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Mike Harrison

Businesses need to tread carefully when implementing mergers and acquisitions. Both sets of management and advisers involved in the recent merger of Berry Birch & Noble and Berkley Financial Services will have spent months devising and honing the strategy that brings the IFAs together. The ultimate aim is the creation of shareholder value – the corporate holy grail. There will be an audible sigh of relief when all the legal and regulatory hurdles have been overcome. However, at this stage, not one penny of value has been created. The success of the merger cannot be judged until integration has taken place.

The figures vary but all the research is consistent in confirming that the majority of mergers fail. The reasons for failure are inevitably to be found in the implementation of the merger. Inadequate planning scuppers many deals and only one in five acquirers appears to have devised a clear implementation plan. Then there is the planning and implementation of the post-merger integration. Too often, the managers responsible for integration have day jobs to do as well. There is also a lack of consistent process or methodology and, frequently, managers have little experience of handing integrations.

Too many managers pursue their own agendas, where self-preservation is paramount, and a lack of early wins can lead to a loss of momentum. It is also the case that too often mergers are dogged by poor and sometimes conflicting communications. There is little worse than an announcement explaining or even correcting the previous announcement.

Last and most important, culture is often ignored, with the underlying assumption that the acquirer&#39s existing cultural values and working practices will automatically and enthusiastically be adopted in the newly merged business.

Unfortunately, there is a tendency to regard implementation as low-value operational work, with too few senior managers prepared to roll up their sleeves and lead from the front, which may explain the high failure rate. This can have disastrous consequences for the merged company, particularly in the so-called people businesses such as IFAs and providers of financial services products.

The main assets of the business – key executives with responsibilities for customers, leadership and the support areas of the business – can quickly become disillusioned and leave. This can damage morale and a downward spiral ensues, leading to another failed merger.

The difficult market conditions that businesses are experiencing dictate that mergers inevitably require cost-cutting – in real terms, redundancy. Very often, with IFAs, the cost-cutting is targeted at the support services, often with little thought for the impact on the sales and servicing of customers. The manner in which this is handled will in turn send signals to the workforce about the type of company that is being created.

Too often in mergers and acquisitions, a them-and-us culture can start to dominate what should be rational business issues. Selection of people for new positions can become determined by the new boss simply appointing the people who previously reported to him or her pre-merger, ignoring the claims of better qualified executives from the acquired business. It is essential that an effective communication plan is in place to keep people fully informed of what is going to happen next. It is very important that deadlines are met consistently.

While there are a lot of pitfalls – and the business schools are littered with case studies of failed mergers – the odds of success can be improved significantly by providing the appropriate expertise and impartiality. As every IFA knows, selecting the right adviser makes all the difference.

Mike Harrison is a director of Integrum


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