What do arranged marriages and their analogue in the business world, post-merger Integration, have in common? The answer: long termed success starts with getting the match right in the first place.
Here’s a telling statistic. According to UNICEF and Human Rights Council, the average divorce rate globally in the case of arranged marriages is 4%. In India, where 90% of marriages are arranged, the divorce rate is 1.1%!
Contrast Post-Merger Integration. According to McKinsey and Co., nearly 80% fail to recover the costs incurred in the deal, and fully half of deals result in reduced profits, reduced productivity or both. Add to this years of fear and instability on the part of employees and their local communities, and … you get the picture.
Still, the industry remains in denial. On a recent blog post I read, a CEO was defending his right to treat non-financial/legal assessments as soft, unmeasurable and therefore marginally important. Later in the post he admitted, “… I have directly participated in 7 M&As as a C-suite executive. 2 have destroyed value and 3 didn't produced the expected return … managing post-merger integration was also poor in those 5. This had a direct influence on return on investment.” Wow.
So, if we have fun with this, there are some lessons to learn from the ancient custom of arranged marriage. In fact, I found an article by a young Indian writer, Aditya Mahajan, that is useful as a reference.
First, arranged marriage is not about the union of two individuals, but of two families. Following the honeymoon, couples involved in their own version of post-merger integration enjoy support from the various parties who feel jointly responsibility for their success, and who have the resources to apply.
This process starts as time is taken to ensure a good match in the first place. Factors such as character, values, interests and life goals are weighed carefully before offers and commitments are made.. Alignment between parties from the onset means less drama and surprise afterwards. By assessing social/culture compatibility as well as the economic suitability, the upfront investment is likely to produce long-term returns.
Lastly, the stigma of divorce, a high price to pay, acts as a deterrent to a marriage of economic convenience. I thought the closing argument in his piece was prophetic for the M&A industry:
“… just consider the cost of your first wedding reception, the engagement ring, the food catering services and the expensive alcohol. Are you ready to make another such investment?”
All in all, most recognize we need a systematic, data-driven approach for both vetting and integrating social/cultural aspects of post-merger integration for organizations considering marriage. By doing so we will lower the risk in leadership team transition and overall failure, and increase the chances that the match will exceed expectations.
Now, if I can only sell my kids on arranged marriage ….
--Check out this blog post that sees post-merger integration from a Change Management point of view.
--Also, a holistic platform Post-merger integration from which to do strategic alignment in M&A work.