mergers and acquisitions systems thinking, Toby Elwin, blog

Mergers and acquisitions systems thinking strategies, part 3

mergers and acquisitions, system thinking, Jigsaw, saw, theory

Clearly, the man to head up our mergers and acquisitions department

Systems thinking strategies for mergers and acquisitions (M&A) provide better integration valuations and post-merger operations. With mergers and acquisitions systems thinking the organization’s view is made of several components that interact with each other while simultaneously act as part of a whole.

Systems theory helps explain dynamic interrelationship of several parts, beyond information technology or back office functions.

Mergers and Acquisitions Systems Thinking

No matter the motive for M&A the real work comes with integration.  A systems view for organizations presents organizations as dynamic entities that continually interact with their environment.  Workforce efficiencies, scale efficiencies, combined technology, and market expansion commonly fall under the synergy tag.

Synergy seems like a hollow word, but synergy attempts to describe cost efficiencies that occur when companies consolidate into 1 company through a merger or acquisition.  Post-merger integration is where the components disrupt or combine to create a new system. There is a congruence between people, process, structures, values, cultures, and external environments.

Previously, in the two related blogs I outlined seven positive system thinking strategies and four negative system thinking strategies from systems theory.

Unfortunately, the negatives have permeated farther and wider than the positives.  Here’s a chance to reverse that.

Just imagine a mission/strategy discussion with your newly-integrated company.

Is it easy to find common ground or common allegiance?  Without a shared sense of mission how can you expect synergy?

Improper application of systems theory in financial models, risk models, engineering hardware systems design control, and human organizational systems model-building exercises lies in the misappropriation of systems integration.

Human Resources for Human Capital

Your human resources department should be the business partners for these assessments.  Are they at the table throughout deal discussions?  Do you have much faith in your human resources department or with a human resources consulting firm to evaluate the deal?  Do they get it?

A look at the graph on below reveals a distinct disconnect between the value human resource professionals believe they provide and the value CFOs believe human resource professionals provide.

Toby Elwin, debating hr's role in deal-making, cfo, mergers and acquisitions systems thinking, M&A, systems theory, mergers and acquisitions systems


If you can not get on the same page as a CFO, no wonder a human resource professional’s strategy is so narrowly focused.  How many organizations or deal teams have a top-flight human resource business partner at the table during mergers and acquisitions transactions?

No on has made a compelling value to be at the table.

How can systems thinking help in valuation and integration?

  • Culture resonance or disonance
  • Future-state executive leadership competency
  • As-is and required technical skill needs
  • Shared services
  • Centers of excellence
  • Product portfolio
  • Customer niche

Mergers and Acquisitions With a Systems Play

So, while share of market, liability, and discounted cash flows get the headlines, the real key to an investment, whether a technology play, new market grab, or expanding core capabilities, ultimately the deal is a bet on a team to deliver results within a fixed amount of time.

Expectation of payoff and timeline is even more highlighted with the external pressures of a publicly-traded company.

What can you do?  Any mix of these:

  • Culture assessment
  • Impact assessment
  • Skills gap analysis
  • Competency assessment
  • Competency models
  • Build (training plan)
  • Buy (recruiting plan)
  • Retention strategies

Demand more from a systems approach than technology.  Shifting to a true environmental systems thinking approach gives far higher expectations for holistic integration planning.

Human Resources For Human Capital

A Towers Perrin study, Why HR Can Make or Break Your M&A, of nearly 450 senior HR executives surveyed substantial involvement of HR executives during the due diligence stage of an M&A were part of 72% of successful deals and only 39% of those that failed.

5 major roadblocks to M&A success, highlighted are HR responsibilities:

  1. Inability to sustain financial performance (64%)
  2. Loss of productivity (62%)
  3. Incompatible cultures (56%)
  4. Loss of key talent (53%)
  5. Clash of management styles (53%) [author’s emphasis]

In the same study 65% of survey respondents indicated that their ideal role in an M&A was to be a strategic partner with senior management, only 8 percent ranked their ideal M&A role as HR functional expert and implementor, where HR involvement is indeed heaviest.

Only half of the respondents believe their HR organizations possess the capabilities needed to play a strategic M&A role.  Why does systems theory or system thinking help?  Because change creates tension and a systems approach works towards an environment in concert.

Systems Theory Series:

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