Making the Business Marriage Work

April 23, 2013

Shared values are key to any successful business merger or acquisition

Can you imagine spending millions of dollars to buy a valuable business and then dismantling it so that its value disappeared?

Unfortunately, this scenario isn’t all that uncommon in the world of acquisitions and mergers. Before becoming a business consultant several years ago, I lived through this exact situation as a vice president with a highly successful community business bank. It was a dream job with a talented team of people growing a business that really cared about its customers, its employees, and contributing to the community. We were a “relationship bank,” and everything we did focused on helping our business clients grow and prosper, which in turn helped our bank to grow and prosper.

After nine years, the bank was sold to a larger retail bank who wanted to be more successful in attracting and retaining small- to medium-sized business clients. They liked our client-centered approach and the financial success we’d achieved. They said they wanted to adopt our business model and expand it into the other communities they served. Sounded like a perfect fit!

One vitally important question that was overlooked in the acquisition process, though, was whether the values of the two organizations were compatible. On paper, the business fit was excellent. However, the organizations’ values weren’t in sync. My experience then, and now as a business consultant, is that while business fit is essential, shared values also are key to any successful merger or acquisition.

A story to demonstrate that point… During the community bank’s acquisition, we were advocating to make things easier on our business customers as they went through the tedious process of transferring all their loans and accounts into the new bank’s systems and formats. We knew one of the processes would be tremendously difficult, frustrating, and time consuming for our business clients, and we were lobbying for a different approach. One of the managers with the new bank said, “You know, you might as well just quit advocating for this. We’re just fly-specks in this whole equation, and no one really cares what we think.” Yikes, I thought, fly specks are just poop, and really little poop at that!

As it turned out, the retail bank (which no longer exists) systematically dismantled all the relationship-driven services, processes, and procedures that had made the business bank successful and merged the clients and employees into their already existing retail banking structure. Clients and employees scattered to other banks, and the value of the investment disappeared.

It doesn’t have to be that way! The positive experience of one of our accounting firm clients emphasizes that it is possible to achieve great success with a merger or acquisition if you pay attention to the values fit, not just the business fit. A little over a year ago, upon completing an assessment of both business and values fit, our client acquired a competing firm. After we worked together to develop a strategic acquisition and implementation plan, they merged their complimentary practices and compatible employee teams so seamlessly that they were able to maintain all current client relationships, attract new clients, and increase the firm’s capabilities and revenue beyond expectations within the first year. And, a recent phone call from the managing partner confirmed that “our second tax season together was even smoother and more profitable!”

How can you assess the “values fit” for any merger or acquisition?

  1. Assess your own organization’s values. Identify what your business stands for and believes in – not just the words espoused but the actions that demonstrate the real values. For example, one of our clients describes their values as “the passion to excel and accomplish great things” and “the humility to respect and learn from our colleagues and competitors.” And, their decisions and actions consistently demonstrate these values every day.
  2. Ask the principals, senior executives, and employees of the other organization what’s most important in their business:
    • What’s their mission?
    • What are their values – what do they stand for and believe in?
    • How do they measure success?
    • How do they treat their customers and employees?
    • What are some stories or examples that speak to these values or success measures (or that seem contradictory to them)?
  3. Ask yourself whether you’d enjoy working with the new people? One executive we know asks himself, “How would I feel if I were stuck in a remote cabin with these people for a weekend? Do I think that would be a positive experience, or would I want to run the other way after two or three days?”
  4. Read everything you can get your hands on about the new organization to see what values “jump off the page.” Look at stories, interviews, annual reports, websites, blogs, and internal memos or emails.
  5. Ask other people what they think, especially people whose opinions you trust, such as colleagues, customers, competitors, industry leaders, media representatives, consultants, vendors, or legal and accounting advisors.

Once you’ve done your values research, the final test is to trust your gut! Ultimately, your gut will tell you whether the values are a fit or not. Don’t try to talk yourself into a merger or acquisition that doesn’t feel right just because it’s a great business fit. It’s worth making the effort to find the right values fit too!