I went to a very interesting breakfast ‘roundtable’ this morning, hosted by People in Business (PiB). We were there to talk about Employee Communications During Mergers & Acquisitions and to mark the launch of a book by the same name written by PiB’s Jenny Davenport and Simon Barrow.
There were a few grim faced, hardened old M&A advisors at the table and some of the things they said got me thinking about their trade.
Why is it that M&A advisors are not subject to qualitative measurement around the long term value created by the transactions they advise on?
Seems to me that they are simply measured on the total fees they manage to acquire in any given year. Check out this list of 2009’s top ten M&A advisors to see what I mean. I had a hunt around for a top ten based on long term sustainable value creation and couldn’t find one.
There is plenty of research which suggests that M&A activity fails to create value for the companies involved more often than not. The failure rate of mergers and acquisitions is similar to that of any large corporate change initiatives – around the 70% mark. And in both cases, it is the so called soft stuff that is widely recognised as the root cause of failure. Insufficient attention to the people agenda, clashing cultures and poor communication in particular.
If the M&A advisors know this, why is it that they don’t do something about it – or at least advise their clients to? It’s because their focus is on getting the deal done. Their priority is to sell the financial and operational value of the deal to the analyst community and institutional shareholders. And these guys have a short attention span. They are looking at the share price graph on the day of the announcement. They are not really interested in how well the company will be performing in 5 years time. And the advisors are interested in getting their fee – which is obviously paid upon completion, not incrementally on a long term performance related basis.
The same can be said of executive search and recruitment. How many head hunters are measured on their ability to fit the right person into a senior leadership role in a company on any long term success metrics? How many would be willing to accept that they got it wrong? None of course. It’s a numbers game, and their job is done once the offer has been accepted and their cheque is in the post.
Actually, I believe that the clients get it. Companies are far more likely to instruct external specialists to conduct cultural due diligence than the advisors. PiB said as much today when I asked them how many of their clients came from advisor instructions. The answer was just one out of the 26 significant M&As they have been involved in. In all other instances it was the company or companies involved in the transaction that called them in.
PiB also mentioned that recent research conducted by Brewin Dolphin indicates that these same PiB clients have outperformed the FTSE 100 index by 68% since the relevant transaction.
So why am I banging on about this?
Because I am communications professional and I believe with all my heart that the role we have to play in the day to day running of a business, and in particular at times of major corporate change, what we do or don’t do has a serious impact on company performance.
Internal Communications is all about creating a climate inside an organisation where the major factors that influence employee engagement can thrive: respect, trust, openness and recognition.
We represent the conscience and the consciousness of the company and no-one is better placed to advise and deliver on the hardest bit during times of change – the soft stuff.