M&A Should Be Transformational — Not Transactional
M&A deals have traditionally been transactional in nature, pursued for economies of scale and to consolidate costs. But that approach has more limited success in today’s volatile business landscape and won’t provide the transformational results that companies need today. To unlock the growth potential that transformational M&A can bring, leaders need a shift in thinking and behavior. In the ever-evolving M&A landscape, mindset and agility are the compass points which can guide organizations toward growth and lasting change. Combining an adaptive mindset with an agile approach arms leaders with a preparedness to pivot as needed. Success in M&A is no longer achieved by following static playbooks; it comes through navigating the dynamic landscape with adaptability. Leaders who embrace uncertainty and adopt an agile approach to M&A integration can achieve the transformative potential that M&A promises.
Businesses have considered merger and acquisition (M&A) deals as a viable growth strategy for more than a century. In the past, these deals have typically been transactional in nature, pursued for economies of scale and to consolidate costs. But today, in an era where companies need to disrupt themselves or be disrupted, organizations are increasingly pursuing M&A for growth through business transformation.
For example, General Mills (GM) has evolved its M&A approach over the past decade. “Prior to 2017, General Mills largely pursued more opportunistic deals, expanding its consumer packaged goods offering with strategic acquisitions like Annie’s organic and natural food products,” shared Doug Power, former Global Head of M&A for General Mills. “In 2017, we pursued transformational growth with our acquisition of Blue Buffalo Pet Products, Inc. for $8 billion. The acquisition positioned General Mills as the leader in the Wholesome Natural pet food category and successfully reshaped our product portfolio.”
M&A’s strategic shift from business “transaction” to “transformation” presents a paradox: yesterday’s transactional approach — which seeks certainty, standardization, and continuity — has more limited success in today’s volatile business landscape and won’t provide transformational results. To unlock the growth potential that transformational M&A can bring, leaders need a shift in thinking and behavior.
In my work consulting with organizations around the world on M&A deals, I’ve witnessed firsthand the failings of a transactional approach post-deal. Leaders often want to rely on past playbooks to make decisions, and overestimate their ability to predict the future and anticipate how things will play out. They equally underestimate how employees, business partners, and customers will react and adjust to change. To navigate the ambiguity inherent in M&A, leaders need to develop the right mindset — one that adapts and sees uncertainty as an opportunity, not a threat. When leaders think in this way, their behavior shifts as well, enabling the organization to pursue a more agile approach to the integration.
When pursuing mergers and acquisitions for true transformative growth, leaders need to adopt a new approach. Here’s how:
When pursing M&A to transform a business, leadership mindset development must be prioritized. A mindset that thinks transactionally will expect traditional playbooks to work for each merger or acquisition, expecting predictable outcomes regardless of the size or type of deal. Yet a mindset that doesn’t settle for status quo thinking but asks “What are we not thinking of?” is what leads to true transformational growth.
To encourage leaders to adopt the right mindset and embrace uncertainty, conduct a premortem. Coined by cognitive psychologist Gary Klein, a premortem analysis imagines that a project has failed, and the team generates reasons for its failure. With an M&A premortem, the leadership team (or board) imagines that the deal has failed and ideates around potential causes and possible solutions. The exercise shifts leaders’ thinking from expecting predictability to recognizing that variables will change and influence deal outcomes. The benefit is not only in considering ways to adjust, but also in adopting a more flexible mindset.
As one Software-as-a-Service client shared as they were merging with another SaaS company, “Doing a premortem informed our leadership’s thinking going into the deal. We recognized the flaw of certain assumptions and thinking those through gave us greater confidence in the transformation.”
If Mindset is about where you are going, Agile is about how you get there.
Earlier in my career, I worked in technology, leading B2B marketing globally for navigation technology company, NAVTEQ (acquired by NOKIA in 2008). NAVTEQ developed digital map data for Global Positioning Systems (GPS). The company used an agile approach to product development — adaptable, responsive, and iterative — to evolve the navigation offering in ever-shifting market conditions. Organizations can apply this same agile approach to manage the external and internal influences present in M&A, adjusting as new data emerges.
