COVID-19’s Uncertainty Has Things to Teach Us About M&A
This guest post comes from Jennifer J. Fondrevay, founder of Day1 Ready, a consultancy advising business owners, private equity firms and C-Suite executives on preparing for the human capital challenges of M&A.
Watch the Video: Jennifer Fondrevay, Founder of Day1 Ready and author of “NOW WHAT? A Survivor's Guide for Thriving through Mergers & Acquisitions” discusses what COVID-19’s uncertainty can teach us about M&A Integrations with MiddleM Creative Vice President Tricia Forbes.
Uncertainty’s Influence
A fair amount of attention has been devoted to what will happen with M&A deal-making once we are on the other side of this pandemic. Fairly consistently, the theories on what’s next end with something to the effect of, “This is unprecedented, and no one truly knows how it will all play out.” Despite the unknowns, there is a lot that we can learn from this crisis to better prepare us for M&A deals moving forward.
The common theme between COVID-19 and an M&A integration is the influence uncertainty has over people—and more importantly—how it affects their actions.
Even when an investment thesis is well supported, we only learn if things will actually work at the execution phase of a deal—when we uncover the challenges we hadn’t anticipated. In the current environment, we face a similar dilemma. We’re developing response strategies for the pandemic without a clear sense of what will be most effective. Similar to M&A integration, success is uncertain until we see what people do.
A successful outcome is contingent upon how quickly people will accept the reality of the situation, embrace the roadmap and implement it. This crisis can provide enormous insight into how we approach M&A deals and most valuably, how we execute them.
Traditional Leadership Methods Must Evolve When Navigating Uncertainty
Throughout the crisis, we have seen leaders stumble when they attempt to play by the more traditional rules of leadership—leading with vision, decisiveness and bold confidence. These leaders previously succeeded because they understood the metrics for success and excelled at them. They knew the rules of the game and repeatedly won.
This same type of leader can falter in a crisis because the metrics for success change rapidly, and the game’s rules are continuously being defined. They have a difficult time pivoting in reaction to new metrics and an equally difficult time accepting they might not know all of the answers. More traditional leaders often take longer to act and develop a response plan, which compounds a crisis and prolongs the pain.
When assessing the viability of leadership styles for post-deal integration, we often apply the traditional leadership criteria to evaluate the management team. This crisis is teaching us that those are not always the right metrics.
Over the course of this pandemic, people have been most motivated into action by leaders who demonstrate empathy and humility, are transparent with what they know and don’t know, actively tap others’ expertise to make decisions and role model the behavior they wish to see.
Learn from the People Closest to the Work
Before COVID-19 was declared a pandemic, many political leaders were sharing incomplete or contradictory information because it was being gathered in real-time and was outside of their scope of expertise. This heightened fear and anxiety (resulting in the hoarding of toilet paper).
When those closest to the work began to share their expertise, we began to get a true sense of what was happening, what needed to be done and how we all needed to behave. When frontline experts shared their knowledge, people had greater confidence in the plan of action, which motivated businesses and community leaders, as well as individuals. We developed a more complete picture of what was required of us and snapped out of denial.
When I consult on the human capital challenges of M&A, I consistently advise my clients to talk with the people who do the work in order to truly understand what it takes to get the job done. Not theoretically—not what it takes based on a sample budget or planned resources. You need to appreciate what the people who actually complete the tasks are up against.
Only then can you get a sense of what the roadmap looks like and what the implications are if some elements of the product or process are missing (say, ventilators or testing). You won’t have a complete picture of a successful post-close integration in your due diligence discussions until you engage your frontline leaders.
How, Not Just What, You Communicate is Vital to Comprehension and Buy-In
When your statements as a leader contradict what people are experiencing, you lose them. We saw this happen when leaders painted a picture of the virus’ spread and impact that didn’t match what people were seeing in their homes, communities and workplaces. People doubted their leadership, which heightened their stress.
For communications to be effective, your stakeholders need to feel that you know what they are going through and that you are being honest with them. You can’t claim that nothing has changed or that there will be little impact. When people are given incomplete or misleading information, they don’t feel invested in the outcome or comfortable about the decisions they must make—and they no longer trust your leadership.
Beyond that, information needs to be brought down to an individual, granular level. “What does this all mean for me and what do I need to do?” is what people want to know.
The leaders commended throughout this crisis have explained the good and the bad of what we face in basic terms, and they boil the situation down to personal action. People are more willing to believe in the way forward and feel invested in it if you are upfront with the challenges faced. Give them as much information as possible to help them understand their role and the specific actions they need to take.
Finally, we are seeing on a global scale that the acceptance of change comes at different rates. I noted in an earlier Fast Company article, “There are people who have accepted the reality of the pandemic and have begun to take action, and there are those who have resisted and delayed their change in behavior. People react to change differently. You can’t predict it or control it.”
Interestingly, that is a lesson M&A has already taught us. When I interviewed executives for my M&A survivor’s handbook, “NOW WHAT?”, each of them shared one common realization they wished they’d appreciated going into the deal: reactions to change vary widely, and you need to be prepared for that.
What Can the Worldwide Pandemic Teach Us About Managing the Uncertainty of M&A?
We have seen the type of leadership that people react to positively. We’ve also seen the leadership that falls flat when people are afraid. We have recognized that the ones closest to the work are those who need to be tapped at the beginning. We have also learned that not all communication is received equally. How it is presented is vitally important to people’s comprehension and what is shared is critical to their buy-in. Ultimately, we have seen that people get to acceptance at different rates. Sweeping change can only begin when a common level of acceptance is reached.
About the Author
Jennifer J. Fondrevay is a Fortune 500 C-Suite “survivor” of three multibillion-dollar acquisitions. Drawing on her experience, she founded Day1 Ready, a consultancy that advises forward-thinking business owners, private equity and C-Suite executives on how to prepare for the human capital challenges of M&A. Her best-selling satirical business book, “NOW WHAT? A Survivor's Guide for Thriving through Mergers & Acquisitions,” guides middle managers through the challenges of business transformation to find the opportunities in change.