Dealing with legacy in mergers & acquisitions
By Louis de Schorlemer, Corporate Diplomat
When queens and kings pass away, the faces of their heirs will rapidly show up on coins and stamps across the country. Such a transition is meticulously organised to allow the crowds to turn from mourning the deceased to celebrating the incumbent. In Mergers & Acquisitions, conveying a sense of continuity is much more challenging for the acquirer, who often lacks prior in-depth knowledge of the company culture and its propensity to embrace change. Early preparation of a step-bystep communication plan provides relief.
When a new owner looks at their acquired business, it is not easy to decide which items should stay and which should go. One of the early questions asked concerns the future role of founders or sellers – whom one is tempted to keep to help a friendly transition with customers and a proper handover of knowhow. At the same time, increasingly diverging interests often result in an ultimate eviction of the seller. Across many civilisations throughout the world, the death of one’s predecessor has often been the only way for a new leader to accede power and legitimacy. In business nowadays, the softer substitute is a symbolic golden handshake accompanied by positive media coverage.
For the large corporate buyer of a decent mid-sized, family-owned SME, his legacy was about a 35-year company history, a founding father, and his managing children. The business of over 200 employees was professionally run and successful, yet key positions were held by the siblings, and the family decided all critical matters. After completion of the sales transaction, the plan was for most family members to smoothly step down from their current roles.
In assessing the risks for business continuity and value capture, the buyer had identified an initial disconnect with some workers who would miss the company’s paternalistic culture and sense of security, and there was resistance to perceived administrative complexity and reduced decision power that were seen as critical elements to deal with for a successful integration. This early assessment of the company culture was based on input from the selling family and management and led to a detailed engagement plan.
Establish the new boss
The first move was to provide clarity to individuals regarding their role and future responsibilities within the organisation. This was complemented by sharing a high-level decisionmaking framework at inaugural post-merger workshops. In addition, the incoming leaders were presented on numerous occasions and their schedules included daily slots for informal and on-site encounters, such as lunch at the canteen or cake at the coffee machine, to engage the broader employee group for in-person meet and greets. While this sounds like common sense, many leaders tie themselves up in management meetings and neglect the need to be visible to all their staff.
In this case, a real difference was made as leaders took the effort to be present at multiple locations over a period of several weeks, demonstrating authenticity and longterm commitment to the company and its employees. And both buyer and seller were equipped with exhaustive talking points to ensure their story was consistent and forward looking. Newly established monarchs will tour their countries with colourful parades and shake hands with the crowds to encourage loyalty and establish their leadership role.
History belongs in the museum
In their narrative, the new owners constantly referred to the decades of successful operations at the company, and warmly recognised the founders. The first benefit was for both parties to shine, and be acknowledge for the success and growth of the organization. The second benefit was for the sellers to wrap up the transition period and constrain the collective memory around a few elements of relevance for future strategy.
The seller compiled a large photo album, gathering pictures from people and anecdotes that had been published about the company over four decades, before personally giving each employee a high-quality printed copy of the book at deal closing. Similarly, incumbent sovereigns may unveil a statue or inaugurate a new square carrying the name of their predecessor to help anchor the past. Speedy rebranding of companies contains the high risk of breaking the emotional bond of people with their former identity and loyalty to the company, and neglects finding an appropriate repository of history.
Keep the balcony
Many post-merger integrations introduce novel communication channels in companies and encourage different ways of interaction to promote change. While these initiatives usually come with good intentions, agitated employees tend to have a limited time attention span and rapidly return to established habits. This happens even faster when expected results fall short. As a consequence, initial trust is withdrawn, and the new leader discredited. The wiser approach builds on existing communication channels and stretches change over a year-long period. Queens and kings stand on the same balconies as their ancestors and on their social media channels, they keep cutting ribbons.
Human brains connect the dots within fractions of a second and they very rapidly associate fresh and recorded information to make sense of a changing situation. Preparation for the selection of elements to keep and elements to drop is critical to support change in M&A. Thorough research will help identify the organisational symbols of a business that will make the difference for continuity. Because in the end, new rulers may wave at the crowds along the parade path, but it’s only after they are gone that their legacy becomes history.
Louis de SchorlemerCorporate Diplomat
Communication in M&A
T: +32 479 93 92 10
Published: GGI Insider, No. 121, September 2022 l Photo: Joe Gough - stock.adobe.com