What Could Be a Hidden Key for a Successful Merger and Acquisition Project?

Decisions to merge with or take over companies are not taken lightly. Any merger and acquisition (M&A) has an immense impact on the business: the amount of money that is involved and the host of negative emotions that often accompanies it are indicative of the respective companies’ identities at play. As such, many analyses and reports are written and discussed to justify the business case of any deal before it is shifted to the Board for approval. Many days and weeks are spent on conducting the due diligence and negotiating the deal. Together with the additional transaction costs for lawyers, bankers and accountants, it is without a doubt that any M&A project remains a costly operation in terms of the money and resources needed.

Despite all these efforts and resources spent, numerous reports will tell you that many M&A projects do not deliver the outcome that was anticipated when making the deal. Some statistics even show that 75% of the deals do not meet the original targets. Other statistics highlight the low success rate of M&A projects by documenting that nearly 50% of the key people involved in the takeover leave within 12 months after the closure of the deal. There are many reasons why projects fail, including a wrong “strategic” fit between the companies involved to poor due diligence processes that lead to incorrect valuations. Yet, at the same time, the first author of this article has also seen very successful mergers that have created great value and lasting success for the newly formed business.

Based on our experience over the years, we want to identify a number of important lessons that can help you increase the success of M&A projects. To do this, we will address five relevant points of discussion. The main question at the core of all of these points will be: “Do the right people look at the right things at the right time during M&A projects?”

1. Spending the Right Time on the Right Things.

An M&A project typically has four major stages:

a) Reviewing the business case. (Why should we do it? What are the benefits?)

b) Developing a business model or structure. (How will we run the “merged” businesses? How will we capture the synergies?)

c) Negotiating the deal. (Do we fully understand the consequence of the terms of the deal?)

d) Starting the new venture and implementing the new operating model.

How much time and resources do companies spend on each stage? To address this question, McKinsey conducted a survey among corporate M&A experts. The most interesting finding was that a disproportionate amount of time was spent on negotiations (approximately 50%; Stage C) compared to the actual preparation of a new business model (approximately 40%; Stage B).

These findings resonate with the experience of the first author. Specifically, in one particular project he spent several months discussing the strategic intentions of both sides with a potential partner. Some people within the company became impatient and asked why it was taking so long. This problem, however, was solved relatively easily by facilitating the conditions under which both parties shared their intentions early on, which established a common ground for further discussions and led to less time spent at the negotiation table. Getting clarity on what both parties want to get out of a deal and having a clear shared view on the synergies are key conditions for any good deal. For this reason, not enough time can be spent on discussing these topics early on in the M&A process.

2. Do We Have a Strong Multi-Disciplinary Team to Lead the Project?

It is a truism that you need a good project team to lead M&A projects. In reality, however, for most members of the M&A project team, such a project is above and beyond their regular business demands and normal operations. It is therefore important to (a) select team members who can spend sufficient time on the project, (b) have a strong project leader, and (c) solid discipline during the meetings in order to focus on the critical aspects of the business project. The organisation must be willing to accept that involvement in these projects takes priority over other business demands and requires a focus over extended periods of time.

Unfortunately, the latter point is often forgotten by organisations. However, in our experience there is luckily much wisdom in organisations as well. For example, when one of the CEOs in our projects was questioned about the cost of his decision to fully “free up” a senior manager, he answered by pointing out that the “cost” of the project leader was only a minor fraction of the benefits that the potential investment could reveal.

3. What About the Contribution of the HR Function to M&A Projects?

HR has an important role to play throughout M&A projects: providing input to the selection process of project team members, due diligence (e.g. employee data, employer liabilities, assessments etc.), and the post-merger integration plan. A key problem, however, is that HR is not always able to play this critical role. All too often they are included only in the latter stages of the project and as such can only provide relatively limited valuable contributions.

We would argue that the real issue may be whether your HR function as a full business partner is ready to play this role or not. If HR is to play a role in an M&A project, the HR business partner must be able to understand the business case fully in order to assess the required project resources as well as the management capabilities for the “new” business after the deal. They will have to be able to advise CEOs and business leaders in the earliest stages of the project on these matters. Also, their input goes beyond the “numbers”, as they must be able to provide insights and opinions on crucial matters such as corporate governance, corporate culture, and the quality of the management and labour relations. In light of this, an effective HR business partner must be able to present integration scenarios addressing issues such as the change of ownership and its impact on management, as well as the possible need and scope of restructuring programs.

