Perfect M&As: Values vs Egos

Paul J. Siegenthaler

Many merger proposals are motivated by the desire to become the biggest in the industry.


In economic terms size matters, being ‘big enough’ is important, but this does not mean that bigger is automatically better because size is also a factor of complexity and can potentially lead to lack of focus. But regardless of the cogency of the merger proposition, the team at the top of the organisation will have their moment of glory in the media and be the talk of the town.



There is, to my knowledge, no systematic research on this topic, but somehow I strongly suspect that many mergers, and indeed some of the mega-mergers such as those that have occurred in the past ten to fifteen years, are motivated at least as much by the ego of the people at the helm of those organisations as by any rational economic value-adding proposition.

It is not hard to imagine how proud an individual would feel by creating overnight the largest company of its industry. Such a venture fulfils the quest for power and domination that is buried deep in the subconscious of many humans, certainly among many of the males of the species. The prospect of significant personal wealth is another factor, but then wealth is nothing more than another vector of power.

No person in their right mind would be willing to admit in public that the main reason for the merger or acquisition they recommend is to provide them with a fantastic ego trip, and so some form of post-rationalised benefit needs to be thought of, in the hope of convincing the shareholders of the soundness of the proposed plan.

If that proposal is sufficiently convincing to sway the shareholders towards a positive vote, it had better be compelling enough to also achieve acceptance and buy-in from the organisations’ employees, or else the integration journey will be a tortuous one. A former Chairman Kraft Foods International Jack Keenan compared merging companies with pulling out teeth, saying it can be done “quick and painful” or … “slow and painful”: nobody wants to opt for the “slow and painful” approach if at all avoidable!

Ruthless focus on a good benefits case

The better and more convincingly a benefits case can be articulated, the easier the integration will be, because everyone involved will have clarity as to the end purpose of the efforts they will be required to make during the transition period. And while in almost every case the benefits of a merger or major acquisition will be economic profit, it is worth remembering that many of the drivers of economic value can also be quite palatable to employees, consumers, local communities or the tax authorities.

Justifying the choice that was made

Read the trade press or in-house company communication: too often, company mergers or major acquisitions are presented almost as a fait accompli, the only possible choice. And yet, the benefits proposition could appear that much stronger if one had taken the time to explain what the alternatives were and why the proposed way forward chosen. In what way it is better than all the possible alternatives?

You can generate real ‘buy-in’ by showing how much better the strategy is compared to those alternatives, because for most of the members of staff and management, knowing they are working for a smart organisation which is one cut above the rest will be a strong source of pride, satisfaction and identity.

Our intellectualised approach of business makes us shy away from ‘obvious’ solutions – there is nothing very remarkable about embarking on an ‘obvious’ path. And yet, what you want the people in your organisation to think throughout the integration process is: “of course we should be doing this”. But to achieve that “of course”, the reason why must be obvious, self-explanatory.

This does not prevent your project from being ambitious and bold, maybe even a little scary to some. Nonetheless, remember that every individual who is acquired to the idea that “of course we need to do this”, will be a self-fuelled proactive player and valuable catalyst for change throughout the integration journey.



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Published on 27th October 2010 by Director of Finance On Line
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