by Tom Allen
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Silo mentality occurs when individuals/teams/departments do not coordinate their activities with other parts of an organization. With this mindset, it can be hard for individuals/teams/departments to understand common objectives/the bigger picture and therefore, how they contribute to the overall success of the organization. In an M&A context this inevitably leads to wasted time, unnecessary costs and missed opportunities.
A boundary-less organization should be the de facto reality for M&A teams – yet it’s not. Silos establish boundaries and can help maintain order within an organization – allowing departments/teams to work together and focus on a particular area of expertise. Yet when it comes to M&A, however, the negatives of siloed working outweigh the positives. The deal lifecycle requires a collaborative approach to working and an agile mindset – silos complicate, and slow, decision making and can therefore result in delayed or derailed deals.
Breaking down silos is not an easy task for any organization – however, ignoring the problems of siloed working can act as a significant blocker to an organization’s M&A success.
Here is a high-level example of how silos may create isolated working practices across a deal:
Department/Team | Business Leaders
Problem/Pain Point: Set the strategy for the organization and identify portfolio gaps to determine when M&A is needed. Business Leaders are the ultimate buyers in M&A, yet they often struggle with (i) visibility of what targets are being evaluated (ii) what deals are being worked on (iii) the stage at which deals are at and (iv) details of critical issues flagged.
Department/Team | Corporate Development Team
Problem/Pain Point: Evaluating a large number of targets on an on-going basis but only communicating with the Due Diligence team when their expertise is required. Additionally, in not communicating with the Integration team, the Corporate Development team struggles to understand the possible issues around integration – i.e. whether a successful integration of a particular target is even feasible.
Department/Team | Due Diligence/Transaction Team
Problem/Pain Point: Lack of awareness of the targets being evaluated by the Corporate Development team and therefore not able to plan/scope the due diligence process in advance (working on a reactive rather than a pro-active basis).
Department/Team | Integration Team
Problem/Pain Point: Lacks access to the information collated by the Due Diligence team and is not made aware of risks and issues flagged until Day One. Additionally, the Integration team struggles to know which targets are “coming down the pipe” and therefore, the deals they will be working on until they go live on Day One of post-merger integration.
|The Problems||Best Practice Recommendation|
|Prepare Leaders||- Lack of clarity over common deal objectives and what "success" means
- Focus on departmental goals rather than organization-wide goals
|- Ensure leaders are aligned on why target is being pursued
- Define what "success" means at organizational level and ensure buy-in
- Create joint incentives around deal success and communicate from top down
|Prepare Teams||- Teams working in silos struggle with cross-functional problems
- Poorly defined roles and expectations
- Duplicated work and limited knowledge transfer
|- Create cross-function team leads
- Define clear roles and responsibilities
- Consider use of collaborative, end-to-end M&A platform to improve knowledge transfer and velocity of information.
|Align Leaders||- Information flow is slow- hindering decisions and impairing agility
- Consensus cannot be reached
|- Clarify decision rights across leaders
- Consider forming a Deal Committee/Supervisory Board to make the final "go"/"no-go" decision
|- Teams encounter difficulties in collaborating in real-time
- Teams lack understanding of how actions impact others
|- Emphasize knowledge transfer across teams
- Define what "success" means for other teams
- Create joint incentives around deal success
- Emphasize joint ownership of deal across teams and end-to-end accountability