As negotiations to acquire a company progress, the buyer wonders, “Will the combination of the two companies work well?”
If the proposed acquisition passes various marketing, technological and financial tests, the buyer must then consider the management issues.
- Who should stay?
- Who should probably leave?
- What should change?
- How long should we allow for the transition?
- How will people react to the change?
- How integrated into the larger business should the smaller business be expected to become?
- Are the operating systems sufficiently similar?
- Who should report to whom?
Of the various management questions to be considered, compatibility between the corporate clusters is perhaps the most significant and elusive. To ascertain compatibility, a Pre-Acquisition Organizational Assessment (PAOA) is performed.
To appraise the culture of the buyer, one observes behavior during the acquisition process, interviews key people, and observes non-acquisition-related operations in progress. To appraise the culture of the candidate for acquisition, one examines operations and reviews key documents, but emphasis is placed on personal interviews. Often interviews are central to clarifying important factors, surfacing their fears, designing a process to manage change, providing needed reassurance, and dispelling rumors.
Sample questions asked to become acquainted with the corporate culture are:
- How are major decisions made? In committee? By one person? By default?
- Do we operate as a team or emphasize individuals and their specializations?
- How do we innovate? Are our best ideas from the ranks? Do they come from the top? Do we rely on outsiders?
- What’s important to us? Profitability? Customers? Quality? Image? Productivity? People? Innovation? If we had a slogan, what would it be?
- What is our normal timeframe and pace? Are we concerned about the immediate situation we face or do we focus on long-term implications and plans? When do we revert to crisis management?
- How are decisions and plans communicated? Informally? Formally? Early in the decision making process or just before a change?
- How do we view our jobs? Are we expected to “do what’s needed and not focus too much on our titles,” or do we use specific job descriptions and avoid overstepping our areas of responsibility?
- Whom do we rely on to solve problems?
- Which people or departments have the most influence? Is there anyone who is forgotten, not considered, or discounted?
- Are our procedures rigid or flexible? Vague or spelled out?
- How consistent are our priorities? What changes our goals and objectives?
- What behavior is rewarded here? Diligence or laziness? Challenging or agreeing? Quantity or quality?
- How do we organize our work? Do we use short-term projects or long-term open-ended plans?
- Is there any person(s) within the company who represents what we are? Do we have a mentor whom people here tend to imitate?
- What kind of person would be comfortable here? Uncomfortable?
- What is an example of recent success? How did it come about? Who did what?
- What is an example of a recent crisis? How did it come about? Who did what?
- How are people hired? Do we tend to promote from within?
- What would we least want to change/most want to change about our company?
- Do we have any recurring problems? Cashflow? Turnover? Delays?
- Are we good at focusing on important things or at being thorough?
The Pre-Acquisition Organizational Analysis (PAOA) therefore helps both the buyer and the candidate for acquisition. Each is more clear about its strengths, weaknesses, style, goals, values and needs. They have a clearer road map along which they can profitably proceed—together or separately. By protecting what is good and adapting on both “sides,” the new entity has an increased likelihood of being better than either company had been prior to the combination.