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Learning from Successful M&A: The Power of Meta-Communication

Learning from Successful M&A: The Power of Meta-Communication
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In recent years, an increasing number of Japanese companies have adopted management integration (M&A) as a strategy to enhance their business environment and expand their operations. However, the harsh reality is that only 10% to 30% of mergers and acquisitions actually succeed in accomplishing their intended strategic objectives. The process of post-merger integration (PMI) is widely recognized as one of the most challenging management issues in this context. (*1)

What exactly makes organizational integration so challenging?
What is the key to realizing the original purpose of M&A, which is to enhance business value?

In this article, we will explore the elements that contribute to successful corporate integration by examining the distinguishing characteristics of prosperous M&A transactions.

30% of Employees Express The Belief That Acquisitions Are an "Afterthought" by Management

Based on a McKinsey survey that examined over 2,000 M&A deals, the post-merger integration (PMI) period is identified as a particularly challenging and arduous time for executives. It is during this phase that management milestones often experience delays, and cultural conflicts start to surface (*2). Unfortunately, in numerous cases, mergers and acquisitions intended to enhance or expand business value end up leading to employee disengagement, operational mistakes, the departure of talented staff, and overall poor business performance, resulting in a sense of separation and disintegration.

Changes in management policies, such as the introduction of a new company's "organizational culture and systems," as well as uncertainty about one's own position and treatment, are common factors that lead to dissatisfaction among employees after a merger or acquisition in the same industry. According to a Harvard Business Review article (*3), around 30% of employees, on average, perceive the merger as "redundant." However, there are also companies where employees actively choose to embrace the M&A process, seeing it as an opportunity for self-reflection and personal growth (*4). What sets apart organizations that successfully integrate other companies and effectively expand their business potential from those that struggle to do so?

Start With Meta-Communication Between Companies

A fascinating study conducted on 204 Indian companies that have engaged in international acquisitions sheds light on the key factors contributing to the success of mergers and acquisitions (M&A) (*5). The research reveals that companies that achieved significant increases in shareholder value following an M&A transaction were not simply executing business strategies; instead, they demonstrated a deliberate focus on promoting cultural integration right from the initial stages.

Traditionally, soft aspects such as fostering a shared culture among employees have been expected to naturally integrate over time and often take a backseat compared to more tangible aspects like operational integration or the implementation of new HR systems. However, the study highlights that successful companies prioritize discussions on values, ethics, and management philosophies between the merging entities at various levels of the organization.

In essence, the focus goes beyond solely aligning business goals. It involves addressing fundamental questions,

  • What do we value most in moving things forward on a day-to-day basis?
  • What kind of people do we want to be?

The primary emphasis lies in integrating these values into our daily actions. This type of communication transcends the immediate tasks at hand and instead takes a broader perspective on our overall situation, our collective state, and the dynamics of our relationships. It is known as "meta-communication."

Can You Be an Agent of Success?

In many instances of successful mergers and acquisitions (M&A), meta-communication plays a crucial role even before the pressing business matters are addressed.

Consider the following questions:

  • What values do we hold dear and consider vital in propelling us forward?
  • What types of relationships do employees strive to establish with one another on a daily basis?
  • On the flip side, how are we currently faring after the M&A?

Meta-communication is not only significant during M&A situations but also in various aspects of our organizational activities, including interviews with subordinates, intense management meetings, and beyond.

Ask yourself:

  • Do you employ effective meta-communication during challenging phases of organizational activities?
  • To what extent do you foster open dialogue regarding the kind of organization you aspire to become?
  • How well do you truly understand the other party involved?

※1 Graham Kenny, Don’t Make This Common M&A Mistake, Harvard Business Publishing, 2020
※2 Brian Dinneen, Christine Johnson, Becky Kaetzler, and Alex Liu, In conversation: Four keys to merger integration success, McKinsey & Company, 2022
※3 Mitchell Lee Marks, Philip Mirvis, and Ron Ashkenas, Surviving M&A, Harvard Business Publishing, 2017
※4&5 Prashant Kale, Harbir Singh, and Anand Raman, Don’t Integrate Your Acquisitions, Partner with Them, Harvard Business Publishing, 2009

Language: Japanese

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