This is no easy task. Therefore, when in doubt about the internal HR function’s ability, we advise investing in the search for the right external HR provider. But, be aware! Many consultants claim to be M&A experts but will often underestimate the task at hand. For example, in one particularly memorable case, a reputable HR consulting firm delegated a 26-year-old intern, equipped merely with a standard checklist.

4. Will the Business Due Diligence Tell You What You Need to Know?

An important lesson is that if you do not know what you are looking for, you will never find it. The same wisdom rings true for M&As. So, why is it that one due diligence process yields better quality information than another? Below we provide some insights based on our experience in several due diligence exercises that were conducted for various companies.

• A good due diligence exercise should start by thoroughly identifying the risks that might have a major impact on the business assumptions justifying the project. This type of analysis requires the involvement of nearly all business functions. A well prepared and professionally led brainstorm with all relevant stakeholders is a sound starting point that could lead to shared awareness and commitment; it creates the right focus throughout the entire exercise.

• Sharing information in a transparent way among the members of the M&A team is very important to put all the pieces of the jigsaw puzzle together. The team leader has the important responsibility of keeping the discussion focused and the relevant information shared with each member of the team. The whole team must be fully accountable for the final results of the business due diligence, and not only for its “specialist” contribution.

• At all times, the M&A team must maintain the highest level of integrity when assessing risks and potential “deal stoppers”. As M&As often tend to create a lot of excitement, many managers, after many months of hard work, may be inclined to push to get the deal done, and at any cost! “Deal fever”, as we have called this type of phenomenon, can have the negative effect of allowing decision-makers to be less critical and more accepting of risks that ought to be considered. One of the CEOs the first author has worked with understood this latter point well. He joined the final review meeting of the due diligence – a process that took several months. The CEO discussed the team’s findings and explained why he might stop the deal. He was also generous enough to offer a team bonus for a job well done even if the deal did not go through.

5. The Real Work Only Starts After The Deal.

What is common to any deal’s ultimate success is the way people are treated. The importance of a good communication plan cannot be underestimated. How will we inform our current and new customers and other stakeholders such as suppliers and authorities? Considering all (social) media and the speed with which communication is currently taking place, such a communication plan requires very detailed preparation and input from professional communication experts. In fact, the lack of a good communication plan is often cited as one of the main reasons for failed integration that impedes receiving the benefits of the deal.

Below we list a few of our own examples of communication initiatives that positively influenced the ways in which people dealt with the uncertainty of the “new” business situation:

• In one case, on the day of the announcement of the acquisition, the CEO of the acquiring company travelled to the location of the acquired company and had a town hall meeting with all employees. His main aim was to welcome the “new’’ employees and to thank the previous management for their work. A joint senior HR and communication team, well prepared, was present to answer any questions on the new situation. This initiative increased the morale and productivity of the involved employees during the transition phase.

• In another case, all key employees of the acquired company were offered a retention package before the official announcement. An interesting point to mention is that in this case “key employee” referred not only to senior managers but also to more junior managers who possessed critical technological know-how and crucial information about the customers. This approach proved effective when dealing with the very human question of “what’s in it for me?” Receiving a clear answer on such a personal matter will positively affect the motivation and commitment of key people coping with the new situation.

• Communicating the composition of the new leadership team on the day of the announcement of the deal is also good practice. The new management team takes charge from day one. This will stop wild guessing and speculative rumors that can create so much turmoil within the organisation. Dealing with change requires prompt action to avoid any loss of productivity or any negative impact on the business. The advantage here is that the new leadership can also start to immediately address any questions about corporate culture and values. In one case, we witnessed that this practice allowed several focus groups to discuss the common characteristics and values (rather than the differences) between the two companies joining forces.


Taken as a whole, it is clear that the way we engage, communicate and deal with people involved in each phase of M&A projects is key to success and positive business results.

Getting the numbers right based on correct underlying business assumptions is, of course, essential in evaluating the potential of a possible deal. However, preparation and successful implementation of a good deal is also conditioned by the quality and attention with which we select and engage the right people.

In our experience, the leadership of CEOs and business leaders who have paid great attention to the selection and deployment of the correct and appropriate number and quality of resources at each stage of the project has in many cases been the difference between the success or failure of an M&A project. In fact, it explains how and why they have been able to create real additional business value by merging and acquiring companies.