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The Formula for a Successful Business Merger

We all knew it was coming. As a senior management group, we had all been informed to attend an offsite presentation room for a briefing on an important company announcement by the CEO. Rumours had been circulating for a while, and this meeting confirmed our water cooler conversations. Our organisation was about to be merged with another corporate profile. The following flood of PowerPoint slides, graphs, fist pumping slogans and pie charts all went unnoticed as we sat there with our minds blank apart from wondering if we were going to keep our jobs, and if so, who was to be our boss.

This is exactly what the CEO did not want us to be thinking about during the presentation.

She had missed some crucial steps in the merger process that almost put the company into the ‘get the defibrillators’ status, and very nearly lost the business. This all happened nearly 20 years ago, but the lessons are still as clear today as they were then.

As an article from Huffington Post puts it ‘Yep, with a 70 to 90 percent chance of dying, mergers are more likely to fail than marriages’ ( ‘9 Mergers that Epically Failed’ 02/23/2013). So why do our business leaders continue to make the same mistakes when undertaking such a risky and corporately dangerous transaction such as an Organisational Merger?

As the market climate continues to contract, and organisations begin to fail, there will be more opportunities for mergers. After all, the decision to merge organisations is done for the right reasons. Corporate leaders can envisage cost reductions in shared services, greater market penetration, more product lines, and, of course, greater revenue. What could possibly go wrong?

If the statistics are correct, in the current market, getting your organisational merger right is critical to just staying in business. Getting it wrong could see your company being acquired by another, or at best, written off as a huge loss.

When my firm is engaged by a client to fix a merger that has gone bad, we so often find common base causes have occurred in the activity. With that in mind, we developed the CM formula to help our clients understand where they can fix the problems, or hopefully, use the formula before they begin the merger process so that it can be a successful venture.

The CM Formula:

Corporate Merger= Strength{(Shape/Size)+Synergy}

Communication +Time

For greater understanding, I’ll pull that apart and explain each component in turn. We’ll begin with the base two components of communication and time.


When a corporation undertakes a merger, as a leader, you must almost adopt a Doctor Who approach to time, where it is both elastically long and infinitesimally short. There must be both a deliberate slowness to your decision making and planning, but a quickness in action once the decision has been made. Too often managers do this in reverse, where they make decisions in haste, and act with the speed of a glacier.

As Pete Pande writes in his Six Sigma books: ‘A key to applying greater discipline and flexibility to integrating a new acquisition is to get comfortable with the paradox of speed and deliberateness. Taking a little extra time helps you get results faster than if you just rush to make the deal look good.

The pace of the merger must also be timed right to fit the capacity of the organisations. Too fast and you risk burning out your staff, losing customers, and missing key merger points. Too slow risks the merger failing completely, as it will disengage your staff and customers. My firm has found that if the merger has not been completed within 12 months, it has a very high probability of failure. Set your pace early, and maintain it, for the duration of the merger. Do not take your foot off the accelerator.

Lastly, start early. So many organisations ignore the merger until the last moment and are often caught flat footed. I cannot stress enough the importance to begin the merger activity as early as possible.


Poor Corporate Communication is the single biggest complaint we receive from staff when working with client companies. Either through the belief that it will hurt the staff if they are informed or they simply don’t want to tell employees- management’s corporate communication is usually the single biggest failure of any merger. Inform your staff often and use different media. Don’t rely on a single monthly email to all staff. The golden rule of communication in a merger is that too much is not enough. If you don’t have one on your staff, our advice is to engage a corporate communications professional who can detail a plan of messaging and platforms for your merger to be successful.

Aligned to this is to engage the staff, from both organisations. Get frontline managers to be involved in the process, you’ll be surprised at the wealth of knowledge they can offer to improve the merger.


This action is deliberately written as Shape DIVIDED BY Size, not as Shape OR Size. Too often in Mergers, the first action the management team undertakes is the review of the Organisational Charts, and begins the process of the re-SIZING of the organisation, usually through the enmeshing of back office functions, or the shutting of one or more geographically close facilities. This simply results in a reduced sized facsimile of the two previous organisations.

