M&A and Stakeholder Engagement

Stakeholders are often ignored in an M&A process. Mergers and acquisitions are complex. The process requires taking a bet on the future. Detailed analysis and careful reflection is required. The usual areas covered in coming to a decision involves understanding the nuances of the commercial, operational, financial, accounting, tax, legal, and organisational aspects of the envisioned venture and a review and condition assessment of the physical assets. There are many other considerations that need to be taken into account as well.

A stakeholder due diligence can be greatly beneficial in coming to the optimal final decision. It can also assist with actions to be taken during and after the acquisition or merger process to ensure minimal disruption.
Most M&A processes involve an inward look at the balance sheets, the income statements and the quality of management. The commercial due diligence will find market synergies. But we know that the modern world had become much more complicated.

A process that includes the assessment of the merger or acquisition on stakeholders such as regulatory and standards bodies, the interlocking supply chains, the customer base, relations with the broader community as well as impacts on products and services, is going to drastically reduce risk and unforeseen complications. Interactions between stakeholders in the combined two stakeholder pool must be considered. When communities and interest groups perceive a threat, they respond vigorously. If they like something, they support it. If they feel threatened, they attack it. We see the effects of social media campaigns all around us.

An excellent balance sheet, solid assets, strong management and a fair price count for nothing if the entity is under attack. It takes executive time way from addressing the merger processes. It creates a reputational smudge and it does nothing for the morale in the newly emerging organisation. And it leaves a legacy of unease.

If both organisations have sound stakeholder engagement strategies, then the process of stakeholder engagement due diligence is relatively easy. A comparison and evaluation, together with a risk review and performance management implications will be sufficient.

If these are not in place, then a more structured approach is required. The process should aim to create a stakeholder engagement strategy for the emerging entity. Hence the specifics of stakeholder maps, issues maps [materiality matrices] and engagement behaviours must be done. This is basic ground work. There is no way around it. The stakeholder maps and the issues maps must take account of the new context after the merger or acquisition. A thorough risk review should be undertaken and the mitigation actions subjected to rigorous review by knowledgeable outsiders with deep insight into the context. The engagement skills in the new organisation must also be addressed. The performance management aspects must be locked down.

Why has this become necessary? Stakeholders are informed, they have powerful tools at their disposal, they can mobilise across a wide front. – witness the South African #CountryDuty campaign that brought Bell Pottinger to its knees. A strong stakeholder backlash will always result in harm to the organisation, and will impair or even destroy any benefits that might have obtained.

A stakeholder engagement due diligence is an essential part of any merger or acquisition process.

#merger #acquisition #duediligence #stakeholder #engagement # risk

Author: James Forson

James Forson spends a great deal of time near the centre of an intricate Venn diagram where management consulting, fiction and business writing, social investment governance, home-grown vegetables and procrastination overlap.