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High Stakes Merger Integration: Is Leadership’s Primary Role to Mitigate Risks or Capitalize on Opportunities?

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Would leaders improve the odds of creating value by focusing on risks associated with a mergers and acquisitions (“M&A”) transaction? Or by generating strategic opportunities to seize the moment? 

You’ve probably heard that many, if not most, M&A deals sap shareholder value. It’s no wonder leaders approach a transaction with a wary eye—even when it holds the potential to open the door to new markets, fill gaps and improve operational capability. Would leaders shift the odds in their favor by focusing on mitigating the risks? Or by rallying others around new opportunities?

Here’s the debate:

Leadership’s job is to mitigate risk.
M&A is a risky proposition that’s fraught with potential failure. It’s leadership’s job to make sure the value proposition is clearly defined and flawlessly executed.
Leadership’s job is to seize the opportunity.
M&A is a high impact, high value tool that brings a wave of opportunity. Leadership’s challenge is to deliver results through an organization that enthusiastically serves the mission.
This is serious and risky business.
Leaders must relentlessly protect the value proposition by making sure the deal is grounded in sound strategic and economic rational. This requires heads-down execution from all leaders.
Opportunity is the name of the game.
Agreed, business is serious and risky, but who can lead from a position of fear? Leadership in times of great opportunity is very different from excellent management.
Livelihoods could be threatened. Better to keep our leaders off the grid until plans are pinned down.
People hear “synergy savings” and think “layoffs.” Better to keep the lid on until it’s time to act.
We are about to delight our shareholders, thrill our customers and markets and supercharge our organization.
Staying off the grid creates a destructive mindset. Instead, effective leaders frame the conversation to reflect the opportunity. They do not abandon the market, the people, or the message.
Our strategy and operating model work. Why increase risk by considering something new?
It’s faster and obviously more efficient to adopt the acquirer’s operating model as the go-forward strategy.
A merger provides a rare opportunity to create a new business-as-usual.
By drawing the best from each organization, leaders have an opportunity to deliver value through greater scale, differentiated offerings and increased efficiencies.

My take

Kevin KnowlesKevin Knowles, Principal, Deloitte Consulting LLP

In the community of executive leaders, only a small percentage ever get the opportunity to truly reshape a business and an organization. Leading through transformative events is a unique mission and in many cases, one of the most significant professional experiences for leaders. Not only is it hard work that exercises every ounce of a leader’s credibility, authority and vision – it’s also a new environment for most leaders.

There’s no denying that successful integration requires rigorous analysis, disciplined planning and precisely executed integration plans. Relentless attention must also be paid to retaining customers and key talent, addressing supplier and vendor concerns and setting shareholder and analyst expectations. Risk-mitigating activities are necessary management efforts and leaders should hold themselves accountable for these results.

During integration, there is also distinct value provided by leaders who have the ability to methodically inspire, engage and empower. Transformative leaders create momentum through their words and actions. They set the rhythm of testing and revising the opportunities. They leverage their credibility and vision with every interaction across every stakeholder. And they thrive in the test of leading purposeful change.

M&A presents many leadership opportunities. My challenge to executive leaders heading into a transformative phase of their organization’s lifecycle is to get precise about defining effective leadership performance and identify who you will lean on to demonstrate transformational leadership. It’s an opportunity too often squandered in the frenzy of M&A.

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Library: Deloitte Debates
Services: Consulting, Mergers & Acquisitions
Overview: Human Capital

 

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