During 2021, we saw merger and acquisition (M&A) activity reach record-smashing highs due to two main drivers. First, companies had the financial means to make a deal happen. Second, they needed to readjust business models for a post-pandemic world. As a result, more companies are on the journey to becoming serial dealmakers―and for good reason.
Our in-depth study on building M&A strength revealed some interesting facts. We found that serial dealmakers—the most acquisitive firms—on average outperform less frequent acquirers in weighted total shareholder return (TSR) by 129% in North America, 75% in Europe and 91% in Asia Pacific.
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A strong serial M&A capability is vital in driving business reinvention and hypergrowth. We define hypergrowth as pursuing revenue growth at a compound annual rate of 20-40%. However, workforce integration often remains a challenge. We’ve found that there can be a tendency toward an operational mindset at the expense of human issues.
For instance, many leaders focus narrowly on deal mechanics and synergy capture. This comes at the expense of orchestrating workforce integration. At the same time, rising labor costs and attrition rates intensify the need for an approach that retains and uplifts workers.
The success of serial dealmakers depends on how well their workforces can absorb and integrate new employees. Helping people embrace change eases this challenge and supports hypergrowth better. Here are four actions you can take today to get to that goal.
1. Build a workforce listening engine
It’s essential that we gain perspective on how to better manage people integration. However, this often conflicts with the daily pressures of swift operational decisions. Executives may have more access to data than ever before. Yet, many find it difficult to get real-time actionable insights on workforce sentiment.
Just 30% of C-level executives feel very confident their organization is using workforce data in a responsible way. Also, while 82% of employees say they have improvement ideas they want to share, over a third don’t feel heard by their employer.
Workforce listening is evolving rapidly. Before, the focus was on pain-point collection and incremental problem solving. In the deals we support, we are using artificial intelligence (AI) and behavioral science tools to analyze and interpret complex data from internal and external sources.
These insights are used to suggest specific actions to improve team productivity, well-being and agility. And platforms can help you explore issues by enabling listening sessions and the opportunity to crowdsource solutions from employees.
A great first step is to determine what information you need to help your company sense, predict and respond to employee sentiment. In doing so, you can empower employees at all levels by making data widely accessible.
2. Design a purposeful, adaptive employee experience program
The concept of employee experience is often narrowly applied to Day One, when the merged or acquired entity becomes active. Planning a comprehensive employee experience journey across the deal cycle provides a more expansive view of human needs. It enables you to realize what acquired employees want to accomplish and how to deliver an employee experience that supports these goals and desires.
Employee needs can shift, often unpredictably, so having an outside-in perspective is critical. By leveraging data along with creativity, you can design employee experiences that drive connection. Employee needs will vary by the deal. That’s why the ability to modify the approach is essential.
We supported a global consumer goods company through multiple deals recently and used a tailored organization design and talent approach for each acquisition. This adaptation will enhance the agility of the workforce, while remaining true to the core identity of their company.
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3. Remember to reskill enterprise and functional leaders
How leadership cares for the workforce can have a disproportionate impact on employee engagement and retention. This is especially true during turbulent events. A study we conducted found that workers have two top needs regarding leadership. First, they need their leadership team focused on compassion and the care of its people. Second, they need to feel confident in their company’s ability to navigate the future.
Your strong leadership can inspire focus and commitment in your employees during a deal. Unfortunately, many leaders remain limited in their understanding of the M&A deal cycle. They are unclear on what challenges to expect. And they don’t fully understand the leadership capabilities needed to guide employees on this journey.
Creating a shared destination. Aligning on the timing of employee impacts. Building connected teams. Together, these tasks can be a large undertaking. The key here is to reskill your enterprise and functional leaders through a cohort-based learning experience. It will help build the mindsets, capabilities and support mechanisms leaders in hypergrowth companies need.
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4. Establish a legion of “Pathfinders”
Identify the true change-makers, or “Pathfinders,” in your company using an Organizational Network Analysis (ONA). It allows you to visualize how communication, decisions and information flow within departments and functions.
Evaluate the effectiveness of each person in a Pathfinder role. Next, give each Pathfinder targeted outcomes to work toward. These outcomes should be flexible and adaptable to the deal phase, while driving continuous accountability and focus.
By putting structure around the Pathfinder role, employees who aspire to lead can gain visibility. Additionally, it provides them with opportunities to learn how the business operates as it pursues hypergrowth. We also recommend developing a dedicated talent base to usher deals through integration. Doing this will strengthen the company’s M&A muscle for future deals.
Invaluable insights, faster time to value
If you’re embarking on a deal, begin by assessing any people risks inherent to the M&A journey. Risks could include deep “change fatigue” from prior company-wide initiatives. The leadership team may lack the energy and skills to motivate the workforce. Or a group within the company might reject the new Human Resources policies, procedures and practices.
Next, determine which workforce segments are critical to the company’s long-term success. These employees need to be partners in the transformation. With this done, you can start building a comprehensive people strategy to activate the four capabilities above prior to closing your deal.
We work with some of the most successful serial dealmakers to help them gain insight into their workforces and accelerate the time to realizing the value of their deals. Get in touch to learn how we can together create leadership readiness and prepare your workforce for hypergrowth.
Co-authored with Srron Graham, Senior Manager, Accenture Strategy.
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