M&A Change Management: Alignment from the Bottom Up

Garrett Findlay, Senior Programme Management Consultant with Saros Consulting.

Historically, organisational change isn’t always clearly or consistently communicated (and that’s not just with M&As). Typically, in high-pressured scenarios, the senior management team cascades information to the next layer, and so on, but this communication can often lead to inconsistencies, and frequently comes down to the personal style of a manager. You can quite often see that one team and one part of an organisation is fully up to speed because their manager has briefed them, and another department are completely in the dark. And that’s where problems can arise.

A study by Gallup on employee performance indicates that companies with effective communication are 3.5 times more likely to outperform their peers. Poor communication can lead to anxiety, rumours, and decreased employee morale – and no more so than in times of change. A good example is the Disney-Pixar merger, one of the most successful corporate mergers in recent years and one in which both companies gained from this acquisition. By involving employees from both companies in decision-making, consistently sharing updates, and reinforcing a shared vision, the merger achieved synergies and built a unified culture.

When senior management teams underestimate how much “bringing people along” they need to do, it can result in a detrimental lack of communication, ultimately delaying or affecting the intended outcome. For change management to be effective, it needs to be more than just telling people at the layer below that the merger is going to happen.

Bridging the Gaps: Why M&A Success Is Built from the Ground Up

Essentially, the merging organisations need to acknowledge that they are very much in the people business. If their merger or acquisition is to succeed, they will need to persuade, explain, collaborate with, educate, and train their workforce. Yes, it’s about aligning strategies, technologies and corporate structures, but ultimately, the newly merged entity is trying to get people to share a common set of objectives and work together to achieve them.

Aligning different corporate cultures can be complex and resulting disconnects can fuel misunderstandings, conflicts and unwanted flight risk of key skills. A McKinsey report highlights that 70% of M&A failures are attributed to cultural differences. But if this critical factor is dealt with early on and with the right approach, the compounding risks can be mitigated.

So how do you do that? Well, first off, you’ve got to identify who all the parties are and work with them and get to know them. Management needs to put themselves in their frontline staff’s shoes to a degree, understand what their pain points and concerns are. Don’t forget, your frontline staff are your experts in the actual day-to-day operations of the organisations involved: they know where the problems are, they know what works and what doesn’t work.

A huge part of winning people over is simple: it’s letting them know that they’re being heard. Just asking their opinion can help to build those bridges. Often, when people feel like they’re contributing to the solution, they are much more likely to get behind any changes.

Where independent parties like Saros Consulting can be invaluable is in their neutrality. We work with all parties in a merger to evaluate the robustness of processes, systems, and teams across entities, and offer an impartial assessment. We’re not part of either organisation, we’re here to facilitate the smoothest transition to this merger or this acquisition. Our duty is to make sure that all parties are making informed decisions that will ultimately lead to optimum gains.

Agility in Action: Aligning IT and Business for Seamless Integration

Planning ahead will also be a vital step in any successful M&A, and this will resonate with the IT function. It sets the stage for effective IT integration. Your IT teams all have their day jobs and their plans and roadmaps for the year. When an M&A is announced, the IT teams are hurriedly drafted in to focus on integration, but sudden priority shifts can strain an organisation’s day-to-day operations.

Early dialogue between IT and business leaders is crucial to establish where business priorities meet technical feasibility, helping to set a realistic integration timeline and prevent unintended impacts on business continuity. Having an independent team facilitate these conversations objectively and coordinate all stakeholder inputs can provide added structure, yielding an accurate assessment and adaptable post-merger plan. By taking an entirely objective view with the interests of the merged entity at heart can help build out a holistic approach.

These early conversations help define both goals and possibilities. Flexibility is essential, as new challenges or constraints may arise, requiring adjustments to the initial integration plan. This iterative process—engaging early, aligning expectations, and revisiting goals when needed—ensures a smoother, more resilient transition.

A structured framework can play a vital role in coordinating the integration process. By establishing clear guidelines and processes, a framework helps teams align priorities, timelines, and resources, even as new challenges surface. With a solid framework in place, each phase of the merger can proceed with a balance of flexibility and stability, empowering both IT and business leaders to respond to unforeseen issues while keeping the overall strategy intact. This structured yet adaptable approach enables organisations to stay agile, maintaining focus on their ultimate objectives as they work through the complexities of integration.

From Vision to Reality: Navigating Tech Complexity with Due Diligence

Successful integration requires a shared understanding between business and IT teams, especially when it comes to project timelines and costs. Business leaders may anticipate certain timelines and budgets, but as the IT teams begin deep dives, they often uncover complexities that weren’t visible at the outset. These insights can shift the project’s scope, sometimes requiring additional resources or extended timelines. The key is fostering alignment between business strategy and technical execution while accepting that some changes are inevitable. Flexibility and ongoing communication allow both sides to adjust expectations as new challenges or requirements emerge, helping to keep the project on track and focused on long-term success.

This alignment starts with a robust due diligence process. Far from being a mere formality, due diligence serves as a critical foundation for integration, offering a clear-eyed view of the technology landscape. Comprehensive due diligence goes beyond risk assessment to include alignment on priorities and early identification of potential pain points in systems and infrastructure that may require adjustments post-merger. This process allows IT and business teams to agree on where resources are most urgently needed and to set a realistic roadmap that factors in flexibility.

One area of critical importance during this due diligence stage is that of technical debt, which can be a real stumbling block in any M&A. For instance, one party may have a system with high software licensing costs set to expire in 12 months. Ideally, migration off the legacy system should be swift, but the process may prove more complex than anticipated, stretching beyond the expected timeframe and adding unforeseen delays, costs and inefficiencies that have not been budgeted for.

This is where incorporating Technology Lifecycle Management (TLM) within due diligence is invaluable. It provides a full inventory and status report of each organisations’ IT assets – the physical infrastructure, software infrastructure, cloud infrastructure, software licensing – and where all those components are on their lifecycle, which is vital to provide a clear picture of the technology landscape and highlighting any technical debt. There are going to be ticking time bombs within those assets, and early intervention and proper planning, with in-built flexibility will be critical to avoid or mitigate those stumbling blocks. This foresight equips teams to plan migrations and system updates more effectively, ensuring that they can allocate resources and create realistic timelines from the outset.

By embedding due diligence with alignment processes and TLM insights, organisations not only mitigate immediate risks but also establish an agile framework for handling the evolving challenges of integration. This early, detailed planning empowers both IT and business leaders to navigate technical complexities with greater confidence, enhancing adaptability and keeping integration on track toward sustained success.

The first quarter of 2024 saw a 36% increase in global M&A deal announcements but despite growth potential, the failure rate of M&A deals could be a lot higher – that is, if the deals are not proactively managed from every aspect to uncover & address potential friction points early on. Studies by Harvard Business Review and other sources report that between 70% and 90% of M&A transactions fail to achieve their investment thesis, with many destroying shareholder value rather than creating it. But by focusing on clear communication and early engagement in the pre-merger phase, the merging entities are more likely to build a solid foundation and create a balance that aligns with the merged organisation’s long-term goals.

At Saros Consulting, we understand the intricacies of post-merger IT integration and have witnessed the value that comprehensive due diligence and IT planning during the pre-merger phase can bring. Our experienced team can help your organisation ensure a seamless transition for maximum value.