Building trust and skills helps merging companies exceed their value-creation target by 30 percent.
Two companies in the food and beverages sector were entering a merger of equals prompted by shareholders who wanted to grow the business globally. Fierce competitors, the two companies had very different cultures: One was hierarchical, the other entrepreneurial.
The board member responsible for integration recognized that the clash of cultures would need to be managed carefully to minimize disruption and establish a constructive working environment. So he asked McKinsey to help make the merger happen and prepare leaders for the integration process and their roles in the new organization.
Integrating the activities of two separate companies while maintaining business momentum creates huge pressures and uncertainties. At such a challenging time, introducing a leadership-development program might seem an unnecessary burden. In this case, though, it soon became apparent that the advantages would outweigh the drawbacks.
By making an early investment in learning, the new organization could begin to break down the barriers between the former adversaries, establish a shared culture of collaboration, and extract value from the merger more quickly. Leaders would play a crucial role: By modeling the values of cooperation, mutual respect, and business focus, they would set a clear example for the rest of the organization to follow.
The leadership development program ran for the full duration of the merger process, from the signing of the agreement to the closure of the integration office 2 years later. The executive board took part in regular trust-building sessions and merger roundtables, while the top 400 executives worked on aligning strategy. The integration managers developed their skills through workshops, and the 30 integration groups focused on team learning.
While reconciling the cultures of the two organizations was a constant theme, the focus of the program changed as the deal progressed. At the beginning, when inexperience was an issue, a merger “boot camp” provided intensive skills training for those directly involved in managing the integration. Later sessions addressed the companies’ legacy of hostility through activities designed to build empathy and help former competitors work closely together as colleagues.
Although the immediate goal was to smooth the way for the merger and maximize the value it captured, the program also had a more enduring purpose. By building broad expertise in M&A , it would equip the organization to undertake further deals as the industry consolidated over time.
The leadership development program quickly succeeded in building capabilities and trust, helping hundreds of participants to develop the mind-set and skills to manage the hectic integration period effectively. As a result, cost savings and growth opportunities both exceeded expectations. The value in cost savings, increased productivity, and new efficiencies unlocked by the merger was 30 percent higher than the stretch target set by the integration office and board.
There were unforeseen spin-off benefits, too. Board meetings became more productive once teams began to submit standard briefing documents with concise summaries of problems and proposed solutions. Because board members had all the information at their fingertips, it took them half as long to reach decisions.
The program has provided the client with a cadre of leaders skilled at managing not just integration but major organizational change in general—an asset that positions it well to meet its growth aspirations in years to come.