Rather, the first action the management team should consider is the SHAPE of the future Organisation. What processes, product lines, and market penetration will ultimately service the combined customer base (and eventually shareholders) best? Once the management team have established their new processes and how the SHAPE of the new organisation is going to look and operate in the marketplace, by putting the customer needs first, only then should they turn to the Organisation Charts and back office functions to determine the SIZE of the workforce.

As our friends at McKinsey write about the failure to first understand the SHAPE of the future organisation, and how one Bank failed to put the customer and their needs first, instead focussing on headcount and reduced branches SIZE, it cost a significant source of revenue:

‘But when one large US bank acquired a competitor with a substantial geographic overlap, the acquirer suffered unusually high losses among the target company’s customers, rendering the deal unprofitable and exposing the merged entity to a takeover. Due diligence on the target’s customers would have revealed that they were heavy branch users and thus especially likely to defect as a result of an integration process that closed more than 75 percent of the acquired company’s branches. ‘ ( ‘Where Mergers Go Wrong’ Scott A. Christofferson, Robert S. McNish, and Diane L. Sias, May 2004)


This could also be called the new organisational culture. Creating Synergies is not just removing one payroll team, or moving all staff into the one office building. Synergy is the new way of doing business. Do you remember in the Communication paragraph above I said to engage your staff? To make sure you bring in frontline managers, supervisors and even your customer facing staff. Ask them how they’d like the new team to operate, what they want to see removed, or brought in. Synergy is probably the hardest action for a manager to complete, as it’s a bottom up process. Without ceding control, you have to let your staff own the processes that will directly affect how they interact with customers, suppliers and other agencies. You are, in effect, building a culture for the new organisation. Importantly, this culture has to be bedded in over time. Be prepared for setbacks. Remember the elastic aspect of time? With Synergy, taking a long view is incredibly important.

At the same time, there is a need to remove the dis-synergies in the new organisations. These are the old ways, old habits, and old practices of the two former organisations. By allowing staff to cling onto the old ways, they will never move to the new processes. Once you have your synergy champions established in the organisation, there is a real need to surgically remove and banish all the old ways.

So often, when I travel and speak with clients after a merger, it has been the inability to remove the old dis-synergies that have stonewalled an otherwise successful action. Managers have been so focused on the physical action of completing the merger; they fail to plan for the behaviours of staff after the organisations have been brought together. When I was talking to my seven year old nephew about this paper, he said that we had to think of dis-synergy as the dark side of the Force, and that I was Luke Skywalker and it was my job to get rid of the sith lord and all the badness. Which, in an odd way, makes complete sense, but only if you’ve seen the Star Wars movies! So, may the Force be with you, as you cut away all the dis-synergy badness inside your new organisation.


This could also be written as Courage in leadership. An Organisational Merger is not something for the faint hearted. Many managers and just about all their staff have never gone through the difficult process of a merger. It is lonely, anxious, heated, and an incredibly stressful time for the Leader. Strength of the leader in an organisational Merger is a force multiplier for a successful outcome. A good leader can bring together two organisations just as well as a poor leader can drive them apart.

Do not confuse a strong leader with a ‘Conqueror’. This is the worst style of leadership to bring into, what is effectively, a marriage of two corporations. A strong leader is one who can listen, builds teams, rewards cooperation, and more than anything else, provide a clear vision and goals of the new organisation. A strong leader has a diverse steering team to provide advice, and provides a safe space for that team to feel comfortable to argue against his decisions.

All successful Mergers have had strong leaders to stay the course, provide vision, think slowly and act quickly. They set the pace, and maintain it for the duration of the action. It takes a certain resilience and confidence to be a successful leader in a Merger. When I speak with Clients about strength, I will often advise for them to find a strong leader for the Merger process. They may or may not be internal to either of the organisations; they also may or may not be suitable for the leadership role of the new organisation once the merger has been completed. But- regardless of where the leader has been sourced, and how long the tenure is set for the individual- getting the right person to lead this change is absolutely critical to the success of the merger.


As the current market continues to contract, there will be opportunities for organisations to merge. If done well, the new entity will be leaner, stronger; customer focussed and deliver greater returns to their shareholders. However, if done poorly, there is the real chance the new organisation may be weaker and positioned for a takeover by another organisation. History shows that there is a very high chance of a merger failing if the right processes and engagements are not undertaken. If you’d like to know more about the formula, or how to structure your merger better, talk to us at The Storey Group.

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