During my time delivering 3 x commerce courses at the Eastern Institute of Technology last year, I spent quite a lot of time, energy and effort promoting the virtues of “collaboration” in the business realm. You’ll notice this theme coming through loud and clear in earlier blogs that I’ve posted.
In a commercial context “collaboration” can also mean “merging”. So what is a merger then ? A merger is the combining of individuals/ shareholders that comprise 2 or more companies in order to realise greater gains/ benefits than those which either organisation has experienced – or could hope to experience by remaining as separate entities.
The golden key to achieving a successful merger is to identify the number of synergies that exist between the relevant organisations – in terms of systems, processes, vision, product development…and most importantly of all management and governance styles. If both parties can see a sufficient number of “ducks lined-up” as a result of making these comparisons, then the chances are good that the merger will work well overall for all stakeholders.
As an instigator and facilitator of mergers, I have found that the most difficult alignment to make between merging entities is in the area of “culture“. It is really important that the representatives involved in negotiating the merger deal talk openly with one-another about the aspects of their culture that they most definitely want to preserve. For example, one organisation may practice a great deal of collaboration and communication throughout its stakeholders, whereas the other organisation may be more inclined not to communicate so openly and often. These differences in approach must be uncovered and talked through before discussions progress to considering entering into a formal agreement.
Many people cringe at the thought of combining forces with other people to achieve common objectives; but I can tell you with much certainty that increasingly those businesses that are open to aligning themselves with other businesses are going to be the ones that survive and thrive in the long-term. It will be these businesses that – through the competitive scale-related advantages that they come into upon merging – will enjoy securing commendable market share.
I have merged (in 2011) a national jeweller franchise in New Zealand with a well-aligned company in Australia, and that combined entity continues to trade well despite the challenges that are an inherent part of being a large company with a diverse range of shareholder interests. I have also delivered presentations to Rotary on the subject of building scale through changing structure – such as becoming a merged entity or being a subsidiary of a parent company.
So my plea to the New Zealand business community is that you at least think about how you could potentially reduce costs and improve comparative advantages (and therefore improve the prospects of being a sustainable operation) by combining the strengths that your organisation offers with those of one or more like-minded business. With 502,000 businesses operating in New Zealand – most of which have a domestic (local market) focus only – it is difficult to see how any significant ground is going to be made otherwise where building scale is concerned. In my experience, scale brings with it considerable scale-related advantages – not least of which include attractive preferred supplier terms of trade and the prospect of long-term sustainability.