Imagine that you’re driving through the city, and your GPS is only as good as yesterday’s traffic report. That’s how too many M&A integrations have been approached — making decisions based on a one-dimensional “map” of static playbooks or checklists, without listening to the live updates of competitive shifts or cultural assimilation challenges. Thanks to advances in navigation technology, GPS systems can now access real-time data, and recalculate a route with every new piece of information received. Drivers can make informed decisions on how they will get somewhere leveraging new data, as well as their own knowledge, such as the ability to take the HOV express lane because they now have a passenger. Just as GPS uses data to inform the driver of changes ahead and possible new routes, an agile approach enables leaders to navigate the complex landscape of M&A by dynamically adjusting their strategies based on real-time insights.
An agile approach encourages organizations to be willing to pivot, much like a driver uses live traffic updates to avoid congestion.
Beyond cultivating a mindset that embraces uncertainty, to successfully navigate M&A transformation, leaders need to understand from the get-go that plans will change and they’ll need to remain flexible. Prepare to think beyond the old playbook and standard checklist. “When people use a checklist approach to M&A, they tend to stop thinking,” said an integration lead of a technology company I spoke with. “They focus more on getting through the checklist than they do on thinking through what the right next step might be. When identifying possible M&A teammates, I look for a tolerance for ambiguity and desire for clarity.” Playbooks can be your foundation for guidance, but consider them as fluid.
To embrace a more agile approach for transformation through M&A, consider adopting these principles:
View the deal vision as a “thesis”, to be tested and measured by OKR’s your team commits to from the beginning, and divide the work into short and long sprints. “Retaining key talent for two years, minimum, was a critical OKR for a target acquisition,” shared the Integration lead of a technology company I spoke with. “We committed upfront and tailored the integration sprints to meet the objective. Before the deal closed, we designed a coaching / buddy / mentor cohort to support the acquired team and within 30 days of closing, incoming managers received specifics on the buddy program. Another 90-day sprint provided core manager training for incoming managers.” Identify sprint interdependencies and be ready to shift resources as needed.
Once the integration launches, cross-functional team leaders should solicit data consistently and assess what’s working and what isn’t. With this knowledge, teams can iterate solutions and adjust as they evaluate the impact of changes. “For acquisitions, we adopted a ‘listening strategy’ including focus groups and pulse surveys,” revealed seasoned M&A executive Klint Kendrick, when he was HR lead at an acquisitive Fortune 500 software company. “For one acquisition, the survey confirmed that the company was great at generating new business, but revealed recurring revenue challenges due to suboptimal customer support. We reassessed the post-acquisition organizational structure and shifted resources to customer support. The adjustment led to about a 15% increase in recurring revenue within six months.”
Debrief throughout, breaking down the work sprints to identify successful aspects and areas for improvement. Look for patterns across similar situations and consider which practices can be standardized — this can improve processes, mitigate unnecessary costs, and foster teamwork. Ian Paice, who supported the enterprise software management team at K1 Operations, concurred. “Pausing to reflect on the milestone completed not only gives you a better chance of avoiding misses in the future; the effort fosters trust among the team.” Learn from the positive and negative experiences.
Throughout this process, assess for key employee metrics tailored to M&A, including:
By monitoring these metrics and following the principles above, you can promote agility, adaptability, and continuous improvement throughout an M&A integration.
In the ever-evolving M&A landscape, Mindset and Agility are the compass points which can guide organizations toward growth and lasting change. Combining an adaptive mindset with an agile approach arms leaders with a preparedness to pivot as needed. Success in M&A is no longer achieved by following static playbooks; it comes through navigating the dynamic landscape with adaptability. Leaders who embrace uncertainty and adopt an agile approach to M&A integration can achieve the transformative potential that M&A promises.
Growth strategy, Mergers and acquisitions, Digital Article
Jennifer J. Fondrevay
Jennifer J. Fondrevay is Founder of M&A consultancy Day1 Ready, Human Capital advisor for Virtas Partners, and best-selling author of NOW WHAT? A Survivor’s Guide for Thriving through Mergers & Acquisitions. As a former global marketing executive, she has been on all sides of the deal equation.
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