By Dan Schneider, The Rawls Group
If you are in a growth spurt fueled by mergers and acquisitions, here is a story that is worth your time. On a recent flight I sat next to someone who had just moved to a new position within a different auto dealer organization. As we talked about his decision, he made it clear that he left because his company had been acquired or merged with a former competitor. “It all seemed like a wonderful opportunity before the deal took effect. Then reality set in, and after about six weeks I put myself on the market. I could hardly stand what the new dealer company was doing with and to our customers, to those of us who had helped our former company grow, and to the culture we had and respected. We just weren’t us anymore!”
To some, that may sound like whining. Perhaps it was, but as I listened to this story it began sound more and more like a case of solid financial due diligence with little to no cultural due diligence. There is no way to predict how this will turn out in the long run; but if my flight companion’s company was purchased in hopes of also acquiring additional talent and other non-financial resources, someone is going to be disappointed. If your auto dealer group’s growth strategy relies mostly on acquisition, here are some Cultural Due Diligence considerations that bear your consideration.
- What is your motivation for acquiring another location? In short, what do you really want to gain from this experience? Typically, the answers are going to fall into one or more of three categories: Market penetration; productivity improvements through people and/or technology; and increased profitability.
- Have you clearly communicated to both houses why this event is taking place? If you have not, you should not be surprised when others do not seem to “get it”. You may need to remind people several times why this is taking place and how it will benefit those involved. Almost every stakeholder will be wondering “What does this mean to me?”
- Based upon your expansion the new location, how it will impact customer service and operations at your existing locations – will your people be spread too thin to respond to customer needs.
- How different is your existing culture to the location you are purchasing and how likely are their loyal customers to feel culture shock and look to other dealerships to fulfill their needs. Sometimes what passes for customer loyalty is not much more than inertia. It takes effort to form new relationships, and absent a compelling reason for doing so, most of us do not. Change in ownership is often a triggering event that starts the process. You could find yourself under the microscope pretty quickly, so have a marketing and communication plan in place well in advance of the cutover date. Make sure it covers what, how, and why questions that convince your new customers there really is something in this for them.
- How many people in the new location are likely to stay with you? Depending upon your personal motivation, that may not matter. It certainly is not a factor in some large transactions. When Whirlpool acquired Maytag several years ago, the motivation for Whirlpool was the “brand” more so than the people.
- How many people in the new location fall into the “must keep” column? If keeping the other company’s talented people do factor into the equation, then making sure they come out as whole as possible is important. The financial compensation associated with pay and benefits will be important; and so will the psychological and motivational compensation that comes with inspiration, delegation, education, and communication. If psychological comp is more important to “them” than it is to you, you are probably going to find yourself losing a lot of the talent you hoped to acquire.
- How comparable are the cultures in terms of these areas:
- Can we identify and keep the right people?
- How well does the acquisition fit into our strategic plans and our growth goals?
- Are our processes compatible and easy to use for client/customers and employees or will we have compatibility challenges?
- What’s the financial break even point and how long will it take us to get there?
- Do you have the talent in house to market and develop your culture at the new location(s)? Once again, your acquisition motives determine the importance of this consideration. If all you are after is additional market share at the existing product or service level, then you may be able to pull most of the new volume into existing operations. However, if you want more than that, then you probably need a well-developed set of managers just waiting for an opportunity to show you what they can do if given the opportunity.
- What is your plan to avoid the turf wars that invariably surface in the blended family created by the merger or acquisition? Moving someone from the new branch of the family into the legacy branch creates a set of problems for the legacy staff. The “acquired” talent may face a level of malicious compliance because one or more legacy staff feel left out or betrayed; and sometimes the new staff simply tries too hard to fit in the with legacy people. Either way, it can result in more drama than anyone ever anticipated.
Mergers and Acquisitions are certainly a legitimate way to execute a growth strategy. No doubt you will be sensitive to the numbers and the financial impact. If you are after more than the brand, however, you will be wise to pay attention to the cultural impact as well. Good Luck!
Dan Schneider, M.A. is a partner with The Rawls Group, a national business succession planning firm. For more information, visit www.seekingsuccession.com or email info@rawlsgroup.com.
