“You lied to me”: The Perils of M&A

I have been involved in a number of mergers and acquisitions during my career. Most have gone quite well, after a number of ups and downs (mostly downs at first), but a few have not been successful. M&A, as I’ve written about on these pages in the past, is a tricky business. This is true for many reasons, including the complexity of deciding whether to pursue this strategy in the first place, the importance of clearly seeing the pros and cons of possible options, navigating the negotiation and regulatory approval processes, and communicating with employees throughout the process.

I’ll focus on the last of these for this week’s post: the importance of keeping employees in the loop and engaged during a time that can be scary and uncertain. I have always prioritized clear, open, and very direct communications with employees during the merger and acquisition processes I have led, through acknowledge that “clear, open and very direct” can be in the eyes of the beholder and not everyone will feel as though I was ‘saying what I meant and meaning what I said’ every step of the way. I don’t love that fact, but have learned that I must accept it. So too do all leaders who pursue M&A strategies.

I recently saw that a former colleague from a company I once led posted on social media that he had fallen victim to an affiliation that was not accurately described to him as it was taking shape. Since I was the one responsible for messaging that affiliation, I took his comment as a blow. And that stung.

But some further reflection has led me to a few conclusions.

First, confidentiality agreements between parties can become a relevant factor. As the leader of an organization in such a process, I may want to say X, Y, and Z to my team but the other party may be ok with me saying X, may wordsmith Y to death, and may put their foot down and make it a non-starter if I dare mention Z. That other party may have good reasons for this because of implications for their employees, thus creating a sometimes delicate dance when it comes to the precise manner some communication plans unfold.

Second, the word “affiliation” is often used to describe such transactions because the specific details of that transaction are still being worked out. And there are many shades of gray when it comes to a merger versus an affiliation and so “affiliation” can be a catch-all descriptor, not out of design but out of convenience. For example, I once worked for a large not-for-profit that “affiliated” with another. Because of tax and corporate law reasons, my company was absorbed into the other. So, they acquired us, right? Well, the board for the new company was comprised of 50% company A trustees and 50% company B trustees. All assets and liabilities were blended. So, some said this was a merger. Others an acquisition. To avoid the confusion and needless debate, everyone simply chose to say affiliation.

Third, the leadership team of the newly established company are compelled to honor the terms of the transaction but there are also many shades of gray here. That team may make decisions that seem to go against the intention of the original plan. This happens all the time and it certainly may be for good reason; things change and that new team must respond to what is happening at the time. Former leaders may have communicated something in earnest that didn’t fully pan out down the line.

Finally… and this is probably most important of all… leaders who are contemplating a merger or acquisition must honor the past, remember the identity and mission of their organization, and certainly fulfill the wishes of the board… but they must also look into the future and try to predict how things will turn out if they stay the course, that is… do NOT pursue the affiliation. If an affiliation takes place, then all will see and understand the consequences of that decision. But no one will ever see what would have happened if they had not done it. Instead, everyone will compare the certain present of the affiliation against typically happier historical times.

Mergers and acquisitions are challenging for all these reasons but in the case of this last one mentioned above, leaders will always (!) be second-guessed for having led their organizations down the bumpier path. No one will ever know if staying the course would have been even bumpier. Leaders have to make this determination. And then… they have to live with the consequences.

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