Many CEOs believe a true test of their leadership occurs when their company is being sold, or when it acquires another company. An even more important test: how to lead the new company.
Right now, several thousand CEO's of private middle market companies are involved in an M&A transaction or contemplating one soon. Many follow a careful approach to acquisition planning. They read books and articles, and attend conferences and seminars that present best-practices for selling, buying or acquiring add-ons to their business. They attempt to learn all they can about M&A by themselves.
All that prep work is a good start. Here are the next five steps to take ensure success after closing:
1. Re-establish the company's vision and values.
Vision and values drive success. Every employee must understand and buy into your vision or they probably won’t support or promote it. After a transaction closes the cultural change may be significant enough that a fresh vision is needed. When employees understand your new vision and values, it is more likely they will embrace it. This gives employees a sense of ownership and commitment and that drives both their success and your company’s success.
2. Share information and knowledge.
After a deal gets done, people wonder what it all means for them. Will their job change? Or worse, could they lose their job? At a time when integration and growth are vital, sharing information and knowledge can become difficult. Co-workers lose trust in each other. In the case of an add-on transaction, the new employees have no bonds with the new company. There is little or no trust. C-level executives must step up and share information freely and openly with these new employees to assure employees regarding their job status. Doing so will improve job satisfaction and ultimately employee productivity. This will translate into post-transaction success for the firm.
3. Be a good communicator.
After a deal is done, things can quickly become hectic and busy. Sometimes, due to increased workloads, the CEO and the executive team hold up in their offices and rarely venture out to talk with employees. Or worse, instead of making human contact they send out emails and memos. There is no substitute for getting out and actively engaging with employees. While email and other documents may be valuable and necessary, there is no substitute for spending time with people face-to-face. One-on-one visits are especially helpful and improve employee morale. Don’t wait - communicate early and often!
Leadership does not mean being the lone kingpin. The best CEOs create organizational leaders. Few things rapidly create shareholder value as when the CEO can turn to a strong group of lieutenants to make things happen. Companies need cool-headed leaders who can motivate and lead employees. You can’t do it all. Lead your leaders!
5. Actively develop the company's culture.
If you don't do this, no one else will. I remember being part of a significant transaction a number of years ago, and almost immediately after the transaction closed the culture began to deteriorate. Morale dropped and people were leaving for jobs at other companies. The turnover was extremely detrimental. Instead of engaging to address the negative culture, the CEO assigned a task force to do it, and he was not on the task force. Within two weeks, four of the seven members of the task force were gone, taking positions at new companies. A transaction can change the culture of a company and make it better, but, the CEO must set the tone and lead to create a high-performance culture.
The leadership of the CEO and the executive management team will be vital to the ultimate long-term success of any M&A deal. It is the perfect time to step up.