When I checked my Twitter notifications today I had a challenge question from Bruce Kneuer asking How might social alter M&A? I have a clear view about that as most mergers fail, and mostly due to people and culture incompatibilities - all found out too late. A socially-enabled company - a social business - will not only mitigate those risks but will also reduce the time-to-value of the acquisition or merger. Faster time-to-value means less head in the mire of integration and reorganisation and more time in the market - beating your competitors.
Bruce is an IBMer working in the #smarterworkforce team on the East Coast, and he was responding to a nice easy-to-read post by "exiled Zimbabwean" Damian Corbet which included a quote from a recent Linkedin post of mine.
So how might social alter M&A?
Here are four important ways, bearing in mind that I'm using "social" as meaning social technologies inside and outside the enterprise:
- Due diligence on a social-enabled acquisition will reveal a lot of tacit and even startling information about the target (or potential partner) company that will not be revealed in a carefully crafted and stage-managed "war room". You'll find out what the employees really think, how the executives relate to today's world, and how flexible and adaptive the company and its people appear to be.
On the other side of the coin the company being acquired can do the same to the Acquirer and perhaps alarm bells will start ringing, or confidence will grow?
- If one company is highly socially-engaged and uses social as an important business enabler and the other is not then executives need to take this very seriously - this is a serious risk factor. The cultural change is a risk, as is the time and effort necessary to bring the non-social company into the social mindset. Is all this going to distract and reduce significantly the time-to-value of the merger?
It's a serious question but probably overlooked by the merger teams at this time. It reminds me of the way companies used to acquire and emerge without a look-in by the CIO or discussion of their systems - much to their regret many suffered horrendous systems integration problems which impacted their financial performance for years. Don't let this happen in social - it will if you ignore this factor.
- If the Acquirer is large and wanting to acquire a smaller company for it's new ideas and innovation and if the smaller company is very socially-engaged and the larger one not so, then you can see the obvious failure that is going to occur here. The acquired people will leave much faster than otherwise and the larger company will not achieve the promise of the merger, despite the brave face to the analysts. And given that many smaller companies are very socially-active from the CEO down this is a serious issue for larger acquiring companies.
- Finally, with respect to internal social media - enterprise social networks - people being merged into a company need to find their reference networks, get access to information, and get questions answered as efficiently as possible in order to become fully productive.
Unless the acquiring organisation and the company being acquired all fit on the one floor of one building then the synergies and "speed to value" of the merger will be significantly affected by the ability to collaborate and share. So organisations which are internally socially-enabled will achieve faster "time to value", higher employee engagement and contribution and more rapid innovation than competitors which are not social businesses.
I'm sure that you can think of other ways in which being socially-enabled will affect M&A. How about the simple idea that people in a company being acquired would feel much more comfortable if they could see that the executive team of the acquirer were active, open and transparent in social, and were human?
Which other ways can you suggest?