LONDON — Shell’s $70B takeover plans for BG Group makes for some striking headlines today. It’s big, and bold, and unexpected. Analysts are still studying it and trying to make up their minds, but it is closely aligned with trends in the larger markets now. Businesses globally are changing their make-up and relationships to power their organisations forward, and try to capture more value.
Here in the UK the BT and EE merger is a one of the top ten mergers proposed in the world right now, although it is uniquely local to the UK. The European Holcim-Lafarge tie-up is an on-again, off-again connection. If you follow the business pages closely you can see the elaborate dance that goes on as the businesses court and the regulators pose questions.
De-mergers or divestments are also making headlines and breaking new ground.The unbundling of BHP Billiton is a public process, no less dramatic than a merger.Lloyds Banking Group and TSB are saying farewell. The split in two of HP and ofBaxter Healthcare are also carefully managed change programmes.
The market is very large for mergers. And the value of them in increasing faster than the volume, but both are on the rise.
But are these mergers and demergers capturing all the intended value? And if not, what can be done?
Who is leading?
Each deal is unique. However, they will all have common characteristics. Every merger or demerger will require people to behave or perform differently. And that will often be where the value will begin to leak out of the deal.
We have seen consistently in past deals that companies cannot be clear enough about who will take the lead. Even in a ‘merger of equals’ there is a dominant partner. In demergers people may have worked together in the past, but that’s no indication of the future.
Each organisation has strengths and weaknesses, and without clarity, planning and strong leadership, people will always have difficulty operating on themselves — changes will be hard to make.
Solo or ensemble?
There is a natural reticence to involve too many people in the business change discussions. Business continuity is potentially at risk, so people need to be kept focused on the work that they have to do. However this view tends to be too narrowly interpreted. At the early, planning phase of business change activity, the circle tends to be too small. The preparation and planning for the announcement and implementation of the change cannot be started early enough. But instead the primaries tend to focus exclusively on ‘the deal’.
As a result of the ‘solo’ approach to planning a merger or de-merger too few plans are made, and value that leaders are so keen not to lose in the negotiation and due diligence phases, quickly leaks away once an unsuspecting team of people is thrust into the change without adequate planning or preparation.
Who calls the tune?
Organisations and management teams can find it uncomfortable to admit the extent to which their plans are influenced by others. Partners, industry leaders, bankers, governments and many others can have significant influence in the business change programme. And they need to be understood and managed too.
There should be no delay in recognising that some parts of the change are within the organisation’s control. ‘Emergent change’ in not so much an inconvenience, as a reality as regulators, investors and even acquired businesses influence the developing mergers or demergers.
What we know to be true
Value in mergers and demergers is delivered in the implementation. It is not the deal that drives the value, it is the ability to deliver the changes required to fulfill it’s promise. Executives tend to get too focused on the deal.
People will deliver the change. Along with the required systems and process changes, it will be the ability of people to adopt the changes that will make the difference between success and failure.
Initiation is easier than implementation. And there will be more scrutiny placed on the launch of the change than there will be on realising its values. In many businesses it is not even clear who is responsible for the successful and final implementation.
Mergers and demergers offer so much more than they are delivering. And in spite of all the complexity and flurry of executive attention, the challenges and obstacles can be significantly addressed by instituting and following through on change management principles.
The choreography might change, the floor might fill faster, and but the dance of M&A and divestments can capture much more value if the changes are properly managed.