The Merger Dividend by Ron Ashkenas, Suzanne Francis and Rick Heinick, Harvard Business Review, July-August 2011

Sometimes the HBR can go months without any interesting articles, at other times there are several within one edition. This latest edition is one of the latter category and we feature another review below.

This article makes the valid point that the integration of mergers and acquisitions creates unique challenges for managers, way outside their normal day to day responsibilities. This is nothing new but the main gist of the article is new and interesting - that mergers and acquisitions should be seen as opportunities to develop managers and provide them with new skills. There is criticism of the common practice of hiving off the integration process to consultants or internal specialists, rather than choosing high potential managers to lead the process.

The authors identify three main skills that are necessary for the integration process and that are also essential for future leaders; these are:

• Getting everyone on the same page
• Executing with discipline
• Building an A Team

Each of these skills is examined in some detail with explanations of what is involved. There are said to be many parallels between the skills that are required post acquisition and what is necessary to run a complex company over the long term. The basic argument is that managing a post-acquisition scenario is a microcosm of, and a crash course for, the job of CEO of a major company.

A particularly good feature of the article is a number of good examples from highly regarded companies from different sectors, like ING, Merck and Timken, all of whom have used acquisitions as opportunities for management development. As a former supplier of management training to Timken, I was particularly taken by their decision to use the integration of a major acquisition as a development opportunity for a member of the Timken family, as a ‘developmental step before becoming chairman’. This raises the key issue of by whom and how the assessment should be made!

This leads on to my main concern with the article and the main danger of applying its arguments. The language used highlights the potential problem - ‘teaching tool, testing ground, learning opportunity - and does not seem to contemplate the possibility that the chosen potential leaders might screw up. Learning frequently involves mistakes and mergers and acquisitions can be expensive testing grounds with millions of pounds and corporate reputations at stake. You may have found out who should be - or shouldn’t be - the next CEO but you may have destroyed much shareholder value in the process.

So the article presents an interesting idea for the management developer but falls short when it comes to risk assessment. One would have thought that an HBR article would have been more balanced in this respect.

Click here to read the article in full:

http://hbr.org/2011/07/the-merger-dividend/ar/1