By Ed Coghlan
“So, why did we buy that company anyway?”
It’s a question that many company executives that merge or acquire other companies ask themselves when the expected benefit of the merger or acquisition doesn’t materialize.
“Between 60-to-80 percent of all mergers and acquisitions fail to meet their merger goals,” according to a Baltimore area woman whose firm helps companies navigate the complexities of integrating mergers and acquisitions.
“It is the actual integration where most mergers fail to achieve their stated goals,” stated Carol Koffinke, President and CEO of Beacon Associates of Bel Air, Maryland.
She outlined four major potholes that companies must avoid when they are working to complete a merger.
The first is remembering that there is a business to run.
“Who’s in charge of running the core business during the weeks and months it takes to complete a merger seems like a no-brainer,” said Koffinke. “But often there is confusion, which can result in less focus on the integration.”
That’s because of the effect of her second pothole, which she calls “unconscious segmentation.”
Often, there is one team working on due diligence to make sure that they understand all of the financial implications of the deal, and a second team that is working on integration of the businesses.
“Often those teams aren’t talking to each other,” said Koffinke, “and the lack of communication can create real problems.”
And those problems can lead to huge problems with employees, which is why “ignoring the human factor” is the third pothole that Koffinke warns her clients to avoid.
“Hard as that is to believe, often the people who do the work get overlooked,” she warned.
If you have been an employee in a company that has been acquired, you know that a natural insecurity will evolve. Employees of the acquired company have questions.
- Am I going to have a job?
- Who is my new boss going to be?
- Will I have to move?
“The sale of the company you work for may be the biggest change that any employee will face,” said Koffinke. “And how the company handles that communication is critical.”
It’s that uncertainty which leads her to the final pothole, which is “speed”, or in many cases the lack of it.
“We tell our clients it’s critical that you have a 100-day plan you are ready to execute in order to make sure that the due diligence and integration don’t drag out,” Koffinke said.
It makes good business sense. Any time between when a merger is announced and when it is completed is a difficult time.
“Competitors see an opportunity to exploit that confusion with customers and can also use the time to recruit the very employees that you wanted to acquire in the first place,” she said.
Koffinke has been working in this area for many years and has developed a product she calls VOICE in order to help companies achieve their “merger intent”.
When American News Report asked her who her obvious customers are, she gave us a surprising answer.
“It probably is going to be a company that has gone through a merger before,” she said.
Koffinke explained that chief executives who are doing their first merger or acquisition almost always think they can do it themselves.
VOICE, she claims, is like an insurance policy that sets up pathways to avoid those four potholes and to make sure that the company executives remember why they decided to buy the company in the first place.