There is No M& A Without Change Management – Interviewing M& A Expert Ramendra Rout

When you see a headline about a major business acquisition, how far does your interest go? The fact is, reporting on M&A transactions often covers the transaction itself but rarely follows the long process of actually combining both companies, which is no small task.

Considering potential synergies and points of conflict is one of many considerations that influence the decision of whether to follow through with a transaction, but the real work begins once the deal has gone through.

Change management is a kind of catch-all term for the process of creating value from the changes inherent to a merger or acquisition. It’s a complex area of focus within M&A, and we asked an M&A expert to help us more thoroughly understand the tenets and benefits of skillful change management.

Ramendra Rout is a senior strategy and business development professional who largely works in the area of mergers and acquisitions, from the research and due diligence stage to integration, business development, and, of course, change management. 

Rout provided some high-level insights into this particular segment of M&A, and we highly recommend this interview to M&A professionals, employees of target companies, and anyone interested in the realities of mergers and acquisitions, all the details the press doesn’t tend to cover.

Today we would like to focus on change management specifically. Can you briefly detail your expertise in this particular area of M&A?

Rout: M&A execution strategy in addition to several influencing factors is most importantly shaped by having a well-established change framework to drive actions to bring both teams together. The sooner you can win hearts and minds, the stronger the foundation for realizing synergies. Change management is a strategic lever for building bridges and aligning everyone toward a single vision.

I am very passionate about organizational change when it comes to acquisitions. For some transactions, I have had the opportunity to interact with the target’s Chief Finance Officer or Chief Information Officer during due diligence and understand more about their professional and personal background and aspirations. These conversations have been very helpful for me to understand the organization’s DNA by getting a sense of their culture, leadership styles, engagement and communication mechanisms, etc. These are foundational themes that are retained throughout the journey of integrating businesses.

Based on our experience in several of our past acquisitions, I, along with my team, have put together a playbook for organizational change. Of course, this draws influences from various theoretical frameworks, but at the core of our thesis is employee experience and having clearly defined actionable engagement for every step of change as part of post-acquisition execution.

A big part of my role is establishing the vision of the combined organization and the roadmap to the target operating model. I spend a lot of time developing change awareness with the leadership of our acquired entities, explaining the journey for the first 100 days, getting them introduced to the team on the ground, as well as the team charter and the governance model for change effectiveness. This helps in a big way in setting the “tone from the top” within the acquired organization.

I and my team spend a generous amount of time understanding the minute details of the process, policy, and standards that get aligned for our acquisitions. Execution success depends on the early adopters, so it’s important to have a group of core insiders who understand and appreciate the change. They become advocates and help complement efforts by becoming the ambassadors of change and answering questions about how to transition toward the new normal and what it will take to transition.

Lastly, it’s time to leverage a multi-dimensional approach toward taking feedback. Global surveys, focused group feedback sessions, pulse checks, and informal one-off connects, for example. There’s an extremely rigorous process of driving course corrections and ensuring that outcomes are published.

Would you say that change management is a relatively recent component or consideration of M&A? Further, is it especially relevant today?

Rout: Change management as a management principle has been in business practice for a long time. Several organizations often drive change as part of business transformation. However, given the current scale and scope of M&A transactions, change has emerged as a critical lever for enabling value creation.

M&As increasingly have become transformational due to a multitude of factors. New-age companies have a unique culture that needs to slowly blend with the acquirer. For people-centric acquisitions, the employee motivators need to be well understood and respected, and many buyers look forward to pivoting and re-position through an acquisition, so it’s important to change themselves.

So for example, when companies are small in scale and privately owned, process and compliance take a back seat while customers and growth take the front seat. But that changes significantly when they get acquired by a public company. A huge volume of fiduciary responsibilities come into play, and change becomes the critical driver of establishing the new way of working.

Consulting organizations have a very different operating model, everything revolves around the partners of the firm. Everyone aspires to become a partner. Consultants engage in dialogues with leaders to do interesting projects or participate in firm-wide initiatives to build eminence and work on client projects that match their aspirations. In a nutshell, this is an operating model that is based on leadership networking, capability development, career ownership, and client centricity.

This is very different from traditional services organizations which have long-tenured assignments with clients and where processes are tightly driven by systems. As the companies build a single business out of both, change assessment principles help in strongly complementing efforts on operating model fit-gap assessment and implementation of the target state operating model.

In summary, change and acquisition execution are two sides of the same coin. Both co-exist and complement and supplement each other. While execution strategy defines how to bring businesses together, change ensures a one-team mindset and helps the business to thrive.

Does your involvement with change management also include interviews with employees and stakeholders, and if so, what does that process look like?

Rout: Yes, conversations with stakeholders are a critical part of change management strategy. I take a well-rounded approach to ensure that both internal and external stakeholders are covered and drive a persona-based engagement. Stakeholder engagements are for seeking feedback, sharing updates, sharing insights, org announcements, impact initiatives, celebrating success, and much more.

I look at change from both external and internal perspectives. Internally, first, I ensure that the CEO of the acquired entity is having a clear line of contact with the business unit sponsor and his/her core task force groups, and our corporate CXOs. Next, my change leader maps leadership teams from the business unit to engage with the top leaders from the acquired entity. These meetings are to ensure that management teams from both sides are calibrated on strategic vision.

