M&A – A challenging and complex work environment

Mergers and Acquisitions (M&A) are complex by nature, and they involve multiple different tasks over a long-time span, often multiple years. These tasks include initial strategic considerations, target search, valuation, diverse legal aspects, and, finally, integration-related activities that involve tasks ranging from reorganizing business processes to psychological challenges. All these activities and tasks require a high degree of specialization and expert knowledge that rest on education and professional experience. The complex nature of acquisitions requires multiple specialisations that often cannot be provided internally by a single acquirer. As such, the market for corporate control involves multiple players beyond the acquiring and target firms. Acquisition processes typically involve external strategic consultancies, advisory firms for valuation, investment banks, M&A boutiques, law attorneys for the due diligence, and many more. These firms usually attract highly skilled graduates from diverse study programmes such as management, finance, law, etc. However, all these specialized activities need to be orchestrated throughout the acquisition process. This is important and difficult, as acquisitions involve a variety of different stakeholders, often with different interests. For example, while the CEO of an acquiring firm might initiate an acquisition for innovation purposes, the integration team might become obsessed with cost-savings as these are typically easy to assess and mature in the short term. This indicates already the necessity of complex coordination. While in the pre-merger phase usually only a small group of internal and external experts is involved, the integration phase typically affects multiple business units and departments, increasing the coordination costs dramatically. However, for realising value from acquisitions, coordination is necessary.

It is the involvement of multiple decision makers and various stakeholders with diverse backgrounds that makes the management of acquisitions and acquisition decisions complex and prone to human error. This matters in acquisitions as the success rates remain constantly disappointing or in other words, unchanged since nearly 100 years. One reason for this might be related to the people being involved in acquisitions. I am fully aware that this might sound counter-intuitive, as we have more than 100 years of experience in doing acquisitions and the profession of M&A management is highly developed and attracts highly skilled people. This forces us to address the key question: What causes problems in acquisitions despite our experience and the specialized knowledge we have about managing acquisitions?

Simply, a specialized background or the context in which we operate frames our understanding of problems and as such, impacts our decision-making behaviour. This is an important point, as in business schools, we offer multiple specialized study programmes that typically focus on analytical elements and the development of the most appropriate solution for a particular problem. Our pedagogy is commonly based on case studies where the initial situation is analysed, and a solution developed. While this approach has proven merits, it might involve limitations for two reasons. First, decision making in real life is often detached from the rational analysis and more subject to politics or forced by an individual’s opinion. Furthermore, in real life, decision makers won’t be in the comfortable situation of comprehensive information as the context is typically highly dynamic. While this holds true for most managerial decisions, the second issue is more related to the complex nature of acquisitions. Acquisitions involve multiple arenas and corresponding problems with diverse solutions over a long period of time, sometimes even several years. From research we know that the most appropriate solution for a specific problem might negatively interact with the solution of another specific problem and as such, affect the overall outcome negatively. Simply, optimising one key performance indicator might harm others.

While this understanding is not new, we as universities need to understand that future M&A professionals are faced with this enormous complexity. M&A are not a puzzle problem implying a single pertinent solution, they might be a fuzzy problem that probably will never be fully disentangled. As such, future professionals need to be prepared to be aware of the multiple (sometimes conflicting) effects of individual solutions and decisions for outcomes. This implies an understanding of the nature of fuzzy problems and of the necessity of making trade-offs. Combined, the acquisition context sets the bar high for university pedagogy to achieve a balance between specialization needed to perform specific acquisition-related tasks and a general understanding to reach strategic goals. Simply, universities need to arm students with a comprehensive understanding and specialized know-how.

At Lancaster University Management School, we see the “doing and making” of management as an important aspect of our pedagogy. While the analysis and potential solution part of management is important and a necessary cornerstone, we believe that future managers need to experience decision-making processes and their diverse consequences for multiple stakeholders. This includes necessarily an understanding of corresponding conflicts of interests, the interacting effects of decisions on diverse key performance indicators, and reflective elements to better understand human behaviour to avoid biases and pitfalls in the future. This all should help graduates or future M&A managers to become responsible decision makers with an integrative understanding.

This claim is perfectly fitting to the idea of the SpringWeekSummit. For students, the SpringWeekSummit offered a fantastic opportunity to interact with a broad variety of professions around the market for corporate control. The event allowed students to see multiple specializations in the field of M&A. Additionally, the format of the event also fostered a broader and future-oriented understanding of the M&A industry and M&A management with speeches and discussions. For us, as a business school, the SpringWeekSummit offered a possibility to reflect upon our teaching, pedagogy, and student engagement. Simply, one of the core motivations to participate in this event was to understand if our programmes fit market demands and how we can develop them to ensure the best possible fit.

Combined, we believe that the SpringWeekSummit was a great opportunity to show our students potential options they have in their future careers and for us to further develop our study programmes. The SpringWeekSummit was a fantastic occasion to bundle the diverse professions of the market for corporate control on one platform stimulating the interaction of future professionals, universities, and players on the market for corporate control.