Being Acquired

Mergers and Acquisitions (M&As) can involve complicated organizational changes that create significant uncertainty for the seller’s employees. In my study, 54% of the participants resigned from their acquired company within one year of the acquisition being internally announced. With M&A transactions overall, the seller’s employees (i.e., executives, senior leaders, mid-level managers, and non-management professionals) face numerous challenges, such as assimilating to the new organization, learning new cultural norms, and adapting to new management and administrative practices, organizational rules, and core values. The kinds of challenges employees must tackle over the course of an M&A transaction can have a significant negative impact, often in the form of unknown and potentially adverse changes in job characteristics, employees’ working and reporting relationships, and employees’ organizational commitment (OC). These are critical to a firm’s current and future performance of services and financial success. Hence, it is not surprising that of the contributing factors to M&A failures, employee challenges, especially during integration, are the cause of one-third to one-half of all failed M&A transactions. This book primarily speaks to owners and employees of a professional services company that may soon be or is currently on the market or has been recently sold. There are also pertinent lessons for leaders of an acquiring company. At a high level, this book also provides insights and lessons for students of business, regardless of industry or organizational level, company size, maturity, sophistication, or growth stage. Based on first-hand experience with nearly two dozen M&As as well as my own academic research into M&As, change management, and employee OC, I offer an authentic view of what happens at multiple levels during and after an M&A event in terms of true objectives of ownership and leadership and in terms of employees’ OC. I will provide you with an understanding of and appreciation for managing organizational change and how to care for and retain legacy and new employees of all levels, roles, responsibilities, and generations. This book also offers insights for examining individuals’ life-long personal and professional journeys and goals, such as evaluating current and emerging mediating factors or life forces that you can use to guide your pathway to success, however you define it. For the seller’s and buyer’s leadership, private equity backers, as well as change-management professionals, employee-culture and engagement practitioners, and other professionals, you can use the principles to increase organizational commitment and retain the seller’s employees (if that is the ultimate intention of the M&A transaction). Employees, after all, are a—or perhaps the—critical asset to every business, and those that are acquired in an M&A transaction represent substantial recruiting, training, and financial investment. My qualitative study resulted in insights into how to manage change and foster organizational commitment before, during, and after an M&A transaction. Study participants included men and women ranging from entry- to senior-level executive experience in the professional services / management consulting industry. Some had recently joined the seller, while others had been employed for a decade or more. seller Some were shareholders of the selling firm, some were offered retention and performance bonuses, and several had previously experienced at least one M&A event, while others had not experienced any. Even though all the interview participants in my study had strong OC prior to the M&A transaction, 85% of them still had negative reactions when their respective organizations initially announced the M&A. This book provides observations and tools to avoid blind spots and weak points regarding employee commitment. The seven principles that I lay out in this book are based on comprehensive research that determined what are the key features of effective employee OC and change and how to navigate them so that your organization and its employees can reap all the benefits of an M&A transaction. I include participant testimonials with each principle for the reader to evaluate whether the statements are relatable and validate their experiences or cause them to think about their own OC and how they would react to learning about an M&A event where they work. Example include “There was a lot of confusion, and slowly my commitment fell as the more and more interactions I had, the less and less response I got from leadership. It just made me feel as though I wasn’t important enough to know what’s actually going on.” There was a cultural shift that “without a clear understanding of why, was towards EBITDA (where previously) culture had been a central point differentiator of our company over our competition, a differentiator for our clients, and a differentiator for a workplace to be in.” “The new president was an atrocious communicator. His messaging was either non-existent or when it came out it was atrocious. He would write emails to the company about how the focus of the company was now to grow by X percent and deliver X more profit.” “For different working and reporting relationships, I don’t know that there was much change with that. They maintained certainly all the reporting structures within the project teams and within the portfolios.” “When the company was acquired, that policy committee was disbanded and the policies became, my perception was, more authoritarian. Instead of less being committee driven, they were more bureaucratic and simply driven from the top.” “The acquiring company seemed to have a lack of strategy, a lack of focus. And because of that, my organizational commitment deteriorated.” “If a change management process had been vocalized and communicated with all employees, I think people would’ve been more open to what’s going on and be part of the process. But if there was a way that people had some input for this change management process, I think it [the integration] would’ve been maybe a bit smoother. I had no idea what it was going to look like, what the process was, even. So, I think if we had been informed about that, that would’ve been really helpful.”