Indian M&As may disappoint unless teams are fused into one

06 January 2007

Many in management feel that the challenge of creating one team out of a merger of two businesses requires sophisticated and expensive management consulting approaches. But communication consultant and author, Stephen Manallack*, argues that spreading the leadership message through the art of conversation is a better and often a cheaper way.

In 2006, Grant Thornton India had released survey results of 200 India businesses and found that 81 per cent were exploring merger and acquisition options. Harish H V, head of M&A, Grant Thornton India, reported that the main driver is the demand for faster growth. "M&A has been rising in India, but it seems it will only get bigger and better in future."

India's M&A activity was at $12 billion in 2004, $18 billion in 2005 and is predicted to exceed $25 billion in 2006 (these rates are very low compared to the West). While most M&A activity has been in new economy sectors such as IT, telecom and biotech, with Tata Steel having initiated the take-over of Corus Steel, a company more than three times its size, future activity will include old economy sectors such as banking, paper, media and entertainment.

When two businesses or enterprises merge, the formal and legal structures might be in place but how should the leadership build one team from two groups who used to compete with each other?

The traditional management response to change of this magnitude is to create an exclusive planning team, develop major new 'teamwork', make the big announcement, launch with all the flourish they can afford, and then expect the change to happen.

Too often after the fanfare nothing is different. The same negativities of gossip, back biting, divisiveness and lack of cooperation can continue between two groups who perhaps never wanted to work together in the first place – and the anticipated business growth from the merger or acquisition starts to fray.

I can give you an example of an alternative leadership style that worked in the merger of two leading consulting practices, one with 150 consultants and the other with a team of 70. These were highly professional but also highly competitive individuals, who had competed with each other over a long time. Now being asked to work together was too hard for most of them, who took the natural step of seeking refuge with their former work colleagues rather than build teams with the new — expected growth did not materialise.