The importance of effective change management

04 August, 2017

Gregg Nahass
US and Global M&A Integration Leader, PwC US

PwC’s 2017 M&A Integration Survey is full of welcome news. As more companies undertake transactions with the goal of transforming their business, they are also honing integration skills. It’s clear that many are adopting leading practices to realize value from their deals.

For instance, our survey shows companies are bringing their integration teams into the M&A process sooner than ever. Nearly a third of respondents now put the integration team to work during deal screening, up from about one-fifth in 2013. The number of companies that waited until due diligence dropped by more than half. Since our surveys began in 1997, companies have been launching the integration team into action earlier and earlier. That acceleration helps explain why organizations are seeing greater financial and operational success from their transactions.

Yet people assimilation remains a significant challenge. When asked which areas they felt were not fully integrated after a transaction, 42% of survey respondents cited people and organization, and 58% said integrating those areas was difficult. The percentage of respondents reporting significant success in retaining key employees during the transition period actually fell – to just 45% from 56% in 2010. A scant 33% characterized employee understanding of company direction as very favorable after the deal, and even fewer—31%—characterized employee morale that way.

Transformation, of course, makes people integration harder. Unlike most absorption transactions, where like merges with like, transformational deals often combine entities with dramatically different cultures, communication styles and ways of working. To get full value from transformational transactions and ensure the most important talent is retained through the integration, leadership must address these “soft” issues, which are tough to track with conventional metrics but can be crucial to strategic success.

Our experience shows that companies implementing an effective change management program show better results in employee commitment and productivity after a deal closes. In addition to leadership, culture, organization and communications, the important drivers of change management in M&A Integration—policies and procedures, incentives, and employee onboarding—can smooth the rough road to people integration.

Unless employees are motivated and aligned, a transformational deal’s most ambitious strategic goals may be at risk. Central oversight and active executive-level support for change management can help choreograph this stubbornly difficult area of M&A Integration. We spoke with a few executives to get their thoughts on the importance of effective change management. Hear what they had to say in our new Change Management videos below and check out the whole video series on our website.

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