Mergers that appear to be successful—by meeting synergy targets and achieving financial goals—can often be harmful to the company in the longer run. A truly healthy merger results in improvements across multiple dimensions, including operating and financial performance, business and technical capabilities, strength of stakeholder relationships, corporate culture, pace and focus of learning, and ability to renew and enhance strategy. This book by David Fubini, Colin Price and Maurizio Zollo argues that CEOs and other senior managers need to focus greater attention on defining and performing their own leadership role in a merger. It's no longer sufficient for those at the top to view their own job largely in terms of avoiding disaster and its attendant bad publicity, to assume that integration is a technical challenge that can be delegated away, or to be daunted by the many dimensions of the merger exercise, some of them intangible.
Based on interviews with almost 30 CEO 'veterans' of the merger arena—and an in-depth analysis of 167 post-merger management engagements completed by McKinsey across all industries and in all countries between 1996 and 2001—the authors have identified five key leadership challenges:
- Create a new top team before the close of the merger and make it the ultimate template for the integration, embodying every characteristic that is crucial for the success of the merged company.
- Ensure that the merger communications is set in the context of the broader corporate story—what the company means for its stakeholders groups, and how they interpret its past and present and anticipate its future.
- Focus effort on a 'performance culture', that is to say the crucial set of attitudes and behaviors that are required to create value in the merged company.
- Identify those external stakeholder groups where the value at stake is significant and to become their active champion.
- Identify the need for, and to undertake, integration-critical learning challenges and ensure that in the process the company learns about itself. Where any one of these leadership challenges is fully embraced—particularly the first one about creating the new company at the top—the goal of a healthy merger will become less elusive.
About the authors
David Fubini is a director of McKinsey in the Boston office. He is the long time leader of the firm's worldwide Post-Merger group and has also served as the North American leader of the Organization Practice. Fubini has been with the firm for over 25 years, during which time he has led efforts for over two dozen of the world’s largest mergers and acquisitions as well as run the firm’s Boston office. He has also worked extensively in the area of organization transformation. He is a graduate of the Harvard Business School.
Colin Price is a director at McKinsey, where he also is the global knowledge leader for the Organization Practice. Price has consulted on organization design, leadership development, behavioral change, and post-merger management for two decades in over 50 countries. He has advised many of the globe’s largest corporations. Price holds a visiting professorship at the School of Management, University of Bath. He holds degrees in economics, psychology, and organisation behavior.
Maurizio Zollo is the shell fellow in business and the environment and associate professor of strategy at INSEAD. His research over the last 12 years has focused on the development of superior organizational capabilities in the management of mergers, acquisitions, strategic alliances, and stakeholder engagement processes. At INSEAD, he teaches on these topics at all levels, from MBAs to senior executives. He regularly consults with major corporations on corporate development and social responsibility issues. He holds a PhD in management from the Wharton School at the University of Pennsylvania.