Winning (20 page)

By too provincial, I mean many acquirers automatically assume their people are the better players. They might be, but then again, they might not. In a merger, you have to approach your new personnel situation as if a headhunter had just delivered you a list of fresh players for about every position on your field. If you simply stick with the going-in team, you could lose better players for no good reason.

Oh sure, there’s a
reason
for this behavior, but it’s not good—it’s just familiarity. Your own people are the devil you know—and they know you back. They understand your business and its culture. They know how work gets done
your
way.

To compound matters, it is simply harder to let go of friends than strangers. You know their families. You’ve been through good times and bad. You may have once told them they had long-term potential with the company. Some may have even worked on the deal.

It’s hard to say, “You’re not good enough anymore.”

But you just have to remember, one of the great strategic benefits of a merger is that it allows acquirers to field a team from a bigger talent pool. That’s a competitive advantage you cannot let pass. Just be very fair in your severance package and face into the deed, even if it means saying good-bye to “your own.”

Without doubt, avoiding this pitfall can be challenging.

I cannot count the number of times we swooped into a deal and installed a GE manager in every leadership position. Most of the time, we were blissfully unaware of the potential that we had lost, but one time in particular, we couldn’t be. The cost was too high.

It happened in 1988, when GE acquired a plastics business based in West Virginia from BorgWarner. It was the perfect bolton deal, or so we thought. The business we bought included an ABS engineering plastic product line. We had an engineering plastics business of our own, albeit in the higher-end products Lexan and Noryl. The GE Plastics team saw one immediate cost synergy. All they had to do, they figured, was to get rid of the BorgWarner sales force and push BorgWarner products through GE channels.

But there was a problem with the plan. Our sales force was a group of sharp, button-down types, accustomed to making a technical sale, convincing engineers to switch from metal to plastic. The BorgWarner sales force was a different breed. They sold their less expensive, more commodity-like product to purchasing agents the old-fashioned way—“belly to belly”—relying on personal relationships and hefty expense accounts.

Our people weren’t very good at that.
*

It was a disaster. We lost 90 percent of BorgWarner’s sales force thanks to our conquering mind-set, and our ABS market share dropped about fifteen points. The acquisition stumbled, and it never did reach its full potential. ABS eventually turned out to be a worthwhile addition to the GE market basket, but at far too high a price.

We should have known better. Two years earlier, we had gotten the people selection process right when we acquired RCA.

On every level, the RCA deal was a win for us. With the acquisition of NBC, it met one of our strategic goals of moving into services, and at the same time, it strengthened our manufacturing base with the addition of three businesses we were already in, semiconductors, aerospace, and TV sets.

In all three of these industrial cases, we took advantage of the enhanced talent pool made possible by the acquisition and picked RCA leaders to lead the merged organizations.

GE’s TV manufacturing business, for instance, was being run at the time of the deal by a smart young CEO who had come into the company through our business development staff. He was an MBA and former consultant, and although he had a bit of a swagger that he needed to be coached out of, his results were OK, and we generally thought he had long-term potential as a leader, which we’d told him more than once.

RCA’s TV business also had a very good CEO in place—he was an old industry hand, with savvy and experience that our guy was clearly lacking. He too had satisfactory performance and was a clear candidate to run the larger, merged TV business. We could have picked either CEO.

But then there was Rick Miller. Rick was the CFO of RCA, and he was a big leaguer—smart, fast, full of creativity and energy. GE already had a great CFO, and it looked like Rick would need to be let go as a result.

As much as we wanted to help out our manager in TV by giving him the job, it just didn’t make sense. We ended up suggesting that both the GE and RCA leaders find new jobs over the coming months, and gave Rick the CEO position. The two who left got great jobs elsewhere.

One last thought on people selection: in the most effective integrations, it starts during negotiations, in fact, before the deal is even signed. At JPMorgan Chase and Bank One, for instance, twenty-five of the top managers were selected by the time the merger was closed. That’s on the far extreme of a best practice, but it is something to strive for.

The main point is, fight the conqueror syndrome. Think of a merger as a huge talent grab—a people opportunity that would otherwise take you years of searching and countless fees to headhunters. Don’t squander it. Make the tough calls and pick the very best—whatever side they’re on.

This pitfall is as old as the first marketplace. People are people; when they want something that someone else wants, all reason can disappear. Again, blame deal heat. This dynamic happens at yard sales, and it happens on Wall Street.

I’m not talking, by the way, about overpaying by a few percentage points. That kind of premium can be made up for in a well-executed integration. And in fact, leaving a little money on the table can be helpful if it prevents the residual acrimony that can slow an integration.
*

I am talking, instead, about overpaying by so much you will never make it back.

The most egregious recent example of this dynamic has to be the Time Warner–AOL merger, in which a giant of a media company, with real assets and products, spent billions upon billions of dollars too much on a distribution channel with unclear competitive benefits. Amazingly, at the time, there was such excitement about an illusory notion called “convergence” that just about everyone jumped on the bandwagon. It was only after the failure of the deal was obvious that Ted Turner, a board member who was instrumental in promoting it, acknowledged on national TV that he had never liked the deal in the first place. By then, such “coolheadedness” was too late for Time Warner shareholders.

