What do you get when you combine an industrial conglomerate and a software company? A conglomerate merger, of course. Conglomerate mergers are strategic alliances between two companies that operate in different industries but share common interests, such as markets, customers or technologies. While there are many benefits to a merger – including cost savings through shared services, expanded product lines and brand recognition – completing the transaction is challenging for even seasoned executives. The complexity of combining businesses with different capital structures, accounting systems and ownership structures often makes completing a successful merger challenging for both parties. However, with the right preparation and execution strategy, you can successfully complete your conglomerate merger and achieve your ultimate business goals.
Reset Culture and Communication
One of the first things you should do before beginning a merger is to reset the culture and communication between parties. This may sound obvious, but it’s important to understand the potential for miscommunication between parties – and how damaging it can be to a successful merger. In order to best gauge how the merger process will go, it’s important to accurately gauge the parties’ communication preferences, styles and biases from the start. This includes considering how the parties prefer to communicate, whether parties prefer in-person meetings or virtual meetings, and whether the parties prefer written communication (like emails). It’s also important to gauge the parties’ communication biases. This includes determining whether parties’ communication is biased towards facts and data, feelings or a combination of both. Knowing the biases of the other parties will help you communicate more effectively and help reduce miscommunication before it occurs.
Go to the Merger Table Prepared
When parties are first brought together to discuss a potential merger, emotions run high and it’s easy to get lost in the weeds. To keep the focus on the ultimate goals of the merger, it’s important to go to the merger table prepared. Before beginning discussions with the other party, clearly understand the goals of the merger for your organization and the desired outcomes for the other party. This includes understanding what the other party brings to the table, the challenges the other party faces and the goals and objectives of the other party. Once you clearly understand the goals of the other party, you can determine how your organization can best support those goals. This will help you determine how you can offer the other party value through the merger. This also allows you to focus discussions on achieving the goals of the merger for both parties and avoiding getting lost in the weeds.
Merger-time Cultural Diagnostics
If you’ve reset the culture and communication between the parties and are now prepared to go to the merger table, it’s time to conduct a merger-time cultural diagnostic. Cultural diagnostics are tools that allow you to accurately gauge the organizational culture of the other party and identify potential sticking points and issues. There are a number of cultural diagnostics tools, including diagnostic surveys, organizational design and cultural fit assessments. These tools allow you to accurately gauge the organizational culture and identify potential sticking points and issues. Once you’ve conducted a cultural diagnostic, you’ll understand the party’s organizational structure, key decision-makers, common pain points and potential sticking points. This will allow you to better prepare and respond to potential issues during the merger process.
Build a sense of urgency
Before you enter into discussions about a potential merger, you should build a sense of urgency among the decision-makers on the other side of the table. This will allow you to be more strategic and focused during the discussions and help ensure that you’re working towards a deal that truly meets the needs of both parties. There are a number of ways to build a sense of urgency, but they all focus on helping the other party understand the urgency of completing a deal with your organization now. This could include quantifying the potential benefits of a merger, conducting analysis of the competitive landscape and understanding the urgency of meeting pressing milestones. Once you’ve built a sense of urgency, you can help ensure that all parties are focused on achieving a deal that truly meets the needs of both parties. This will help ensure that the discussions remain focused and help prevent any side-tracking that may lead to a deal that doesn’t fully meet the needs of both parties.
Negotiate key merger terms
Negotiating the terms of a merger is often an intimidating process, but it’s important to understand that all mergers are negotiated mergers. While there are some terms that are generally agreed upon – like equity ownership and financial terms – there are also a number of terms that are up for negotiation. This includes everything from the terms of the actual merger agreement to the governance structure of the new company following the merger. Cultural fit assessments, organizational design and cultural diagnostic tools will help you identify key terms and issues that are up for negotiation. The best way to negotiate these terms is to begin with a splash page. A splash page is a document that outlines the key terms and issues that are up for negotiation, and it’s often presented in a schematic format that’s easy to understand and follow. Having a splash page will help you stay focused on the key issues and will help keep discussions focused and strategic.
Determine what to sell and what to keep
While details of the financial structure of the merger will likely be negotiated, the terms of what to sell and what to keep are generally agreed upon. However, it’s important to determine what to sell and what to keep well before the merger is finalized. Why? Because it’s important to have your ducks in a row before the merger is completed. Having your ducks in a row will help ensure that there are no surprises following the merger and that the new company is able to operate as effectively as possible. Having your ducks in a row also gives you time to properly inform key stakeholders and employees within the organization. This allows you to properly prepare employees for any changes that are likely to follow the merger and assuage any concerns they may have.
Be Transparent From the Outset
In order to build a successful and lasting merger, it’s important to be transparent from the outset. When parties are first brought together to discuss a potential merger, it’s easy to get lost in the weeds and focus on the metrics that are important to your organization. However, to be truly successful, you must focus on the metrics that are important to the other party as well. This includes data like the number of customers the other party serves, their key demographics and the number of employees in the organization. Being transparent from the outset will help ensure that the metrics used to evaluate the success of the merger are the metrics that are important to the other party. This helps ensure that the metrics are relevant and that the success of the merger is accurately determined.
Consolidate Your Shared Services Before Merger Closing
One of the best ways to prepare for the finalization of a merger is to begin consolidating your shared services before the merger is finalized. This includes all shared services, such as IT services, financial services, HR services and procurement services. These shared services are often underutilized and can be easily streamlined and consolidated before the merger is finalized. While you can begin consolidating shared services before the merger is finalized, the most impactful time to do so is immediately following the signing of the merger agreement. This gives you ample time to properly consolidate and transition services following the closing of the merger.
Be Realistic About Timing
The best way to ensure that a merger is successful is to be realistic about the timeline. While it’s important to be strategic and thoughtful during the discussions, it’s important not to rush the process. This will ensure that all parties are adequately prepared to transition into their new roles and responsibilities following the merger. While it’s important to be strategic, it’s also important to be realistic about the timeline. Mergers can often be challenging and require a great deal of effort at the executive level. In order to be successful in the long term, it’s important to have the right people at the table and to be strategic in your approach and decision-making.
There are many benefits to a conglomerate merger, including cost savings through shared services, expanded product lines and brand recognition. However, the complexities of combining businesses with different capital structures, accounting systems and ownership structures often make completing a successful merger challenging for both parties. With the right preparation and execution strategy, you can successfully complete your conglomerate merger and achieve your ultimate business goals.
Related Course: Financial Modeling Skills Course