I then focus on employee experience, and for this, I along with my change lead run a different format of connects, for example, an informal one-on-one to understand “What’s working?” and “What should we do differently?”. Based on the interview responses,  we prepare a summary of actionable items for the project team.

The other type of discussion is focused on culture, and this is a tough one because of its broad definition and tying cultural assessment feedback into operating-level actions. For some, there is no easy solution, but our principle is to ensure that our project plans enable both teams to embrace each other’s strengths without losing identity.

Overall, there are several avenues to connect with different segments of stakeholders and ensure that vision, execution, and experience all come together.

Without naming the companies involved, can you talk about a change management challenge you’ve encountered in your work and how this challenge was overcome?

Rout: This is an interesting one. A few years back, I was involved in an acquisition that was a private equity-owned new-age consulting organization with a completely remote workforce that was spread out all over the world. Based on conversations with their leadership, I was able to appreciate differences in the leadership style, growth strategy framework, collaboration and communication, and even office attire!

At the highest level, I ensured that our leadership has a comprehensive view of the target operations and practices and ensured that its communicated top down that the core DNA of the acquired entity was maintained. That said, our strategy was to not only maintain the acquired entity culture but also to ourselves adopt the same.

The first big thing was to transition from our business formal dress code to business casual. In a subtle way, this was an opportunity to shed the image of a services organization to more of a gen-Y agile and boundaryless digital organization. The second aspect was an awesome set of tools and systems that enabled remote workforce collaboration which we adopted. The third aspect was the overall cultural dimension that was being driven by the strategic framework “Vision & Values, Methods, Obstacles and Measures”. To inculcate a common objective and strategic vision we ran an initiative by the name of “Cultural Reboot”, which included roadshows across all office locations for the teams to understand the acquired entity strategy.

This was a unique scenario where the implications of  changing the acquired organization would have been disruptive, so instead the decision was to adopt the acquired organization’s culture and way of working.

Just how integral is company culture to change management? Is a change in company culture inevitable during an acquisition?

Rout: Culture is a core pillar of not only change management, but also building one team, one vision, and one way of working. The approach is to understand the company culture from the lens of workplace practices, unique operating aspects that shape employee behavior, and most importantly ensure those are addressed as part of the change strategy.

As a general principle, there is no one-size-fits-all answer. There are certain regulatory and compliance aspects that become critical for a company that’s registered with the stock market. That means additional procedures come into play for the acquired company’s legal, finance, and management leadership team. This also means that certain routines change.

When daily work  procedures change, it potentially impacts day-to-day peer interactions, and it might require calibration and adjustment  with the new expectations.

New operating practices drive new behavior and might redefine the culture. However, to ensure that this change is not disruptive, it’s important to ensure that there are several channels of support, such as providing additional in-person support, seeking feedback and taking corrective actions.

So, yes, certain organizational aspects change in M&A, leading to a different user journey, and then there are non-material aspects around company practices that are retained. Overall, I would say change is inevitable, and that said, it might change culture as well. The objective is to uplift the acquired organization’s culture through this change.

Is it also important to track changes for a certain amount of time after the merger or acquisition has actually taken place and after changes have been implemented?

Rout: Yes. Right after the legal close of the transaction, it’s time to lay out the roadmap for the first 90 days. This is a critical moment. Market teams start collaborating with their counterparts in cross-up sell activities with their clients. Additionally, governance mechanisms change.

The acquired organization’s leadership needs to be familiarized with what will change by when, and what role they need to play to support the change. I create project plans around priority activities, track progress, and drive cross-functional dependencies. Any challenges are highlighted for resolution.

Usually, after the 90-day window, larger organization integration projects are run. These lead to the development of the end-state target operating model, a refresh of goals and objectives, alignment of policies, and integration of systems and processes.

My workstream leads create functional area-specific project plans and milestones. Milestones in the plans are logical points of change, and I ensure that a matching communication, training, and change familiarization plan addresses “why change?”, generates excitement for change, shares new user journeys, and supports post-change issues.

Usually, a rough timeline is anywhere between twelve to twenty-four months of tracking change until both organizations get folded into a single structure. There are exceptions where I can support acquired organizations for longer as well.

What is the most important aspect of change management for leaders with a target company to understand?

Rout: An acquisition is usually driven by various factors. In simple terms, the decision for an M&A is made by a handful of leadership teams, and the rest have to follow the path whether they like it or not.

That said, as I mentioned earlier, change is inevitable, and based on how well the acquisition rationale has been communicated to everyone and understood, different employee behavior emerges. It’s natural that different sets of employees from the acquired organization would be at different levels of change adoption.

A critical responsibility resides with the acquired organization CEO and his core team to provide unwavering support for the agreed business strategy and vision for the business.

However, that vision needs to be mirrored by the rest of the management team and other staff members. It’s important that the vision is conveyed clearly through different channels and that a high level of engagement is maintained through the post-acquisition integration journey.

Trusted leaders need to do the heavy lifting of ensuring that transparency is maintained and that career growth opportunities are provided. Most importantly, they need to be the chief evangelists of change as part of integration.

The leadership needs to be the custodian of the core culture that existed pre-acquisition, uphold the core beliefs during the post-close phase and support bridging teams, encouraging them to come together and learn from each other’s strengths to help build a stronger combined business.