Of course, 2000 was a time when everybody was overpaying for everything. In the publishing industry, for example, the German media giant Gruner + Jahr paid an estimated $550 million for two properties,
Inc.
and the New Economy magazine
Fast Company.
At the time, the purchase scared the daylights out of other business magazines. But during the recession that followed, the premium could only be seen for what it was—excessive. No integration in the world would ever make up for it, a fact to which a crowd of deposed Gruner + Jahr executives would likely attest.

There is no real trick to avoiding overpayment, no calculation you can use as a rule of thumb to know when a sum is too much. Just know that, except in very rare cases of industry consolidation, if you miss a merger on price, life goes on. There will be another deal.

There is no last best deal—there’s just deal heat that makes it feel that way.

In October 2004, there was a glowing article in my hometown paper, the
Boston Globe,
about a “thriving survivor” named Brian T. Moynihan. Brian started his career at Fleet Bank in its mergers and acquisitions division, then over fifteen-plus years, rose through the ranks to run its wealth management business, which is what he was doing when Bank of America bought Fleet in April 2004.

In the months after the merger was announced, many executives at Brian’s level were shown the door—not Brian. He was promoted to run Bank of America’s entire wealth and investment management division. In fact, Bank of America was so committed to Moynihan, it moved a hundred or so of its wealth managers from North Carolina to Boston to accommodate his leadership.

“It remains precisely unclear why Moynihan emerged on top while colleagues fell,” the
Globe
said.

It wasn’t unclear to me. All you had to do was look at a quote in the same article from Alvaro de Molina, Bank of America’s president of global corporate and investment banking.
*

Brian, he said, “was an immediate partner.”

Which brings me to the one huge pitfall common to people at acquired companies: resistance. Resisting a deal, no matter how scared, confused, or angry you are is usually suicidal for your career, not to mention your emotional well-being.

Now, I don’t know if Brian Moynihan ever felt scared, confused, or angry about the Fleet–Bank of America merger. And in a way, it doesn’t matter because he clearly didn’t show any of these emotions. Instead, he showed exactly what you should show if you want to survive a merger—enthusiasm, optimism, and thoughtful support.

Why? Because for an acquirer, there is nothing worse than laying down a boatload of money for a company, then walking through the front door to be greeted by a bunch of sour faces and bitter attitudes.

Who needs it?

Yes, some resistance to change is normal. But if you want to keep your job in a suddenly bigger talent pool, and frankly, if you want to enjoy work,
don’t act like a victim!
Get behind the deal, think of ways to make it work, adopt the biggest, most can-do attitude you can muster. Tell yourself the good old days are over—and the best are yet to come.

I understand that not everyone can get their heads around this notion, but there is a price to pay if you don’t.

Bill Harrison recalls meeting with a very talented manager from JPMorgan Chase who was one of the premier “sour faces” after the merger.

“For Christ’s sake, man, you’re so good, we really want to keep you,” he told him, “but if you can’t act in a more positive way and embrace this change, you’re not going to make it.”

The inevitable ending to this story is that the manager was, as Bill puts it, “like most people—no good at hiding his feelings.” He left within a few months.

In mergers, managers will always pick the people cheering for the deal, even if they are not as talented or knowledgeable as the people pouting. When there are two people to do the same job, if their abilities are anywhere near each other, the upbeat, pro-merger candidate wins.

I have an old friend who worked for almost his entire career at a large insurance company, ending up with the top job in marketing, PR, and community relations. This executive was very close with the company’s CEO, a relationship that afforded him all sorts of entrée into the executive decision-making process. He was the CEO’s right-hand man, confessor, and sounding board, even though his title wouldn’t suggest such impact.

Then, a few years ago, my friend’s company was acquired by a financial services company halfway across the country, and his pal the CEO was “promoted” to chairman, with a two-year exit strategy.

I wasn’t completely surprised when a month later, my friend called and asked to meet me for a drink, the sooner the better. When I saw him a few days later, he was completely forlorn.

“I am of no value to the company anymore. They kicked my boss upstairs; he’s out of the game. My new boss is far away at headquarters, and he and I are not clear yet about just who is going to do what. I hate the situation I’m in.”

To make a long story short, I advised my friend to befriend his boss and find as many ways as possible to make the merger a success. If he was as good at his job as he claimed, the new CEO would notice soon enough. In the meantime, it would be dumb to get booted for sulking.

My main message was, I suppose, “Swallow your pride, prove your worth, and start again.”

A year has passed, and my friend has never been happier professionally. He carved out a new position for himself overseeing the integration of three overlapping businesses, took on the responsibility of advising the new head of marketing, and finally found a great, high-impact role working with the organization’s new advertisers on a branding campaign.

“I don’t know why I took it so hard,” he said recently. “I’m always telling people that change is good, and then I let change freak me out. The hardest part was talking myself out of the hole. In truth, I had to fake it for a while, but one day I finally got over myself and stopped being a pain in the ass.”

That’s good advice to remember next time you want to bitch about the deal, your new bosses, and the tragedy of your fate. You and your bad attitude can be replaced—and will be if you don’t learn to love the deal like the acquirers do.

Mergers mean change.

But change isn’t bad. And mergers, in general, are very good. They are not only a necessary part of business, they have the potential to deliver profitable growth and put you in a new and exciting strategic position at a speed that organic growth just cannot match.

Yes, mergers and acquisitions have their challenges, and all kinds of research will tell you that more than half don’t add value. But nothing says you have to fall victim to that statistic.

Don’t let deal heat get you, and avoid the seven pitfalls—then reap the rewards of what happens when 1+1 = 3.