Retail Mergers and Acquisitions
01 Sep 2006
by Dale MiyakawaThree Ingredients to Improve the Odds of Success During Mergers and Acquisitions
About the Author
Dale Miyakawa
Dale Miyakawa is a senior leader with EDS' Consumer Industries and Retail team and the Global Retail Industry Segment Leader. He has significant experience involving merger, acquisitions, consolidations, program management and change management.
In the retail industry, the pace of consolidation and competition continues to accelerate. Each transaction is unique and plans to bring companies together must be dynamic and must assimilate the companies' cultures, brand image in the marketplace, merchandising practices, processes, applications and infrastructures.
There is not a magic recipe for the complex task of merging two or more companies, but a comprehensive plan that includes three critical components can improve your odds of success:
- Communicate. Don't underestimate the importance of your people during a merger or acquisition. Addressing basic questions such as job security and benefits through a formal change management program lays the foundation for trust with your most important stakeholders. Employees will resist change – no matter how beneficial – until they clearly understand the personal impact.
If you want employees to pay attention to critical messages, help them move beyond their initial reaction with frequent communications from senior leaders. Continue to communicate with your employees even if there is nothing new to say. People want to know what's going on.
Early in my retail career, the family-owned grocer I worked for was acquired by a large department store chain. All employees had questions about the impact the merger would have on them, and it was important I not only understood what the acquisition meant for the company, but how it would affect me and my career. That experience drove home the importance of a company's culture and protecting it through a transition such as a merger or acquisition.
Retail is a people business and your employees are essential to your long-term success. If you don't take care of your people, they may be less inclined to take care of your customers which will be reflected in poor customer service and increased shrinkage in the stores – your employees can make or break your business.
- Protect the brand. Speed is critical to integrating two businesses and their operations, however some companies let their good intentions cause irreparable damage to years of branding and merchandizing by the acquired company. Changing the merchandise mix too drastically, terminating an existing loyalty program or reducing critical customer facing store systems functionality will eventually harm the brand and revenues will fall as customer loyalty plunges. The last thing you want to do is impact a customer base built over many years serving the local market needs.
Before making changes you can't easily reverse or change, build a business case for the change. Look at regional, demographic and POS purchase data to consider how a change will impact market share.
- Develop a governance structure to manage risk. A merger or acquisition throws many projects and initiatives into play all at the same time. A strong governance structure or program management office serves as a focal point to handle complexities, identify critical dependencies, indicate resource issues, manage daily issues, and integrate multiple cultures, processes, applications and infrastructures.
A program management office brings discipline and proven processes to a complex situation. This is where you reduce risk and bring the long road of a merger to a successful new beginning where a combined company is now stronger than the individual pieces it started with. Integrating companies is so complex and important that retailers often turn to outside firms with essential experience to help manage this part of the process.
Prepare now for future transitions. Mergers, acquisitions and consolidations often happen quickly. Build flexibility into your company, so you are ready to move quickly when an opportunity presents itself.