Investment bankers, stock market traders and egotistical executives love them. But for the most part, mergers and acquisitions are proven exercises in corporate destruction.
They hammer staff morale and cause havoc in personal and professional relationships. The financial rationale – “synergies” through cost cutting – rarely fulfils pre-deal expectations. So it is hardly a surprise that academic research shows 80% of mergers fail. Yet they continue to be justified, grounded in a misguided belief this time will be different.
Once in a while, however, mergers are genuinely part of a Grand Plan.
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For South Africa, the grandest was conceived in the early 1990s by visionary Piet Badenhorst. Pre-empting Capitec, he believed banking would be dominated by the lowest cost producer. So in a series of audacious deals, he engineered the merger of his United Building Society with previously independent Volkskas, Allied and Bankorp to create the country’s largest retail bank.
A chartered accountant, Badenhorst is blessed with a brilliant analytical mind. But like many other highly numerate men, he lacked the softer skills. A fact reflected in his unimaginatively named Amalgamated Banks of SA (Absa) where I arrived in 1994, a few months after the board ejected Badenhorst after one too many disputes. A bitter Badenhorst, advised me against joining, claiming he was betrayed by the “Broederbond”. He left for Australia soon after being fired.
The managerial chaos that stemmed from that four-into-one merger is not the kind of thing easily forgotten. Particularly the continuous restructuring, typified in a poster that popped up on staff notice boards all around the company.
Complete with cartoon of a Roman centurion it quoted one Gaius Petronius Arbiter from 60 BC: “We trained hard, but it seemed that every time we were beginning to form up into teams, we would be reorganized. I was to learn later in life that we tend to meet any new situation by reorganizing; and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency, and demoralization.”
I later discovered the quote was fake. But it did make a valid point. For centuries, when those who make the rules are confused, they restructure. Yesterday, global consulting group Mercer released its 2017 Global Talent Trends Study. The report assimilated responses from 7,000 senior HR professionals worldwide.
Here’s the thing: virtually all respondents (93% to be precise) plan to redesign the corporate structure within two years. They blame technology. The real reason is bewilderment. Confused managers are especially vulnerable to the “silver bullet” of restructuring. But that bullet is a dud. Be warned.
