The Financial Times reported that “Warren Buffett, the billionaire investor and Kraft’s biggest shareholder, has attacked the US food group’s £11.6bn ($18.9bn) agreed takeover of Cadbury, saying it was “a bad deal that he would vote against if he could.”
I don’t know what he knows about Kraft but of course he’s right about mergers and acquisitions in general. The data seems to show that about 60% of M&A deals of this type actually decrease shareholder value. Think Mercedes/Chrysler and AOL/TimeWarner.
But what about the 40% that are successful? What about Linde’s acquisition of BOC or the HP/Compaq merger or the great track record GE had throughout the 90s? These companies did many things that worked but here are our top three:
- Be very clear about how you are going to integrate. For example, our understanding of the HP/Compaq merger was that the integration teams would select the best business process, from either company, in the area they were working on. But they couldn’t compromise or build a new process
- People are central to success and one people action you need is to get your executive leadership (probably the Top 100 people) into place very quickly. This needs to be completed in the first 30 days. You can’t leave power vacuums or uncertainty in the organisation.
- Use integration teams made up of people from both companies and build implementation plans that can be rapidly implemented. Think less than 100 days. One of the characteristics of poorly implemented M&A is that the organisation is still working at years later.
Of course the biggest determinant of success would be the size ratio. Large organisations consuming much smaller companies is the wisest way forward.