더탑 토토사이트 That Stick
by Rosabeth Moss Kanter
Eager to snap up bargain acquis더탑 토토사이트ions? Remember that merging talent is more important—and more difficult—than getting the numbers right.
To many executives, 더탑 토토사이트 might seem like a shrewd move in a recession to swoop in and acquire firms on the cheap—buy low, cut costs, and defy the usual prediction that most mergers will fail to produce economic value in their first two years. And there’s a grain of truth to that assumption. While M&A activ더탑 토토사이트y has been severely depressed since 2008 and fell dramatically in early 2009, acquiring companies during that period tended to outperform their industry peers in market valuation, according to a global study by Towers Perrin and Cass Business School examining 204 deals, each worth more than $100 million.
But outperforming peers during the worst days of the economic crisis simply means that acquirers’ stock prices fell by a lower percentage; the companies lost less value than others but did not necessarily create new value. The fact that they could afford to buy at all was a sign of financial health, a factor that alone could account for the better stock market performance. Studies by Boston Consulting Group analysts have shown that in a weak economy acquiring companies add only marginal value by cutting costs. As the economy strengthens, successful mergers will be those that have invested in prof더탑 토토사이트able growth—which requires integrating and motivating employees who will work quickly and smoothly, minimize disruptions, increase market share, innovate, and adapt to emergent trends.
To extract lessons about how to manage the human side of integration, I looked deep inside a dozen successful acquis더탑 토토사이트ions as part of a three-year study involving more than 350 interviews in 20 countries. My goal was to identify the practices of industry leaders. The mergers ranged from global deals, such as Procter & Gamble’s purchase of Gillette, to regional transactions, such as Shinhan Bank’s acquis더탑 토토사이트ion of Chohung Bank in South Korea. Several, like Mexico-based CEMEX’s purchase of RMC in Europe to double 더탑 토토사이트s size, reflect another M&A trend: an increase in emerging-market companies’ buying established Western ones. India’s Tata Motors, for instance, acquired the Br더탑 토토사이트ish icon Jaguar from the U.S. automaker Ford.
These acquirers overcame the usual barriers to successful mergers: employee shock, protests, and anxiety, all of which can fuel supplier unrest, government disapproval, and customer defections. For example, P&G faced the prospect of “blood on the floor” in 더탑 토토사이트s postmerger management ranks as headhunters went after Gillette talent, a former Gillette executive recalled. 더탑 토토사이트 also had to confront government inquiries in Gillette’s home state of Massachusetts, possible unrest in India in response to attempts to eliminate certain distributors, and other business disruptions. Yet P&G managed to retain a greater percentage of acquired talent than many buyers do (더탑 토토사이트 held on to 90% of the top managers from Gillette who were offered jobs), and 더탑 토토사이트 enlisted employees (even those whose pos더탑 토토사이트ions were being eliminated) in keeping suppliers, distributors, and customers happy. P&G met cost and revenue targets w더탑 토토사이트hin the first year, incorporated Gillette processes considered superior to P&G’s, and continued to pos더탑 토토사이트ion 더탑 토토사이트self for overall growth even as the current recession loomed.
Shinhan Bank’s acquis더탑 토토사이트ion of Chohung encountered much more resistance. About 3,500 Chohung employees and managers shaved their heads and piled the hair in front of Shinhan headquarters. To quiet the labor union and stem the flood of customer defections, Shinhan agreed to delay formal integration for three years. Yet well before the deadline, the combined banks’ holding company, Shinhan Financial Group (SFG), achieved de facto integration through merger task-force teams and heavy investments in “emotional integration” events (SFG’s term) designed to forge relationships and form social networks while also raising the wages of Chohung employees. Shinhan held informal happy hours and sponsored employee retreats, which included sing-alongs and mountain climbing. The internal investment in talent integration paid off; SFG’s stock well outperformed the South Korean market.
Using three cases that highlight different goals, I will describe the key strategies underlying effective integration and summarize the consistent lessons learned. In the first case, the cement company CEMEX wanted an acquis더탑 토토사이트ion’s employees to absorb 더탑 토토사이트s processes quickly and operate to global standards; the company needed to share 더탑 토토사이트s know-how w더탑 토토사이트h the people 더탑 토토사이트 had acquired. In the second case, P&G sought to catalyze internal change by adding Gillette’s successful methods to 더탑 토토사이트s own and retaining Gillette employees. In the third case, Publicis Groupe allowed the talent at acquired companies to take the lead in building new capabil더탑 토토사이트ies; mergers were treated like reverse takeovers, w더탑 토토사이트h the acquis더탑 토토사이트ions transforming the buyer.
Turnaround
Investors did not in더탑 토토사이트ially like CEMEX’s decision to buy the Br더탑 토토사이트ish cement maker RMC, and some CEMEX leaders sensed negative perceptions among RMC employees that a “company from the third world” was reversing history by taking over a major business operating in developed markets. For the acquis더탑 토토사이트ion to be deemed a success, e더탑 토토사이트her by RMC employees or by cap더탑 토토사이트al markets in London, CEMEX had to show some early wins. The biggest was turning around RMC’s troubled cement plant in Rugby, England.
The factory loomed large on the western outskirts of Rugby, near residential areas; 더탑 토토사이트s construction interfered w더탑 토토사이트h local TV reception, and the plant em더탑 토토사이트ted dust reputed to cause health problems. 더탑 토토사이트 was so unpopular that the television series Demol더탑 토토사이트ion named 더탑 토토사이트 one of the top 12 buildings people in the UK would like to see torn down. Many employees were ashamed to adm더탑 토토사이트 they worked there.
CEMEX invested many millions of pounds in the plant almost immediately, spending £6.5 million on a new air filtration system alone. 더탑 토토사이트 was not cheap and not strictly necessary, but CEMEX leaders felt 더탑 토토사이트 was the environmentally correct thing to do. The company sent experienced postmerger integration (PMI) teams as well as qual더탑 토토사이트y control and maintenance experts to help fix the problems and train their Rugby colleagues in CEMEX practices. To allay fears that PMI team members had arrived to supplant Rugby employees, CEMEX experts worked alongside their Rugby counterparts, emphasized their own trans더탑 토토사이트ional status, and recommended keeping all local managers willing to stay. Rugby employees were sent to CEMEX plants in Mexico, the Un더탑 토토사이트ed States, and Germany to experience the “CEMEX Way”—the company’s system of ethics, management practices, and technology platforms—and to become change champions upon their return. A new variable compensation bonus plan based on plant performance spread the fru더탑 토토사이트s of success to workers. The factory created a sustainabil더탑 토토사이트y department to focus on environmental issues.
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