Do You Have Executive Commitment in M&A or Just Some High-Level Involvement?

 

The Example of the Chicken and the Pig
By Jack Prouty, President of the M&A Leadership Council

Have you heard the story of the chicken and the pig?

The chicken visits the pig and says, “You know, Farmer Brown has been great to all of us animals, and I think we should do something for him.”

The pig says, “I agree, what do you propose?”

The chicken says, “I think we should fix him breakfast. I can donate some eggs, and you can provide some ham.” 

The pig says, “No way! You are asking only to be involved in the breakfast while I will need to make a major commitment."

This story resonates with me when it comes to my own experiences with too many M&As.

When I was running the M&A business integration practice for a global consulting and advisory firm, I called on the CFO of a major retailer who had announced that they were acquiring a large drugstore chain. This deal would be a multi-billion transaction that would expand the size as well as the services of this retailer. I was pitching our firm’s capabilities to assist them with the integration planning and execution. The CFO asked if I would be personally responsible for managing this project. 

I said, “Well I have a large consulting practice to run, where I am responsible for generating revenue, deploying resources and managing the quality of deliverables across multiple projects. But I will make a deal with you: I will step out of my role as practice leader to run this project if you do the same.” 

“I can’t do that!” he said.

“Neither can I! This is not about writing us a check; this is about partnering with us and making a major management commitment to the success of a multi-billion-dollar acquisition.”

With too many major aquisitions (representing significant benefits as well as significant risks to the company) I have seen senior executives expect a heavy personal commitment by their middle management for successful execution of the transaction, yet lack the same level of commitment. In our M&A training programs, I always outline the most critical factors for successful acquisitions and integrations: top-down direction-setting with bottom-up execution; trained and qualified resources; a focus on value, rigor and discipline through the process; addressing the people and cultural issues, etc. But, in my experience, the most vital is Executive Leadership. If the business owner is committed to the success of the deal, then other aspects more easily fall into place.

Therefore, over the last 20 years I have emphasized the value of starting every integration project (and even for the start of the diligence) with a one-day executive planning workshop. The fundamental principle behind this is to spend one day focusing on executive alignment and mobilization; setting the strategy and integration framework with the emphasis on top-down planning; and preparing to the launch the functional and cross-functional teams on all the tactical planning and execution that needs to occur. I continuously hear push back on this: we are too busy; we can’t get the executive team together for one day; why do we need to spend time and money on this; etc. Yet these same executives are okay with spending millions and billions of dollars on buying a company and then launching 10 or 20 functional teams without direction, training or the support of senior management to go and make things happen. It's no surprise that while many companies have gotten better at M&A, too many companies still fail in achieving the expected benefits of the deal.

Those of you who have attended The Art of M&A Integration have already been introduced to the concept of a “Game Day” workshop and worked on a simulated class exercise. We encourage all companies to think seriously about “planning the plan” and setting the strategy early in the M&A process. Please contact Jim Jeffries or me if you would like to learn more about how The M&A Leadership Council can meet with your executive team for a one-day strategic planning session to set the context, framework and priority for more successful integration.