You’ve signed the deal, now the hard work starts… the role of leadership in a successful M&A. 6 top tips.

At ENGAGE, we have worked with leaders and leadership teams in various M&A scenarios. Here are our top 6 leadership tips based on a number of common challenges we have seen clients having to tackle:

1. Charting the course: Visionary leadership

At the heart of successful M&A is visionary leadership. Leaders must articulate a clear, compelling vision that unifies the merging entities under a shared purpose. This vision is crucial in guiding employees through the uncertainty that accompanies any integration. By communicating openly and consistently, leaders build trust and ensure that everyone understands the strategic goals and the benefits of the merger. This unified vision helps mitigate resistance and fosters a collective commitment to the new organisational identity.

Our experience shows that the measurement and understanding of whether leadership communication is landing with employees and that messaging is coming across as clear, open and consistent is integral to assessing whether the vision is helping to chart the right course.

Our data from our work with a Global Fin-tech firm shows that:

• Employees who see the senior leadership team communicate a motivating vision for the future were 4x more likely to be engaged
• Those who felt communication of business opportunities for bringing the firms together was clear were also 4x more likely to be engaged
• Having clarity around the strategy for the integration long-term meant employees were twice as likely to be engaged.

2. The leadership challenge: Cultural integration

When we work with leadership teams undergoing M&A, one of their key priorities is the integration of distinct corporate cultures. Effective leaders recognise that cultural alignment is not a byproduct, but a critical component of M&A success. They proactively engage with employees, encouraging open dialogue and respecting the unique aspects of each organisation’s culture while, at the same time, finding the right blend of values and behaviours to help the new organisation succeed.

To help leaders get to the right culture for the future, they often need to think through a number of key questions:

1. What elements of the previous cultures do we need to retain – what values and behaviours have contributed to the success of both organisations previously?
2. What aspects of the culture will need changing or bringing together / reconciling to help the newly merged entity perform effectively?
3. Are there any aspects of the previous cultures of either firm which need “dropping” to ensure success as the integration progresses?
4. Are there any cultural aspects that need adding into the mix to help achieve the strategic goals of the M&A?

3. The leadership imperative: Talent retention

Retaining talent is another area where leadership is paramount. EY (2019) reports that 47% of key employees leave within a year of an M&A transaction. M&A can create anxiety and uncertainty among employees, leading to attrition if not managed properly. Leaders at every level play a pivotal role in identifying key talent and providing assurances about their future roles and career paths within the new entity. They must be visible, approachable, and empathetic, addressing concerns and fostering a sense of security. By valuing and investing in their workforce, leaders can maintain morale and prevent the loss of critical expertise and institutional knowledge. Our data shows that when senior leadership teams communicate a motivating vision for the future, employees were 2x more likely to stay with the company in the next year.

4. Leadership in action: Operational excellence

The operational integration of two companies requires strong, decisive leadership. Leaders must make strategic decisions about harmonising systems, processes, and structures to achieve operational efficiency. Our work with a Global Fin-tech showed that employees who believe that they have been equipped well enough to adapt to the current working environment were 2.5x times more likely to be engaged than those who did not feel well equipped.

5. Leadership for the long haul: Sustained growth

The ultimate success of M&A is measured by the long-term performance of the merged entity, which we often see not living up to market expectations. Leadership during the initial integration phase lays the foundation for future growth and stability. However, the role of leadership does not end there. Leaders must continue to monitor progress, address emerging challenges, and adapt strategies as needed. By fostering a culture of continuous improvement and innovation, leaders ensure that the organisation remains resilient and competitive in an evolving market landscape.  This requires leadership traits such as active listening and the use of two-way channels, such as crowdsourcing of ideas from employees.

6. Leadership team integration: A critical building block

Finally, leaders themselves need to integrate as a merger or acquisition comes together.  Our work suggests there are three critical parts to this:

1. The selection of which leaders take the merged entity forwards and which leaders exit the organisation: this requires the agreement of selection criteria, the use of assessment tools and careful organisational design principles.
2. The formation of the new leadership team: this can require initial team coaching sessions and “fitness sprints” to help the team come together and agree its new purpose, leadership principles and decision-making protocols.
3. Creation of new “ways of working” for the team: how do leaders intend to behave with each other to make their leadership of the new entity a success?