June 28, 2017

How Empathy Makes Mergers and Acquisitions Successful

“This is the first time I’ve been acquired by a company that felt like it had a soul.”That’s what John Derusso was told after leading an integration. John is the Director of Corporate Development Integration with Cisco Systems and has been for the past four years.

In response to this comment, John says, “This is the aim”. As an integration leader, you want employees of the acquired company to feel comfortable. You need to mitigate their fear, uncertainty, and doubt. John believes you must take care of people through change management.

When discussing why some acquisitions are successful, while others are not, John indicated two overarching reasons: strategy and execution. At times, the acquisition may be executed perfectly, but if the market evaporates, the acquisition will falter. Other times, the strategy may be perfect, but issues arise during execution, such as the resistance of people, or a difference in technology.

“This is the first time I’ve been acquired by a company that felt like it had a soul.”

John thinks it is crucial to consider people from the very start of an acquisition. “Who are they? What is their culture?” John encourages reflecting on the question, “What do people mean to you as an acquirer?” If you associate people with cost, you will act one way. If you think of people as the “wellspring of innovation”, you will act a different way.

A very small percentage of people know an acquisition is going to happen. John believes it is important to remember that employees of an acquired company experience shock. As an integration lead, it is your responsibility to communicate with the acquired company’s leaders to say, “This is our game plan as it relates to people.”

When a deal team discovers a promising deal, the first question to consider as an integration lead is, “Where would we take this integration?” The initial conversation with the seller is aimed at understanding how their company works, followed by negotiation and diligence.

In determining whether a deal will be easy or hard, John says it is key to evaluate how similar or different the company is to yours. If the company is different, it doesn’t necessarily mean it’s a bad deal. It may mean that you - as the acquirer - need to create new capabilities.

Throughout the process, John highlights the importance of empathy. If you want to be a successful integration leader, “Project yourself into their circumstance and feel what they’re feeling in a genuine way.” This is not only the case with employees, but holds true for shareholders, customers, and business partners. John warns of becoming too internally focused during acquisitions. “If you aren’t careful, you can over pivot.” He emphasizes the importance of being transparent with the acquired company’s leadership team.

This transparent and proactive communication is not only important for external maintenance, but internal decision-making as well. While the biggest decision may seem like signing the deal, there are still decisions to be made post-close. To answer the question, “How’s it going to work when we’re done?”, John places ownership on the governance team. “Don’t think of the governance team as an audience, think of them as owners of the outcome.” While it is the integration leader’s responsibility to bring about a decision, the governance team is responsible for convincing one another what the right decision is.

Individual circumstances will inform the degree of integration, but according to John, there is one cardinal rule, “Do not destroy value. The last thing you want to do is detract value from what the [acquired] company brings.” When determining the level of integration, it is important to recognize the harm you could do. How far you integrate is determined by the governance body.

John wrapped up the conversation by discussing his biggest lessons learned. He reiterated, “Literally practice being empathetic. Put yourself in their shoes. See the world as they see it. That will inform how you go about things.” You need to be able to bring together people with different points of view. “Achieving common ground is essential. If you don't have common ground, you don’t have integration.”

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