not be created instantaneously. Leaders must do the following to accelerate change acceptance:

  1. Cast a Compelling Vision

Synergy targets motivate investors, but integrating and transforming organizations post-deal requires casting a compelling and purposeful vision to managers and front-line employees. This gives a sense of purpose and direction around which the organization can unite. It can also aid in overcoming one of the highest hurdles to integration – uncertainty.[3] A clear vision built on the deal thesis helps individuals and teams connect with something meaningful that transcends the unknown. Effective change management entails developing a vision that is purpose-centered, future-focused, and incorporates relevant components of the cultures of legacy organizations. A purpose-centered vision leads to greater confidence in leadership, establishes grounds for trusting new colleagues, and prompts teams to look forward to the work ahead instead of backward to what they are leaving behind.[4]

  1. Align Executives

Following the development of a compelling and purpose-centered vision, it is key to align executives around the vision so that they can collaborate to communicate and execute. Frequently, pivotal leadership team changes are made in the midst of M&A deals, resulting in both the addition of new players and the loss of former executive team members. This, and other changes, can lead to executive leadership team misalignment, often forecasting failure for the outcome of the overall deal. Potential failure is signaled in part by leaders have a difficult time articulating the ‘why’ motivating all of the changes.[5] Change management promotes honest conversations with executive stakeholders to understand their needs, concerns, agendas, and ambitions.[6] This information can then be used to assess leadership team gaps and areas of incongruity that need to be aligned. When the C-suite team is all working from the same playbook, their teams are significantly more likely to understand the purpose of the changes made and future benefits, minimizing infighting and focusing resources on change delivery.

  1. Maintain Positive Morale to Optimize Execution

Although M&A activity inevitably causes organizational uncertainty and, in some cases, turmoil, change management can help keep morale positive and employees engaged and aligned.

First, leaders must practice managing tensions proactively and with empathy. Change management provides structured, constructive outlets for managers and employees to vent their frustrations, be validated by leaders, and receive the encouragement and support they need to move forward. Further, adept change managers can detect and prevent routine frustration from escalating into destructive behaviors, such as spreading rumors and developing coalitions to block progress. Leading change effectively requires continuous monitoring of unproductive activity that can avert efforts to achieve the M&A value proposition.[7]

Second, to sustain change momentum and positive team morale past the initial M&A integration, it’s critical to deploy change management to reward successes and celebrate achievements. This includes thanking employees via both traditional financial incentives and alternative, non-financial incentives. Counter to many leaders’ expectations, research shows non-financial incentives can be more successful in motivating employees to do superior work than annual cash bonuses and other incentives.[8] For instance, in the midst of integration, a leader or team member might notice that an individual has gone the extra mile to accomplish a goal. They can alert a C-suite team member and suggest that a handwritten thank you note be sent to that employee. Additionally, leaders can consider other rewards, such as flexible work opportunities, training and development, paid time off, and verbal or written praise. These forms of motivation can have a powerful impact, motivating employees to stay the course throughout the integration.

In Action: Change Management Accelerated $1B Acquisition

In a prominent one billion dollar acquisition of a publicly traded company in an adjacent market space, the CEO had valid concerns about keeping morale high as organizations with two very different cultures integrated. Attrition of talented team members was a significant risk, and low employee morale would prompt people to defect to competitors. Upon carefully communicating the reasons for the acquisition and the opportunities available to everyone upon a successful integration, the CEO also made the decision to invest in change management

The change management team orchestrated executive town hall meetings and meet-and-greet sessions so that parallel functional teams could get to know each other and begin working together effectively.  They also launched an internal communications strategy and developed a Change Champion network that supported the changes at all levels in the new, combined organization. The intentional undertaking in change management paid off as the integration of these very different teams was expedited. Ultimately leadership defined a shared mission, vision, and core values, cascaded critical communications across the organization, and provided consistent change management across their national employee base. The CEO was able to successfully lead the integration effort and hit relevant cost cutting targets.

Conclusion: Change Management is Key to Integration Value Creation

M&A integration entails disruptive organizational change, impacting every employee from the C-suite to the front-line. Integration leaders have the opportunity to leverage proven change management strategies to reduce organizational disruption, resistance, and attrition. In turn, incorporating these strategies will equip the integrated firm to unlock new value and reach ambitious growth and synergy savings targets, while establishing the foundation necessary for ongoing success.

[1] Stephen-George Davis and Zane Carmean, “2019 Annual North American M&A Report,” PitchBook, 1/21/20.
[2] Tim Creasy, et al., “Best Practices in Change Management – 2018 Edition,” Prosci, Inc., 2018.
[3] Erica G. Foldy et al., “Sensegiving and the role of cognitive shifts in the work of leadership,” The Leadership Quarterly 19 (2008): p. 514-529.
[4] Thomas W. Malnight et al., “Put purpose at the center of your strategy,” The Harvard Business Review, 2019See also: Eric G. Flamholtz and Yvonne Randle, Corporate Culture – The Ultimate Strategic Asset, California: Stanford University Press2011: p. 109-134
[5] See: W. Warner Burke, Organization Change: Theory and Practice, California: SAGE Publishing, 2018.
[6] Bruce Patton et al., Difficult Conversations: How to Discuss What Matters Most, New York: Penguin Books, 2010: p. 147-163.
[7] See: W. Warner Burke, Organization Change: Theory and Practice, California: SAGE Publishing, 2018.
[8] Anais Thibault-Landry et al., “Winning the war for talent: Modern motivational methods for attracting and retaining employees,” Compensation & Benefits Review 49, no. 4, (September 2017): p. 230-246.

© Copyright 2020. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.


change management, operations, f-performance, memo, merger integration

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