According to authors Chip and Dan Heath, authors of Decisive: How to Make Better Decisions in Life and Work, over 80 percent of merger and acquisition decisions end in failure. There’s been a lot of discussion about why that is. I believe that one primary factor contributes to this monumental waste: lack of strategic relationship alignment. We must change the compensation and culture of M&A deals to reward focus on relationships – before, during, and after the transaction!
To get a clear picture of how a lack of focus on strategic relationships harms M&A outcomes, consider the example of two companies with different distribution models. Company A, which sells predominantly via a direct sales force, buys Company B, which sells through channel partners. It’s easy to see that sales management is going to need to resolve that conflict once the acquisition takes place. What’s more difficult to see is the relationship conflicts that will ensue. Company A has a relationship with end customers. Acquired Company B is limited to relationships with distributors. Their distributors have relationship with end customers. Blending those two company’s customer relationships into a harmonious new status quo will not come easily, as neither company has experience with the new type of relationships required. Without conscientious attention to strategic relationship alignment, a rough road lies ahead.
Three Stages of Relationship Alignment
Few dealmakers look at relationship alignment in the pre-acquisition due diligence phase, or during the post-acquisition integration phase. And yet, unless three stages of relationship alignment are executed well, that M&A initiative is likely to join the 80 percent that fail. Here are the three stages: Read the rest of this entry »