In a time of unprecedented disruption and the increased demand for innovation, it is important to keep up with market change. In order to remain competitive and take advantage of new opportunities, you must constantly develop, refine and renew your portfolio. One of the most effective ways to do this is through inorganic growth – joint ventures, alliances, mergers and acquisitions – coupled with the divestment of non-strategic assets where necessary. Your M&A decisions must, of course, be in line with your strategy and at the same time promising. That sounds simple, but it is a challenge.
Digital innovation thanks to M&A
A new trend in M&A is the acquisition of digital innovation and the talents that create it. The key to maximising such M&A value in this case is to nurture these talents throughout the transaction and to show them an attractive future in the merged unit. A traditional approach may not be the best choice for this.
As a result, 75% of UK executives believe that they can no longer rely on their current M&A skills when doing digital deals. One reason is that traditional M&A integration approaches can freeze innovation for up to three years because they tend to push innovation to the bottom of the priority list. Considering that an integration process can take 12-36 months for most large transactions, a company risks staying away from innovation for a long period of time, while the competitors do not sleep.
Securing M&A-values with an agile approach
An agile approach with advanced analysis technology enables incremental and continuous innovation during M&A integration. It is flexible and highly iterative. Activities are launched in short sprints, each focusing on immediate priorities and requirements. The approach is also highly collaborative. Fast decision making is one of its key features.
Agile approaches to mergers and acquisitions are well suited to projects involving the integration of digital solutions or activities aimed at building revenue synergies with new customer-focused processes, systems and algorithms. However, they should complement rather than replace traditional approaches. After all, the traditional approach is still best suited to ensure discipline and consistency in the integration of specific functional areas such as finance or compliance.
Hybrid M&A integration – the best of both worlds
A hybrid M&A integration approach that takes advantage of the best features of both approaches changes the integration game. It allows companies to focus on synergy gains and new business opportunities, but also on risk management – both in terms of reputation and execution. It provides teams with tools to focus on different aspects of the business using different methodologies. Thanks to the highly collaborative nature of “Agile”, the new approach also ensures better cultural fit between different entities. Perhaps most importantly, the merged organisation will be able to maintain – if not accelerate – its innovation agenda and defend its market position well.
Two European utility companies have had positive experiences with the agile approach lately and were able to manage the sensitive post-merger integration in a way that kept customer base stable. The approach also ensured that innovation was at the forefront throughout the process, which drastically reduced risks thanks to early detection of problems. Employees felt heard and appreciated in the new organisation. And the layoff rate in the merged company was significantly below expectations.
What’s in for You?
Certain aspects of integration still require traditional approaches. Identify with us where an agile integration approach makes sense. We introduce such new practices step by step, ensuring that your employees can follow and appreciate the new approach. We would be happy to show you how you can also perform your leadership role with agile teams and demonstrate how training, reporting and measurement criteria can be applied in an agile way.