I've been following a transaction that has come together recently. The transaction is complex, involved a number of moving parts and, in my view, comes with a great deal of risk for a number of parties. I know many of the folks involved in the transaction and am familiar by reputation with many others, and I have a high regard for their acumen and intentions.
But when I read that one of the perceived strengths of the transaction is that many of the players in putting the deal together and who will now be operating together know each other well and belong to the same country club, I had one immediate filter-free reaction.
Yikes.
Let me explain.
The pre-existing relationships were absolutely necessary for putting the transaction together. But every integration effort involving people with pre-existing relationships has a problem. The only difference is among those who recognize it and respond and those who think they're immune.
The value of these relationships needs to be leveraged in the earliest stage and diluted from that point forward. The more apparent the dilution is to the organization as a whole, the better. They need to be controlled against to assure they don't weaken or dilute organizational discipline moving forward, either through actual or perceived behavior. None of the individuals involved are controlling owners of their company. They are employees who represent entities and their authority is provided for and limited by those entities. Their actions and decisions, expecially because they know each other, will be, and should be, subject to greater scrutiny.
Further, among themselves they must understand that the context of their individual relationships is now totally different. A peer is now your boss. Someone you play golf with is now a member of the Board of Directors. You are now competing with someone you've known through a professional association for the same job. The neighbor with whom you've long shared workplace horror stories with is now part of that same workplace.
So if that's the problem, what's the solution?
1. Act fast on significant matters where momentum exists and the honeymoon can be leveraged. The value of the pre-existing relationships will diminish rather quickly and should be leveraged on major issues in the earliest stage. If the words "low hanging fruit" are used or even contemplated there's a problem;
2. If there is no clear "core business vision" be comfortable identifying and operating as a holding company with integration efforts developed as product lines. If those efforts cannot be supported as product lines there is not sufficent support to move ahead;
3. Explain why everything is being done, clearly, concisely and conistently. Adopt transparency as a mantra - be sure to commit to it if you do. Connection to vision, mission, measures of success must be used;
4. With the same urgency, begin the process of developing clear decision-making processes - balance the need for buy-in with the need for speed;
5, Segment for audience - shareholders, bondholders, integrating structures, partners, staff;
6. Be incredibly mindful of the differences in performance derived from financial engineering versus those tied to operating activity; and
7. Never lose sight of the fact that objectively verified results are required - in everything you do.
And in the end remember, while personalities brought the deal together, culture, process, execution and discipline applied agnostically and consistently are necessary for sustainable success.
GS
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