Talent considerations in M&A scenarios

Written by
Changeboard Team

16 Jun 2016

16 Jun 2016 • by Changeboard Team

Who is Manchester Airport Group?

M.A.G currently serves over 48 million passengers through its ownership and operation of Manchester, London Stansted, East Midlands and Bournemouth airports.

The business is privately managed on behalf of its shareholders with IFM Investors owning 35.5%, Manchester City Council also 35.5%, and the 9 Greater Manchester Councils of Bolton, Bury, Oldham, Rochdale, Salford, Stockport, Tameside, Trafford and Wigan owning the remaining 29%.

If listed today the organisation would be a FTSE 100 business. The ‘airport’ business is a complex one covering aspects such as assets, infrastructure, buildings, customer services, retail, 24/7 operations, all with a significant proportion of services delivered through third parties.

M.A.G has only recently begun to turn its attention overseas and appointed Rosemarie Andolino to the newly created role of chief executive officer and president of M.A.G U.S. She will oversee the development of M.A.G’s airport services business in North America. M.A.G U.S will work with airports to develop and operate terminal and retail solutions, passenger lounges and car parking facilities. M&A activity has returned in abundance to the market as companies continue to seek avenues for growth and confidence in the market returns. All too often during due diligence and the integration stage, emphasis is placed on the more tangible elements of a merger.

All too often culture and talent are overlooked. Daimler and Chrysler is probably the most well known example of a merger failing due to a lack of due diligence on cultural alignment. It is reported the HP and Compaq merger resulted in a combined $13bn loss in market capitalisation, as HP’s engineering-driven culture based on consensus clashed dramatically with Compaq’s sales-driven approach. The importance of talent and culture have since proven their importance but are still frequently ignored, often with dramatic consequences. 

Daniel's story

Daniel joined Manchester Airport Group (MAG) three years ago at a time when the business’s ambition was taking off (no pun intended). The organisation had been successful but was not capitalising on all the opportunities within its reach. Their strategy to turn this around was simple - “Be bigger and better!” The ‘Bigger’ element, i.e. growth, would be achieved both organically and through acquisition and the ‘Better’ through efficiency and improvement initiatives. To be ‘Bigger’, the organisation knew it would have to reorientate itself in order to have a strong platform from which to acquire. The organisation focused towards becoming more agile and adopting a more aggressive approach to growth and healthy appetite for risk - an organisation faster in its execution and its decision making. In February 2013, having achieved this change, MAG acquired Stansted Airport for £1.5billion. 

The Stansted airport acquisition

MAG officially acquired Stansted on 28th Feb 2013. The operation was a great compliment to the company’s portfolio following years of under investment and operating below full capacity it represented a significant growth opportunity. Like most large airports, Stansted is effectively a small town; with its own grid, transport infrastructure and tens of thousands of people working on site. Stansted had been up for sale for almost five years which had left employees somewhat ‘bored and bruised’, with a general wariness in the employee population and a lack of vision on future direction. Upon the acquisition completing, M.A.G immediately began to implement a turnaround programme at the airport which in addition to seeing £250 million being invested in improving facilities for passengers and airline customers, also included overhauling the culture.

How to do due diligence on talent and culture

This is ambiguous and always varies. When acquiring a business, information on talent can be gleaned from recent talent reviews, assessments and speaking informally to incumbents. Reviewing the structure of an organisation can also infer a lot about the culture of the organisation. Certain structures convey more of a structured or command and control approach; others highlight a decentralised and autonomous workforce. At the final stages of the acquisition, the organisation being acquired will almost always deliver a presentation on their organisation as part of the sales process.

Here, who is and isn’t present, the information that isn’t shared and how information is presented can reveal a lot more about the talent in the business and culture of the business than the actual information provided. Access to data can understandably be restricted; therefore gaining access to multiple data points can be invaluable. Regardless of the insight gained, it is important to maintain a sceptical view as the actual state of talent and culture can be surprisingly different when full access post-acquisition is gained. 

MAG's approach to integrating - Stansted

The CEO, Charlie Cornish, very much treated the acquisition as a merger in terms of their mindset and approach. The organisation was very vigilant about maintaining all that was good about Stansted and sought to support and develop key talent in the business to make the necessary changes for improvement, as opposed to inserting their own management team entirely. As part of their integration strategy they only allowed a small core team of MAG leaders and specialists on site full time in the first 6 months. This avoided swathes of people descending on the new asset, full of good intentions, but inadvertently putting isk and inconsistency into a well-considered integration plan.

The first 90 days post acquisition were spent heavily communicating with employees, educating them about MAG’s visions and plans and listening to employee and leader feedback. MAG as an organisation has a strong focus on communications but it is important to note this is two way communication. Daniel points out that the best way to get a feel for the challenges and culture is to speak to those involved. In the end, however, when evaluating, managing and changing culture, the biggest carriers of culture are leaders!

Know where the organisation is going, the vision, and what key drivers will get it there. Ensuring talent and broader HR initiatives are aligned with these drivers is critical to maintaining the culture and retaining key talent.

Ensure there is a change management process in place. Attempting to significantly change the culture of a business can push it breaking point. To ensure your talent isn’t bearing all the stress a strong change management process can make this transition manageable. 

Considerations post acquisition

The element that has the highest impact on culture during an integration and the hardest to control is the leadership element. It sets the ‘tone’ in the business, communicates the vision and translates macro variables into something that the organisation’s people can respond to. It’s important post acquisition to ensure that a formal process is in place to evaluate talent regularly, identify high potential (not just high performers) and benchmark this talent against the external market. From his experience, Daniel highlighted how important it is to correctly position talent assessment as a development tool and not a ‘test’. Assessment results should be integrated into formal development plans and used for training and secondment opportunity selection.

You shouldn’t just seek to understand the culture of a target acquisition to ensure the integration doesn’t fail. You should instead seek to understand the culture to ensure integration is a success but to also harness the immense power the culture can provide. Correctly doing so can truly make the whole more valuable than the sum of its parts.