Few events in the life of an organization have more potential for disruption than an M&A transaction. An acquisition, divestiture, or other change in ownership can spark dramatic change in how people are employed and motivated in every part of the business. Figuring out how to keep the right people in the right slots to keep the organization running smoothly—even as some positions are eliminated—should be a top priority for deal teams.
Too often, it’s not. And the consequences for deal value can be serious. Neglecting organizational design issues can cause a loss of key talent, confusion about new or overlapping roles, and poor morale. When acquirers don’t address organizational issues adequately prior to close, they expose the target organization to avoidable risks.
On the other hand, companies that build organizational design into the deal process and carefully plan for new talent, roles, and reporting structures can get through M&A transactions smoothly, with all hands pulling together in the same direction.
In this paper, we show how C-suite executives and transaction leaders can make the right people and organizational-design decisions, manage risks, and effectively communicate the rationale and objectives of the deal to internal and external stakeholders.
Below we look at organizational issues during M&A in four phases
1. Defining organizational risks
Deals often bring significant changes to a company’s operations. Without a thoughtful approach to defining and developing a model and structure to support these operations, leaders will likely find themselves unable to align their stakeholders to mitigate potential risks that can arise—risks that could derail a deal or erode the intended value.
An important step in addressing design challenges is to define and understand the organizational risks that are inherent with deals. This step includes looking across the organization to understand risks such as the ability to maintain business continuity or retain key personnel and then develop solutions to mitigate those risks.