The economic downturn and the COVID-19 pandemic have forced companies to rethink their business strategies and explore new revenue opportunities. For some, that has led to growth, while others have struggled to compete. Despite the economic uncertainty, the window for mergers and acquisitions (M&A) has remained open (even if only slightly), and will get larger as companies adjust to this next version of normal. During the 2008 recession, M&A deals were down 31% year-over-year, but there were small pockets of opportunity for those who did their homework prior to the downturn, which allowed them to take advantage of the current landscape. We expect the same will hold true in the latter part of 2020 and into the new year.
M&As are a long, arduous process for any organization. In fact, studies have shown that 70 to 90% of M&As fail, making a clear strategy and plan for execution critical. There are so many layers to consider; beyond merging revenue streams, companies need to blend cultures, make branding changes, differentiate product sets, establish new leadership, and shift job functions. Organizations need to dive deep into their M&A strategy in order to make effective decisions, as these decisions will shape the long-term success of the new company.
Managed service providers who have found their ideal partner company need to remind themselves throughout the process that there will be ebbs and flows. Here are three tips MSPs should consider during the M&A process:
Manage Leadership Changes
Leadership changes are one of the biggest challenges in any M&A situation, and likely the most sensitive area to address. While some role changes may be accepted with open arms, others who have worked in the organization for years may feel as though they have been displaced. As such, leaders should approach any role changes strategically, cautiously, and with empathy.
When it comes to making decisions at the executive level, a unanimous decision among the executive team is important to ensure that everyone's voice is heard. These bigger decisions can range from who to name as the new CEO, where official headquarters should be located, employee retention, financial decisions, and future acquisitions. It is important for the new executive team to understand respective roles and responsibilities and stay within their designated job functions. Change can be difficult (and sometimes uncomfortable), but trusting in colleagues to do the right thing is essential for the organization's overall success.
Manage Employee and Customer Relationships
Managing employee and customer communications pre-, during, and post-M&A is critical. Employees want transparency into what the change means for their job security, responsibilities, and future prospects. Customers want to know they will still receive the same level of customer service and won’t experience any disruptions. To avoid mixed messages, there needs to be a primary point of contact for each. The leaders of the respective M&A companies need to share their decisions and, when possible, the reasons behind them. This will lead to trust of the new organization and cut down on speculation about business-level decisions.