Leadership capabilities necessary for a successful merger or acquisition

puzzle_people_working_together_1600_wht_6984Growing through mergers and acquisitions is a common strategy but the sad truth is that 40-80% of mergers fail to meet their objectives.

A study of 94 mergers by a Washington-based consultancy firm Potentious found that, using the Korn-Ferry 360 degree evaluations, the following leadership capabilities were the key to success.

In the acquiring company

  • Motivate others
  • Influence others
  • Build relationships
  • Develop others
  • Act with integrity
  • Show adaptability
  • Focus on customer needs

In the target company

  • Motivate others
  • Influence others
  • Build relationships
  • Provide direction

The findings are  based on a five year study using a range of financial indices as well as the 360 data.

Although there is an overlap in the capabilities for both organisations the study revealed that they were more important in achieving success at senior level in the acquiring company but at middle management level in the target company.

I wonder if this is because senior executives in the target company are more likely to be demoralised or worried about their future whereas middle managers might see it as an opportunity?

Cary Cooper and colleagues did some research in the UK into mergers and acquisitions back in the late 1980s and found that morale and productivity (what we would now call employee engagement) often took 12 – 18 months to recover.

Based on these findings the author of the study, J Keith Dunbar, proposes that :

  • assessing the collective leadership capabilities should be part of the due diligence carried out before any merger, and
  • that the middle managers at the target companies, who are crucial to success, should be offered contracts which will keep them there.

Source: HBR September 2014

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