M&A: Are the leaders of now, the leaders of the future?

Getting your leadership strategy right is critical to long-term value creation in deals. High levels of attrition and leadership turnover can cause uncertainty across the organisation and significantly impact the whole deal strategy, while leadership performance during a deal can make or break careers.

There is no one-size-fits-all approach to developing a leadership strategy for an organisation post-transaction. But there are some critical issues to consider.

Post-transaction leadership is partly about transition: what leaders do you need to retain in the short term to protect deal value? But also, transformation: who do you need to retain and develop longer-term to deliver the deal value?

Leaders need to be identified – or developed – who can lead on transition or transformation, and who are engaged and incentivised to deliver deal value.

Based on our experience supporting clients on defining and executing their post-deal leadership strategies, we have identified seven key considerations that are crucial to getting this right:

1. Identify critical leadership roles – during a transaction there’s likely to be duplication in senior roles. Building your organisation design, layer by layer, leadership role by leadership role, will help you define key roles and develop role-specific success criteria to refine your identification and selection processes. Also, think about the differing priorities of potential buyers – a PE house will want leaders who can control and drive down cost, while a trade buyer will want leaders who can drive change, innovation, and overall effectiveness.
   
   
2. Match roles to leaders, not leaders to roles – many organisations tend to design roles for individuals, rather than what is needed for the business.
   
   
3. Choose leaders who are good for the many. Being a good business leader is key, but it’s also about finding individuals who truly care about people and the world around them, particularly with the increasing focus on ESG in the deals process.
   
   
4. Map out a candidate assessment and selection journey early on. Use assessment and selection tools that are fair and transparent, following a process designed with the candidate's experience in mind. This helps to ensure your candidates go through a seamless assessment and consistent selection process.
   
   
5. Onboard effectively – getting onboarding right at leadership level is crucial. Ensure your leaders are set up for success, aligned on deal strategy and have all the tools and resources they need to lead the organisation successfully.
   
   
6. Incentivise and provide clarity on the value proposition for leaders early on to ensure they sponsor the deal and recognise how it will support their personal ambitions and development.
   
   
7. Coach and transform your leaders. Corporate transactions are likely to be personal milestones for leaders. Take the time to understand the personality traits of each leader. Support them in pursuing a new direction, or being retained and realigning to the strategic objectives of the future organisation.

An example that illustrates the importance of getting this right is our work supporting a global organisation with its acquisition of another global asset, where leadership selection and retention was recognised as a key priority in driving deal value.

We worked with an external provider to manage the selection process in the newly combined organisation, ensuring objectivity, independence and clarity in the process. This resulted in an equitable balance of leaders from a geographical, functional and diversity perspective.

This targeted approach to selecting and placing leaders ensured the right people with the right skills from both organisations were selected to lead the future organisation – a critical factor in unlocking deal value.

Another project saw us supporting a client on a multi-billion dollar acquisition and integration of a global asset. The buyer was intent on managing the selection process to retain their existing leadership team, without checks in balances in place, which then meant that up to 8 out of 10 leadership roles went to the buyer’s side, where human instinct and tribalism kicked-in. This had the potential to cause uncertainty and disengagement among the employees of the analytics company, as they saw their leaders side-lined.

To manage this risk, we worked closely with deal-makers and HR leaders as they transitioned from deal close into the newly combined organisation. We focused on defining the leaderships’ personal journeys through the deal and provided them with the right level of contact, support, and tools to set them up for success and support their teams – bringing both legacy organisations into one joint team.

Successfully managing cultural change and maintaining positive employee engagement can preserve deal value by halving the anticipated post-acquisition attrition rate. We saw this in action when working with a technology giant who acquired and integrated another asset. By deliberately managing engagement, the organisation saw little attrition during or after the transaction, protecting and creating additional deal value.

Without a clear strategy both during and post-transaction, leadership can quickly have a significant and costly impact on the technical and people side of deals. Selecting and engaging leaders should be prioritised early through objective and transparent processes – setting an example of how the rest of your talent can expect to feel throughout the transaction.

We would love to hear about your challenges and successes in leadership strategy pre and post-acquisition. Get in touch if you’d like to discuss any of the points raised or how we can support your integrations and separations.