undconsorten LLP

The human factor
Two companies. Two cultures. One goal. Why culture, leadership and people proved to be three key factors for a successful merger announcement.

Two worlds apart – Three weeks to announcement

"Make the announcement of this merger a success!
You’ve got three weeks."

The assignment was as clear as it was challenging. Our client, a Latin American automotive supplier, was about to make its first transatlantic acquisition: the purchase of a European family business in the same industry. The date for signing the contract was set. The takeover was to be announced immediately afterwards.

How do you prepare two companies to become one – especially when two worlds collide? Two cultures (Latin America and Europe), two differently shaped organizations (an emerging, globally expanding risk-takerand a quality-conscious, solid mid-size company)and two different types of executives (ambitious, dynamic high potentials and experienced managers with a long company history).

While M&A processes usually tend to only focus on the financial and legal aspects, we realized early on that our approach had to focus on three rather soft key factors:

Culture: Highlighting commonalities to overcome differences
Both companies were united by their family character, their enthusiasm for their customers and products that complemented each other. This overarching "merger story" had to be told so powerfully that it overshadowed all differences.

Leadership: Making managers pioneers of change
No change works without the executives as role models. The management of both sides therefore had to act as one team when the merger was announced and prepare the ground for the new company through their own actions.

People: Clarifying the added value for each and every individual and inspiring people
The merger’s aim was to achieve growth, and it opens up new opportunities for all parties involved. These advantages had to be highlighted in order to counter prejudices and fears of change and to create a positive mood.

Please don’t touch this! - Two weeks to announcement

A neutral point of departure needed a starting point from which the interests of both companies were equally taken into account. At the beginning, however, we were only allowed to contact the buyer’s side, which initially gave us a very one-sided picture.

The situation was aggravated by the fact that although our client was aware of the importance of cultural and human factors for the success, short-term business issues received a lot of attention. Thus, important roadshows and factory visits for new major customers were organized in addition to preparations for the announcement. At the same time, we received indications that this had already led to irritation, rumors and fears on the part of the Europeans – because officially there was only a business cooperation between the two companies.

We persuaded our client to hold talks with all the managers involved on both sides in order to inform them comprehensively about the planned merger. The discussions proved to be essential in order to better assess the delicate mood. There were some concerns as to whether the cooperation in the new management team would be successful in view of the cultural differences.

When two become one – Announcement week

Culture: The "merger story" was the heart of all events and communication around the day of the announcement. It was to clarify briefly, clearly and unmistakably why the two companies complemented each other perfectly.

This story was tailored for communication to the respective target group (e.g. managers, works council, employees, local politicians). The "merger story" had to be structured and formulated in such a way that it appealed to and acknowledged both sides. In addition, the two CEOs would need to be prepared to present this story convincingly together.

While the "merger story" unfolded its unifying power, cultural warning signs from the discussions and critical situations we had observed were discussed in intercultural learning sessions. The aim was to break down prejudices and to raise the participants' awareness of how to treat each other with respect. The events made a visible contribution to mutual understanding in the days that followed.

Leadership: The management team should become the engine of integration and speak with one voice to the employees. At the "top 15" conference (value conference), the basis for the joint approach was laid. For two days we worked intensively on the values for the unified company, defined guidelines for cooperation in terms of integration and formulated goals and milestones.

But when it’s about people really finding their way to each other, the rational level is not enough. That’s why we attached great importance to scheduling enough time for people to get to know each other personally. The result was as convincing as it was moving: at the end of the conference, thirty people who had sat facing each other with their arms crossed at the beginning embraced each other in honest solidarity and enthusiasm for the common task.

People: All preparations were geared towards the central event: the day of the public announcement of the transaction. Or rather: the day of the announcement cascade. It started at the works council; then top management informed the employees who had been invited for a townhall meeting, while at the same time the media were informed. It was important for us to include the feelings and concerns of the employees in the communication. Both CEOs presented the decision together, and each spoke a few words in the local language of the other. Following the presentation of the "merger story", the executives answered employee questions. We captured their spontaneous reactions to the news in a pulse check, a short survey that the participants were able to complete as they left the hall.

In order to further ensure the best possible guidance for all employees, the middle management were given short training to prepare them to absorb worries, counteract uncertainty and answer questions from their teams.

In conclusion

In this case, too, it was a mixture of many factors that contributed to the success of the merger. Constructive and productive cooperation required the support of the people involved on both sides. Through our focus on culture, leadership & people, we succeeded in taking all managers and employees on a joint journey, convincing them of the advantages of the project and overcoming their reservations. The key was to bring people from both companies together on a personal level. This created the basis for mutual trust, and it is the best prerequisite to ensure that the further journey of the new company is one that leads to the successes strived for.

In the months that followed, we were allowed to accompany the integration process further and were able to quickly resolve many hard issues. This was possible because the hardest obstacle – mistrust – had been overcome since day one.