Why mergers and acquisitions fail: the impact of the Twitter takeover on its people
Did you know that while mergers and acquisitions are an excellent opportunity for companies to move forward and expand into new markets, studies show that between 70% and 90% fail?
So, why do mergers and acquisitions pose such a challenge? Aligning all the parties involved, working under new leadership, and integrating with a different company, are just a few of the internal issues. Critical external factors, such as regulations to prevent market domination, can also stall success. However, the most definitive issues are often internal and preventable, as seen in Elon Musk’s disruptive takeover of Twitter.
So, what causes the lack of cooperation that prevents a successful integration?
The main challenges of any merger and acquisition
Mergers and acquisitions often fail because people don’t believe in the new version or vision of the organisation once it is acquired. And this happens at all levels. Key people leave because they don’t believe in the project anymore or lose power to newcomers, teams don’t get along or demotivation sets in.
So, how can management avoid these situations?
Often the two parties’ expectations, motivations and intentions don’t align. The buyer’s expectations of the business’s current state and potential don’t align with the seller’s understanding of the changes they need to prepare the business for.
Companies planning a merger or acquisition need to set expectations early on, so everybody knows what to expect at any given time throughout the process.
This misalignment of expectations can be caused by poor communication.
Misalignment is discovered during the takeover process, causing friction and even failure. Poor internal communication creates an environment of uncertainty and frustration as employees don’t know how their jobs will be affected and struggle to readjust to incoming changes.
Leaders must prioritise honest communication between the buyer, the seller and employees throughout the takeover process. Regular check-ins reduce the likelihood of misunderstandings and prevent the build-up of uncertainty in the company.
Lack of transparency
Poor communication and determination to transact quickly can lead to a lack of transparency.
The buyer isn’t warned about the actual state of the business and what they’ll have to do to achieve the outcomes they want. With limited transparency, buyers often gloss over the parts of the business that make it worthwhile acquiring in the first place.
A picture of what the business will look like post-takeover should be established beforehand and shared, so everyone involved in the company knows the vision for the future.
Every business has a unique culture, intentionally or unintentionally, designed by its leaders. The new leadership might not have the same values, focus and way of working and will make decisions that starkly contradict with the established culture. If the motivations and priorities of the two parties don’t match, value-building integration is challenging.
The current culture of the business, and the key contributing factors to its success, should be explained and presented to the seller. Any changes the new leader wants to make to the company culture should be carefully planned and gradually implemented to prevent disruption.
Why Musk’s Twitter acquisition was so disruptive
A recent acquisition is a perfect example of how tricky an M&A process can be - the purchase of Twitter by Elon Musk, an outspoken entrepreneur with celebrity status. The public exposure and spectacle have not helped the situation, as users are now questioning the capabilities of the business to continue serving them. Two significant errors have been made in this process.
Disrupting the workforce
The main decision that left the business and users reeling was firing almost 50% of Twitter employees within the first few weeks, marking a significant operational change with zero consultation. This pushed employees into an intense and pressurised work environment, compounded by uncertainty and demotivation. It left the business struggling to keep Twitter running on half the workforce.
However, it is fair and expected for the focus and priorities to change under new leadership, particularly when making cuts to bring the business back into profit. But Musk’s very public and hard-hitting approach dismantled the parts of the business that were developed in response to advertiser needs, such as ethics and content control.
A lack of understanding of the business
Acting so abruptly cost Musk revenues and reputational damage. The almost immediate realisation was that he couldn’t deliver on his new mission with a drastically cut workforce. So, many employees that were made redundant were asked to return.
The rapid decision-making that’s proven so detrimental is due to a lack of understanding of how the business operates and serves its customers. An example is the short-lived and quick roll-out of a subscription model of the much coveted ‘verified blue tick.’
Had Elon Musk taken the time to understand what made Twitter so successful, he could have avoided the extensive backlash and plummeting of revenues.
Bringing two separate entities together and establishing sufficient synergy is a challenge. Each has its own motivations and priorities. But with alignment and understanding of the expectations and cultural status quo, through clear and transparent communication, integration can be highly successful for all involved. This is evident in notable exceptions, such as technological giant Cisco, which acquired over 200 companies and retained 87% of key employees two years after the acquisition.
However, as demonstrated by Elon Musk’s acquisition of Twitter, drastic changes that aren’t in alignment with company culture and show disinterest in the current workings of the business can quickly backfire.