change-management

What Should M&A Change Management Look Like In 2021?

“You can have all the numbers crunched any way you want, and they can add up to these great numbers, but if the people don’t come in and operate in the way that is needed for success we’re in trouble” - Dawn White

According to Dawn White, M&A change management guru at Corning, change management is at a pivotal turning point in the world of M&A. White notes more senior leaders are giving change management the respect it deserves and putting their time and money behind it, thus highlighting its importance. In fact, White asserts senior leaders are no longer considering change management to be a “soft skill” or change management practitioners to be “party planners and survey people.” As our world and ways of business continue to function through COVID-inspired changes, as well as social and civil awakenings, it is not surprising change management needs a clearly defined seat at the mergers and acquisitions table. With this in mind, and with the assistance of White’s expertise, below we examine not only the importance of change management in 2021, but also change management best practices all acquirers should leverage in order to extract maximum deal value. 

What is change management?

While change management is becoming more prominent, not everyone understands what change management is, or they might be operating with differing definitions. White emphasizes the importance of establishing with the entire M&A team what change management means and what it is trying to accomplish. “To me, change management is taking individuals from their current state and moving them to the desired, future state,” White explains. This means shifting the way individuals currently work; implementing change management helps them not only adopt new practices and methods but also truly embrace them. 

What are overarching best practices for change management in M&A?

  1. Understand where the employees are — Leading with empathy is essential; in M&A, employees do not have a choice when it comes to change so understanding employee mindset is vital. Specifically, anticipate the questions and concerns employees might have and plan ahead what you want them to be excited about coming into your company. Preparation for the transition pays off in big dividends. 
  2. Connect with employees directly — White advocates for going onsite and engaging in in-person interaction when possible. As we still grapple with COVID mandates, this might not always be possible; therefore, she recommends leveraging technology to connect and engage. Moreover, White touts the importance of focus groups; she recalls a time she met with employees for an hour-long focus group and simply began with, “tell me the little things you’re worried about. What are your small questions you might not feel comfortable asking others?” The target employees then asked questions about the acquirer’s website and email system, which made a world of a difference reducing future employee anxiety and increasing employee efficiency. White also speaks to the importance of encouraging employees to also engage. She offers a simple tip for increasing engagement when meeting virtually: put a note in the meeting request for everyone to please put their cameras on. This “head’s up” “gets people engaged and gets them ready to be engaged.” 
  3. Strengthen your change management with cultural assessments — A cultural assessment is a formal approach to how employees at the target work, how they tick, and what the overall target personality is. Fortunately, this assessment can be done remotely as well. White likens the cultural assessment to the relationships with family and friends we all have, noting you have to understand the people at the target, just like you have to understand friends and significant others outside of work. Once the cultural analysis is completed then you need to look at the differences between the target’s and acquirer’s cultures and what these differences mean for the deal and for integration. Usually, these differences suggest some adjustments need to be made and some extra steps need to be taken as the deal progresses. 
  4. Consider culture early — While a formal cultural assessment might not be conducted during due diligence, due diligence leaders and team members should be paying attention to, and taking notes on, the target’s culture. Of course, financials are often the primary focus of diligence, but White stresses at the end of the day people need to do their jobs well for a successful deal: “you can have the numbers crunched any way you want, and they can add up to these great numbers, but if the people don’t come in and operate in a way that is needed for success, we’re in trouble.” 

What current challenges to change management are acquirers facing?

In a post-COVID world, acquirers will face additional integration and cultural challenges, highlighting again the critical nature of change management in M&A. In addition to the processes, systems, and company beliefs that have historically required change management practitioner attention, White observes the shift to work from home and return to work policies can be a challenge. Consider you are currently working from home full time, but then you are acquired by a company that does not allow for working from home full time. Or, take for instance, there might be shifts when it comes to travel; perhaps you enjoy traveling for your job, but you are acquired by a company that is enjoying the savings from less travel. Ultimately, these hypothetical examples highlight the need for due diligence plans and change management plans to adapt and prepare for a new post-COVID world. 

What are the top 3 things acquirers should be doing in 2021 to achieve more successful integrations and deals?

  1. Establish a clear vision — Establish a clear vision of how the deal will bring value and be sure everyone understands the vision (not just the senior leaders). Vision adaptations must also be made clear along the way. 
  2. Put people first (and do the "extra" things) — Employees make companies successful and, therefore, make deals successful. Putting people first and doing small things prior to Day 1 reap multiple rewards. White suggests conducting a “get to know the acquiring company” session prior to Day 1, during which the target’s employees can ask questions and express concerns. 
  3. Be ready to adjust — Plans are great, but you cannot get so bogged down in your M&A process that you fail to pivot, adapt, and do what makes sense. 

What skills and attributes should companies look for in a change management leader?

White begs M&A leaders to stop throwing “whoever is available” into the role of change management leader. Change management requires a deep skillset and is a hybrid of art and science. More specifically, White notes personality matters as much as robust training because ultimately people need to feel as though they can approach the change management leader and ask questions. 

Final Thoughts:

Overall, change management must be at the forefront of acquirers’ deal plans and processes. As White says, you want the target’s employees to be “a part of the change, not a victim of the change.” Taking change management seriously throughout the deal’s lifecycle increases employee buy-in makes for more seamless integration, and ultimately allows acquirers to extract more value from the deals they pursue. 

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