1st Edition
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
Biography
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 get wrong. In more than 35 years, none of her hundreds of projects has failed. She has worked with more than 80 clients in 13 industries. Some of her clients include leaders in organizations like Avon, Emerson, Estee Lauder, Kraft, and Tyson.
Linda first studied decision-making while working on her PhD in 1994. She conducted long-term original research on138 American POWs (including John McCain) who had survived five or more years of brutal imprisonment. The study, under the direction of the U. S. Navy, uncovered the pivotal decisions the POWs had needed to make to stay resilient—decisions about their beliefs, identity, and life’s purpose. These research findings have guided Linda’s work with executives ever since.
Today, Linda works predominately with those in the c-suite to help them make decisions on issues like business growth, Mergers & Acquisitions, and succession planning. (In fact, Linda was one of eight succession planning experts who worked with John Tyson after his company’s acquisition of International Beef Products—one of the most successful acquisitions of the 21st Century.)
Linda has written or cowritten six books, including The Magnetic Boss, Landing in the Executive Chair, Challenge the Ordinary, and Tough Calls. She also writes regularly for CEO Magazine and Corporate Compliance Insights.
Linda is an inductee in the Million Dollar Consultants’ Hall of Fame and holds numerous professional certifications, including Director of Professionalism, a designation given by the National Association of Corporate Directors.
Since taking the helm at Belden in 2005, I have overseen 15 major acquisitions. Through trial and error, I learned the lessons Drs. Henman and Dierickx have taught in this book. Senior leaders who don't have more than a decade to learn these lessons should read and heed the advice from these two psychologists.
- John Stroup, Belden Chairman and CEO
Too few people understand the psychology behind buying and selling companies, but Drs. Henman and Dierickx, do. They don't explain the technicalities of deal. Instead, they concentrate on what must happen in the minds of decision-makers to ensure success for all concerned.
- Kevin Short, Chief Executive Officer, Clayton Capital Partners; Author, Sell Your Business for an Outrageous Price: An Insider's Guide to Getting More Than You Ever Thought Possible
Study after study puts strategic risk above all other enterprise risks combined, and M&A transactions are a key component of strategic risk. From cognitive biases to culture and talent, The Merger Mindset shows the reader how to avoid common pitfalls and focus on key success drivers. In a masterful way, Dierickx and Henman share their words of wisdom with practical case studies, interesting anecdotes, and amusing quotes.
- James Lam, Author, Implementing Enterprise Risk Management; Chairman, Risk Oversight Committee, E*TRADE Financial; Independent Director, RiskLens, Inc.
We talk about "the art of the deal" as though it's a Faustian bargain, a Mephistophelian dance with the devil. And small wonder—most deals fail to meet expectations, and many fail, period. Chrysler and Mercedes once "merged" though Mercedes actually swallowed Chrysler, and everyone lost money. We need to study the art and science of the deal, and Dr. Henman and Dr. Dierickx are the experts in that realm. Don't read about how deals are made. Read herein when and why they're successful. The devil is actually in the details.
- Alan Weiss, PhD, author, Million Dollar Consulting and over 60 other works in 15 languages
Mergers and acquisitions are some of the most high-stakes events in a leader's career. To see around corners and avoid hidden pitfalls, you want experts on your side - and you can't do better than Drs. Constance Dierickx and Linda Henman. Their deep expertise will dramatically increase your chances of success.
- Dorie Clark, adjunct professor at Duke University's Fuqua School of Business; Author, Entrepreneurial You and Stand Out
Mergers and acquisitions are major events in the life of an organization. I have come to appreciate that while the technical aspects, such as valuation and contracting are vital, they are insufficient. In The Merger Mindset, Dr. Dierickx and Dr. Henman articulate what it takes to make deals work-a holistic view and tolerance for ambiguity. Too often leaders look for a blueprint when what they need is the right mindset.
- Steve McElhiney, Chief Executive Officer, EWI Re, Inc.
Mergers and acquisitions are often viewed through the lens of valuation and terms of the deal. Yet, whether a deal succeeds has as much to do with what is unknown and as what is disclosed or revealed in the process. Uncovering the organizational dynamics, leadership habits and unconscious assumptions of even the best-intended people requires more than a plan. The Merger Mindset describes these dynamics and what to do to reduce the risks inherent in deals.
- Patrick Brennan, Senior Vice President – Operations, Cox Automotive
Constance and Linda have done a masterful job at both, sketching a broad framework and providing indispensable detail on every crucial element required for M&A success. Whether you are new to the world of M&A or a seasoned veteran, Constance and Linda's insight will keep you out of the ditches and between the guardrails.
- Gregory Kozicz Ph.D., President and CEO, Alberici Corporation
