Strategy

The critical role of leadership in M&A success

How can leaders equip themselves with skills to make M&As successful? Quite a range of skills are during and after the M&A process, and then the leaders of both entities need to prepare themselves for post-completion changes. Gurprriet Siingh, MD, head or assessment, culture and development at Russell Reynolds Associates, goes into detail on what's involved

By Mamta Sharma

Mergers and acquisitions (M&A) activity continues to remain robust in the post-pandemic world and leadership readiness is a critical factor for the success of any such transaction. This starts right at the beginning i.e. in selecting the right partner to merge with or acquire, says Gurprriet Siingh, managing director and head of assessment, culture and development at executive search and leadership advisory firm Russell Reynolds Associates.

In an exclusive interaction with People Matters, Siingh talks about the role and impact of leadership in M&A success and how leaders can equip themselves with skills to drive the integration between two organisations.

How important is the leaders' role in a successful M&A?

Ensuring you pick the right synergies is key to value creation and ensuring strong cultural similarity (not sameness) heightens chances of success.

Post-acquisition integration wouldn’t be possible without leadership that focuses on key priorities, ensures cultural inte-

Even if everything looks like it’s going well, the surest way to build trust and ensure people remain calm and balanced is to be transparent and to listen

gration (about 48% leaders surveyed assert that a lack of cultural understanding of both cultures is a key factor in the failure of an M&A) and ensures talent integration. Most M&As will have some or a lot of redundancy – making the right choices of which leaders to keep and which to let go, is critical.

Top skills that leaders should possess to drive M&A success?

Be calm, composed and centered: There is a lot of uncertainty, flux, and volatility during an M&A. This could be all the way from the Competition Commission's delays/challenges to managing share prices through the integration to managing emotions of key talent on both sides of the merger. Hence, leaders have to keep a cool head.

Empathetic but assertive influencer: Leaders must be able to marshall others’ emotions and energies through the volatility. They must be able to rapidly build relationships at the target company, enroll key leaders to support the process and collaborate with these leaders to drive key messages and decisions.

Balance: Balance short term deliverables and performance through the M&A timeline, while keeping focused on achieving long-term value from the M&A.

Communicate. Communicate. Communicate: This holds true at both ends, your own organisation and the target organisation. Often we over-focus on the target organisation and miss the fact that there will be concerns at our end too. Show up often. Overcommunicate. This is one instance where more is less. And communicating doesn’t only mean that you show up to talk. More often than not, show up to listen. Even if everything looks like it’s going well, the surest way to build trust and ensure people remain calm and balanced is to be transparent and to listen.

Often when I’ve been part of mergers, we’ve maintained a high degree of openness by ensuring that everyone knew the principles behind how banding/grading will be arrived at. Why and how assessments will be run and what decisions will be influenced by the assessments. People will

Leaders need to dial up empathy, show up often, create spaces of psychological safety and treat everyone like adults by being clear and direct about reality but by also being empathetic and supportive when needed

assume the worst. Make sure you prove them wrong!

How can leaders equip themselves for a successful M&A integration?

Be involved at the outset in understanding the key drivers of value. Be present for due diligence meetings with the auditors. Focus on a few key levers that drive value. Get those right and on time.

Other than this, only two things matter: culture and leadership. Make sure you invest in understanding the two cultures, and even consider involving a third party who will give you an objective survey – an insider will have many biases and blind spots. Understand what works across both cultures and what’s radically different.

Think in terms of Us, or New Company as a whole, and not in terms of Us vs Them. Usually, the acquirer comes in with a coloniser's mindset and believes they are superior, but this is a pitfall. You should operate from humility and curiosity – you bought the other firm for a reason, and that is they will add value to you. Value that value. And understand what it is about their leadership, culture, ways of working/thinking that generate value that you were willing to pay a premium in order to procure for yourself.

What are some of the leadership capabilities needed to bring together companies with different cultures? • Hard-nosed but empathetic and gracious • Relationship building • Influencing • Systems thinking • Inspiring facilitator/leader • Cultural sensitivity

How does one tackle the hard question of leaders themselves being made redundant by M&As?

Directly. Leaders and employees are adults. They all know that redundancies will be part of the process to unlock value. They are ready for it. Treat them as adults, inform them clearly. Be direct but gracious and graceful. Build a strong outplacement into the M&A planning.

Any lack of clarity or transparency will only tend to heighten the anxiety that is already running high. The press will do you no favours, analysts and reporters will be writing about the “value unlock” and about “redundancies/synergies”, so there will be a lot of information out there. Leaders must know how to communicate effectively in order to address unvoiced concerns and

assuage how people feel.

How are decisions on which leader (from either side) will be taken into the new management team (for mergers), and how are fates of leaders of the acquired company decided?

This is usually decided via a third-party assessment where the leaders are assessed. There is greater equality when a new company is formed because it is new ground and almost a revised organisation structure that needs to be staffed. In a merger scenario, this might, at times, be unequal.

There are cases where leaders of both companies have been assessed in order to select the right leader for the new company but there are equally cases where only the leaders of the target company have been assessed. There is no one established template.

Sometimes, it is known which roles in the acquiring company are weak and those are clearer placements. At other times, biases and favouritism can sometimes spoil the show. However, in the last few years, it has become a best practice to assess leaders on both sides of an M&A to identify the best fit for the roles.

How does a company retain top leadership talent during M&A?

This is not very different to retaining and engaging employees, although the emotions are certainly heightened in an M&A scenario.

What we need to ensure is that transitioning leaders are treated with respect. That leaders who Leaders must be able to marshall others’ emotions and energies through the volatility. They must be able to rapidly build relationships at the target company, enroll key leaders to support the process and collaborate with these leaders to drive key messages and decisions

are made redundant are treated fairly and have been communicated to, effectively.

At times, even leaders at the acquiring firm are uncertain. Therefore, communication is critical at both ends.

Leaders need to dial up empathy, show up often, create spaces of psychological safety and treat everyone like adults by being clear and direct about reality but by also being empathetic and supportive when needed.

Ensuring consistency of communication is vital. Ensuring employees continue to feel valued is even more critical.