Why Post Merger and Acquisition (M&A) Integration Fails

Why Post Merger and Acquisition (M&A) Integration Fails

The traditional method of going about integrating two companies together whether it is an acquisition, merger, or a strategic alliance relies on ad hoc methods and false assumptions. Though methods vary the key component to integration today is based on analysis of human capital metrics, financial assumptions, and some top-down command and control behavior. Perhaps this is why so many mergers and acquisitions (M&A) fail to achieve the synergies that they expect prior to the transaction, and to which shareholders will ultimately hold them accountable.

Part of the reason so many post merger and acquisition (M&A)  integration projects fail, is that so much of the decision-making process to cut, promote, and keep employees within the organizational network is based on formal titles, loyalty to either company (tenure), and the differentiation between which employees are key and which are not.

What organizational network analysis (ONA) teaches us about integrating a company together is that so much of the value driven transactions occur in the background-within the hidden communication networks, and rarely does it follow formal authority lines. These formal authority lines form the basis in which middle managers make their cutting and promoting decisions during an M&A’s post integration period.

Part of synergy fulfillment risk is the complexity of the synergy goals themselves, and most often those goals are dependent on a value harnessing integration of both organizations’ human capital, especially given that prevailing wisdom argues that post a merger or an acquisition there is generally an outflux (rapid outflow) of internal talent. Identifying key value creators in the organization regardless of title or of level of experience is absolutely essential to capturing synergies in the mid-and long-term phases of the transaction life cycle. Commonly, lack of synergy capture from human capital is ignored due to its lack of viability in the short term, and the general assumption that “things will stabilize and then we’ll see the expected synergies from our people,” as some M&A managers often claim.

One of the most proven methods of achieving this goal is to conduct a Talent Sphere Mapping™ based on social network analysis and organizational network metrics more specifically utilizing expertise networks as a placeholder for network mapping. Doing so allows M&A teams to plan integration life-cycle actions with a much more strategic positioning towards achieving synergy goals.