The Merger Mindset How to Get It Right in the High-Stakes World of Mergers, Acquisitions, and Divestitures

The Merger Mindset offers a unique perspective for leaders?those executives whose companies, reputations, and futures will thrive or fail because of a deal or a series of deals. This book for leaders helps decision-makers deal with the powerful undercurrents and interpersonal dynamics at play in every deal, and no one is more qualified to write it than Constance Dierickx and Linda Henman.

Other books on mergers, acquisitions, and divestitures overwhelmingly have one characteristic in common: they?re technical. Attorneys write books about the legal and contractual aspects of deals; project management experts write from the point of view of managing tasks and schedules; and investment bankers write about valuation and negotiation. The Merger Mindset presents an amalgamation of what Drs. Dierickx and Henman have observed?and in many cases, helped to create?in more than 65 cumulative years of consulting with Fortune 500 companies, privately-held firms, family-owned businesses, and military organizations. Their in-the-trenches experiences spurred them to arrive at this premise: To position their organizations for more success, leaders can?t shy away from the high stakes, tough decisions about their futures.

This book maps the key steps in the M & A journey. It takes the reader through how to make the decision to grow acquisitively, identify roadblocks and typical wrong turns, and ultimately shows how to unlock their decision-making potential while navigating an increasingly uncertain world. Through compelling stories and surprising research findings, readers will discover that there?s much more to the decision-making that drives M & A deals than they ever imagined, and they will come away with tools to help them deepen their understanding of what it takes to succeed. A fascinating read, the text weaves lessons that surface from the stories with highly pragmatic advice about suggested mindset, checklists, processes, and diagnostic tools. Readers will understand that while M & A deals aren?t simple, leaders don?t have to overly complicate them either. Instead, they can simplify the process if they remember hope shouldn?t serve as a strategy, and they can?t abdicate or delegate their leadership responsibilities.

The lessons from mergers and acquisitions are critical to those considering a deal, but applied elsewhere, they have equal value, even though noticing them takes more effort. This is the essence of leadership: doing the hard work of ensuring that the gulf between strategy and tactics does not lead to either over simplification or needless complexity.

Contents

Acknowledgments ix

Introduction xi

Part I High Stakes 1

Chapter 1 The High-Stakes World of M&A 3

Why Do a Deal? 4

Five Essential Traits of a Successful Deal 6

Deal Progression 11

Vision 14

Financial synergy 14

Operations 14

Talent 15

Culture 15

The Insidious Nature of Fear 16

Conclusion 20

Note 20

Chapter 2 High Stakes: High Risk, Low Visibility 21

Betting on Value 21

Are You in Jeopardy? 24

What People Think of You Matters 27

No One Likes Shaky Ground 29

Gambling with Loyalty 33

Conclusion 36

Note 36

Chapter 3 Think of All We’ve Been Through 37

Where We Have Been 37

Where Are We Going? 40

How Will We Know When We Get There? 42

What Good Will It Do? 46

Tough Calls Start with “Why?” 48

Conclusion 50

Notes 51

Part II Leadership Traps 53

Chapter 4 Necessary Uncertainty: Overconfidence,

Rationalization, and Bias 55

You Can’t Shine a Light in Every Dark Corner 56

Overconfidence 59

Rationalization 62

Bias 63

Spreadsheets Don’t Make You Smart 67

Conclusion 70

Notes 71

Chapter 5 Talent Is Not Your Greatest Asset 73

Take the Risk Out of People Decisions 73

E5 Star Performer Model 76

Ethics: Doing Well by Doing Right 77

Expertise: The Raw Data of Talent 78

Excellence: Consistency of Performance 78

Enterprise: Setting the Bar 79

Experience: The Yesterdays That Define the Tomorrows 79

Leading through Ambiguity 80

Whom Do You Want to Leave? 84

Why You Need Gyroscopes 86

Conclusion 90

Notes 91

Chapter 6 Critical M&A Decisions 93

What It Takes to Decide 94

If I Only Had a Heart 98

Courage Is Not Recklessness 100

The Rewards of Heavy Mettle 102

Deals Create Decision-Making Traps 104

Groupthink Trap 104

Complexity Trap 105

Status Quo Trap 106

Anchoring Trap 107

Sunk-Cost Trap 108

Inference and Judgment Trap 109

Conclusion 109

Notes 110

Part III Correlations, Cause, and Culture 111

Chapter 7 Sailing in Uncharted Waters 113

Rough-Water Rafting 114

Implement or Drown 116

The Messiness of Metrics 119

Keep Your Customers in the Boat 123

Run a Triple Play 125

Conclusion 130

Notes 130

Chapter 8 This Makes Cents 131

Formulating the Strategy for the Deal 132

Setting Criteria for the Deal 134

Identifying and Evaluating Targets 137

Evaluating People and Planning Succession 139

Integration 142

Conclusion 145

Notes 145

Chapter 9 Elements of Culture 147

Beyond the Code of Conduct 148

Setting the Pace 152

Organizational Learning 153

Capacity and Appetite for Change 157

Building New Neural Networks 160

Conclusion 162

Notes 163

Chapter 10 You Bought It; Don’t Break It 165

Integrating with a Merger Mindset 166

Set Objectives; Measure Success;

Reap the Benefits 168

How Will You Be Better Off If You Integrate? 171

Integration Do’s and Don’ts 174

Cast Your Leadership Shadow 177

Conclusion 181

Notes 181

Index 183

Constance Dierickx helps organizations turn volatility into opportunity. Senior leaders hire Constance to help them grow their businesses—especially in turbulent situations that require courageous leadership. She has consulted to organizations in Europe, the Middle East, South America, Canada, Mexico, and the United States. Clients include companies from the Fortune 50 to startups in industries such as asset management, banking, entertainment, insurance, logistics, manufacturing, private equity, retail, restaurant, technology, and wholesale services.

Early in her career, while a broker at Merrill Lynch, she observed firsthand the power of emotion and perceptual distortion on major decisions. Her curiosity about the behavior of both clients and colleagues led her to study psychology and business and to earn a Ph.D. After joining a global consulting firm, she became a key resource to boards on top leader succession and organizational transitions, whether planned or imposed.

Constance has worked with companies such as AT&T, AutoTrader.com, Bank of America, Benckiser, Boys and Girls Clubs of America, Cox Enterprises, IBM, Centers for Disease Control and Prevention, Johnson Controls, Manheim, Next Gear Capital, Olive Garden, Reckitt and Colman, and Zenith Data Systems.

She is known for her sharp insights and pragmatic advice. Her point of view is sought by publications such as The Wall Street Journal, Boards and Directors, Corporate Board Member, Directorship, Fortune.com, People and Strategy, and Chief Executive. Additionally, Constance is the author of High Stakes Leadership, which Taylor and Francis publishers released in 2017.

Dr. Linda Henman, who is known as the Decision Catalyst ®, is the founder of the Henman Performance Group, a leadership consulting firm located in St. Louis, MO. Linda helps C-suite leaders make decisions that they must get right and can’t afford to g