More to Mergers Than the Numbers

Last week I was chatting to an investment house who actively takes a part in the management of their investments in an unusual way. Rather than simply invest and turn a penny, they have been actively assisting their boards with a range of ideas and services to (gently) transform the business by making the Exec Team more aware of the existence of specialist skills, and where the Exec Team was expected to add value and expertise.

It struck me that this (refreshing!?) attitude and approach was quite(!) unusual and I reflected on some of the disastrous combinations I had seen and why that was…

I reckoned on four or five things but the main “gap” was around style. Communication style was certainly up there as was “lack of…” but the main one was management style. Culture if you will.

So, what lessons have I taken from it all… Financial Due Diligence… yes, of course we must. However, that has to reflect some upside from coming together surely? And where will most of that upside come from I wonder?

Some cross selling of “stuff”? Indeed!

Other back office “synergies”? Very probably.

Case by case it varies… some hygiene factors will minimise the risk of failure but the big area for exploitation has to be the buzz that the enlarged management team gets from working together, learning “stuff” and sharing ideas – all of which will be more optimal in a high energy, collegiate and, I venture, friendly environment. Why then with so much to gain, to so few business combinations spend so little on “people due diligence” and board effectiveness…?

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