Key to M&A Success: Aligning Organizational Capabilities to Drive Strategy

Published: May 14, 2018
Modified: May 20, 2020

BY REED DESHLER

If you’ve ever worked in a company that was acquired, but several years later it still felt like the two companies were separate, you know that merging businesses financially doesn’t necessarily result in a full integration of the organizations. The right acquisition can be an incredible catalyst for organizational growth—which is why the market is always abuzz with hype about potential M&A deals. Unfortunately, in far too many cases the hype fizzles into a disappointing reality: The merger or acquisition ends up failing in the market or doesn’t live up to its promises or potential. Is this high attrition rate inevitable? Or can something different be done to avert the risk and allow leaders to more reliably tap into the unrealized value of a well-matched acquisition?

Cracking the M&A code

When M&A failures are analyzed, it becomes clear that many occur not because of poor financial or strategic planning on the part of the organization’s leaders, but because adequate time and attention were not focused on assessing and planning for the organizational alignment between the two companies. At the time of any acquisition—or even long before—the leaders must have a clear concept of how the organizations will come together organizationally and operationally. It’s important to spend time considering how to integrate the strategic organizational capabilities of both companies in a way that takes full advantage of synergistic opportunities between them.

Two key questions to facilitate alignment

How can leaders begin to align disparate organizations and business models? It starts with strategy. When considering or undertaking a merger or acquisition, be sure to discuss the following two questions:

  • How will combining the two companies’ capabilities generate distinct value in the marketplace?
  • How can the capabilities of the two organizations be integrated to drive that strategy?

Organization design is a critical component of any such discussion. Consider which processes of the combined organizations will create the greatest competitive advantage and what work can be centralized for cost reduction. Integrating the organization in the proper sequence also is important. The acquisition’s business-model impacts and differentiating capabilities should be understood and aligned before you consider operational cost-saving issues, such as the integration of back-office work.

Successful M&A demands alignment

A deal that makes a lot of sense on paper is a good start. But it’s only a start. Remember that all organizations are perfectly designed to get the results they get. Simply acquiring a company and saying “now you’re part of us” won’t change the way people think and act. And until thought patterns, behaviors, and work change, you can’t expect different or enhanced results. To follow through and reap the benefits you desire from a merger or acquisition, you must ensure that the two organizations merge not just in theory but in practice—and in a way that is strategically designed to make the most of their combined capabilities. The leaders must sit down and define the value created through a merger, along with the capabilities that must be developed or enhanced to create this value, and then make the necessary changes to the structure of the organization. Only then will they realize the results they anticipate.

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About The Author
Principal of AlignOrg Solutions, Reed Deshler specializes in developing strategic organization designs and helping companies bring them to fruition. As an organization consultant, he works with executive teams and HR teams to define winning strategies, align their organization and business models for success, and mobilize employees and stakeholders in the desired direction. He’s guided Fortune 500 companies—including 3M, Abbott, Hertz, Chevron, Cisco, and General Mills—as well as middle-market businesses and nonprofits through change successfully and helped them solve complex organizational challenges. Deshler is co-author of Mastering the Cube: Overcoming Stumbling Blocks and Building an Organization that Works, a guidebook that outlines AlignOrg Solutions’ organization alignment process. He regularly writes and speaks on issues related to organization transformation and ways to implement—and create buy-in—among stakeholders for new business designs. Learn more about becoming an Alignment Leader.