There is a great possibility that the post-pandemic economy will feature not only a weeding out of weaker companies, but also greater consolidation among those remaining. Some companies will falter, but many will prevail. Whether it is due to financial pressures of this new reality or the normal synergies of bringing companies together, there will still be deals in the coming months.
Beyond announcing the deal- always the more exciting news for reporters and deal makers- we must ask in the post-pandemic world what is required to make each deal succeed. You can make big promises in a deal announcement, but we all know that delivering on your commitments and combining companies with skill, art, and experience is the ultimate challenge in creating new entities that deliver for employees and shareholders.
There is a science to combining cultures and companies. The most experienced merger veterans know this, but even they will be tested in the period before we return to offices and a world with a vaccine.
There are some considerations we should be thinking about now to anticipate a successful combination of companies that produces the best results for every stakeholder.
Throw Out the Old Platitudes
The proclamation of a “merger of equals” is largely a myth. Only one party will likely win control. The cultures of the two companies will be different and the combined company will require either a new culture or will accept that one company culture will dominate. So, just say that up front, recognizing that we live in an age of transparency. Know that combining cultures takes work and expertise, and acknowledge that publicly, from the start, hard as that might be.
If you plan to run the companies separately for a while, say that from the start, as well. However, recognize early on that financial imperatives may require you to accelerate combining infrastructure to achieve synergies you have projected. Reserve the flexibility to alter your plans in communications to stakeholders.
Use What You Have Learned from Zoom Culture
We have learned a great deal about meetings and connecting in the era of Zoom. Use the emerging best practices, including recognizing Zoom fatigue. Yes, you can see too much of each other, even during the intensity of integration activities. Sometimes a phone call will do. Continue to introduce executive teams early on to begin to build trust. Construct smaller group and 1:1 conversation that is personalized to discover not only what work needs to be done but how your teams do their work. Check the culture posters at the door and have real conversations. Consider introducing meeting “proctors” whose job is to ensure conversations remain real, agendas are uncovered, examined, and dealt with.
How Have You Dealt With COVID-19?
Cultural integration is perhaps the most important component of a merger. No test of cultural approach is perhaps more relevant than how the merging companies have dealt with COVID-19. Were you quick to act? Did you mobilize a disciplined crisis team? Was it easy to send people home to work or was a “we like people in the office” culture an impediment? How have the two companies approached return-to-work? The way your company approached the monumental challenge we are facing at present is an excellent diagnostic tool for assessing how your company culture works and ways you may need to adjust to achieve a successful merger.
Some Things Have Not Changed
Even if logistical complications from COVID-19 begin to ease, it is likely most merger integration meetings will still take place by phone or video conference. Investing in large, in-person integration meetings was already becoming a thing of the past. They are too expensive. Most of your work will still be accomplished in detailed sub-meetings on human resources decisions, financial decisions, technology and systems integration IT and culture integration. To the extent possible, deciding between best practices and systems is still a fact-based evaluation process with pragmatic and financial implications. Building trust and communicating what you know when you know it, will still prevail as the best winning tactic.
There will be many issues that we have to face and resolve differently in the combining of two companies during this pandemic. What is most important is that you begin to examine them now, during or before your due diligence. Culture is often given short shrift in due diligence. The ability to understand how we work and recognize where change may be needed is one of the greatest predictors of merger success. And remember, no handshakes in this deal!