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Mergers And Acquisitions – A Survival Guide

Paul_CollyerBy Paul Collyer, Panelmet Consulting

If you have been in the construction products industry for any period of time you are likely to have been exposed to a merger/acquisition, or know colleagues who have. Mergers and acquisitions are an important strategy for corporate survival, and are also a result of cyclical economic activity. They are also somewhat akin to shotgun weddings. As someone who has survived four of them in my career (M&A’s, not weddings!), I’d like to share some of the lessons I’ve learned.

Rule #1: Get ready for change.

You will often hear from the acquiring company statements such as “we won’t change a thing”, and “we bought you because…” This is often an attempt to lower the anxiety level of employees – for everyone to take a deep breath and not over-react to new ownership or to the coming changes. You will often hear statements such as:

• Your company is profitable

• Your management team is strong

• We have tremendous product synergy

• Together we will be the market leader (dominant market share)

• Your customer base is highly desirable

• We will now enjoy the advantages of vertical/horizontal integration

These are all perfectly logical reasons for M&A’s, and are given with sincerity and positive intent. But let’s look a little deeper…

Corollary #1A: Companies buy companies they think they can make better (more profitable). These areas of improvement will vary, but typically include:

• Overhead reduction

• Manufacturing efficiency

• Centralization

• Unified corporate philosophy

• Equipment modernization

• Product consolidation

• Research and development

• Elimination of competition

• Improved customer service

• Better product quality

Corollary #1B: You don’t buy a business and not want to run it. First of all you’re dealing with human nature. Whoever spent the money wants to inspect their purchase, take it out for a test drive, and see what modifications they may want to make. There is also a strong sense of ego – whoever has the money to purchase another entity also feels they are the better business as evidenced by their superior financial position. 

The acquiring company will seldom leave things as they are indefinitely after a buyout. There is often an evaluation period, maybe six months to a year to observe the business and existing management team first hand. After the initial honeymoon period, things are bound to change. This generally happens slowly at first, concentrating on management reports, meetings and accounting systems etc. The next stage generally gets messier and involves salary and benefit reviews, vendor evaluations, overhead reviews, manufacturing efficiencies, areas of duplication, overhead reduction opportunities etc.

Rule #2: The most difficult change is always cultural.

It is far easier to change products, accounting systems, office and manufacturing locations etc. than it is to change the way people have always done things. This applies to both management and non-management personnel. Virtually all people are somewhat resistant to change and are creatures of habit – once we find something that works, we like to stick with it until forced to adapt.

Adaptation is absolutely the most critical component of surviving M&A’s. As a manager, you may be asked to change how you do your job, or even the role you have been in. Keeping an open mind to new ideas and ways of doing business is absolutely necessary to remaining a member of the new team. Realize that there is NEVER only one way to do anything, and be flexible in your approach to your job. Some of the best solutions come from a clash of ideas. Don’t be afraid to express your opinions and share your experiences, but be receptive to new strategies and solutions – it is amazing what you can learn if your mind is open.

The surest way to be relieved of your duties is to refuse to change – that is a battle you will NOT win. While we’re on the subject, stop yourself from saying “we’ve always done it this way”. That says volumes about how you think. Step out of your silo and take a look around – it’s not so bad!

Corollary #2A: New management wants to build their own team. This is where things can get very dicey for the business. Nothing is more upsetting to employees than watching a long time respected manager or employee leave (or be forced to leave) by new management. On the other hand, every CEO or manager who is responsible for the actions of others needs to be able to choose their own team. It’s really no different than a new head coach bringing in his own staff. In order for him to be effective, he needs to trust that his staff is willing and able to carry out his wishes. After all, ultimately it’s the boss’s neck that is on the line.

Corollary #2B: The first 90 days is the most critical evaluation period for all parties. First impressions stick. If the new owners/management come in heavy handed and don’t take the time to fully understand what makes the acquired company tick, then better get out of the way and watch the exodus of employees occur. The ones to leave first are usually the best employees, because they know they are good and have no issues finding other suitable employment, often with a direct competitor.

Similarly, this is the time period where the existing managers and employees are being carefully evaluated by the new owners/management team. If you wish to continue your employment at the company, then it is prudent to listen first and speak second, and to observe how the new team operates. Cooperation is the most valuable asset you can offer the business.

Rule #3: Put the good of the company ahead of your own self interests.

This applies to management as well as non-management employees. One of the most difficult things for any person to do is to put the needs of others ahead of their own.

If you are a manager, understand that the company is bigger than any individual – yes even you! One of the first things you learned in business school was the concept that a corporation is designed to outlive the executives. You are temporary keepers of the flame, and as such all your decisions should be made using the same golden rule “What is best for the business?”

If you are a non-management employee, understand that helping others is the most positive and lasting personality trait you can exhibit to gain the trust and respect of your peers.

In either case, putting the company first will get you noticed in an extremely positive way by everyone you work with, because without the company no one has a job.

Rule #4: Understand your position may change.

You may be asked to change positions and responsibilities. Perhaps the company org structure or philosophy is changing, or perhaps your position is duplicated within the organization. When approached with a “deal you can’t refuse”, you have several choices in how to react to this opportunity:

1. Accept the new position – “it’s just what I’ve always wanted”… maybe

2. Politely refuse the opportunity, but be prepared for your possible termination (better have a backup plan)

3. Politely refuse the opportunity, but express a desire to continue in your same position if possible (you will no longer be considered a team player, and will likely forfeit any future promotions)

4. Negotiate a new position, or express a desire for another open position that fills some other need within the business (creative problem solving)

5. De-select (leave to seek other employment)

If you care to remain with the firm, being open to new opportunities can have surprisingly positive outcomes. If you select choices 1 or 4, you have the opportunity to grow and increase your skill set. If you decide later on that the new position is not a good fit for your interests or abilities, then at least you have shown the ability to put the company’s needs ahead of your own, and are much more likely to receive the same consideration from the company in return when requesting a change. Just as importantly, you will have learned new skills that you can then leverage into other more exciting opportunities, whether internal or external.

Paul Collyer is vice president of business development for Metl-Span. He holds an Industrial and and Systems Engineering degree from Georgia Institute of Technology (Georgia Tech), with professional affiliations/certifications that include Construction Specifications Institute (member), Certified Construction Product Representative (CCPR), LEED Green Associate (USGBC) and Green Globes Professional (GBI). Collyer has more than 27 years’ experience working for construction product manufacturers in the insulated metal panel, single-element metal cladding and pre-engineered metal building industry.

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