The Real M&A Campaign: Knowledge-Sharing

Blog Topic: 
Knowledge Jam

The NASDAQ-ICE expressed "deep commitment" to a merger with NYSE and have gone to the press and the shareholders to prove it.  It feels inevitable that NASDAQ's sweetened offer will win over the Deutsche Boerse offer. Then, antitrust regulators will be evaluating the deal.  Whichever direction this merger takes, it is none too soon to start planning for the very real M&A test: merging the knowledge of very diverse cultures, operations, and professional networks. By Katrina Pugh, AlignConsulting 2/19/11

The NASDAQ-ICE team is "deeply committed" to a merger with NYSE, and has put their money where their mouth is.  At a 21% premium over the Deutsche Boerse offer, with 3.8B in secured financing (in addition to cash on hand), $66M in voting NYSE securities, and a $350MM reverse breakup fee, they've all but provided the roses and chocolates.

Well, almost. NASDAQ has also stated that they plan to divide NYSE into two businesses (securities and derivatives trading).  Further, they have boasted that their merger will have a superior impact on operating costs.  That generally implies consolidating redundancies on the floor, in the back office, and in management as two specialized companies are created. 

It goes without saying that either a deal with Deutsche Boerse or with NASDAQ-ICE represents a radical shift for NYSE, in terms of its operating identity. As a result, even if regulators agree that it is a tax-free combination, expenses will be in the hundreds of millions.  That's not just merger-related charges.  A shift in operating identity brings other hidden costs.  These are the costs of knowledge, what I call knowledge blindspots, knowledge mismatches, and knowledge jails:

  • Even more insidious than talent flight is talent invisibility. Each organization has brilliant knowledge-workers working with different titles, different job-scopes, different personal networks, and different operating models. We have blindspots about where expertise lives. Searching (or missing) that expertise results in wasted time, output quality, and spirit. (Attrition is inevitable. Retention bonuses can't buy spirit.) 
  • Even where documentation exists, it may be too brief or too detailed -- that is, mismatched to the new combined function or newly scoped roles. For example procedures can cover reams of paper and hardly answer the question, "Why did we do it this way, and what can we apply to the merged organization?"
  • Finally, NYSE's, ICE's and NASDAQ's knowledge may simply be tied up in volumes of repositories, procedure documentation, or intranets. It's in jail because it's hard to find, retrieve and absorb.

Integration costs will escalate if the parties don't start planning for the merger of knowledge. The fastest way to surface and translate knowledge between organizations, especially ones with different cultures and operations, is through facilitated conversation. Leaders throughout the organizations need to look into the blindspots, and identify pockets of insight. They need to intentionally bring people together in conversation to discover, collect, and spread know-how. Facilitation is essential to ensure the conversation is about respect and curiosity, not defensiveness or job-fears. Importantly, executives, themselves, need to model openness, a respect for diversity, and a capacity for dialogue.

I remember a sage boyfriend telling me what to say when I was being acquired by JPMorganChase while I was a First VP with BankOne. He gently advised, "Just say to them, 'I have so much to learn from you. And say it with your heart.' " He was right. That line opened up many doors, and even some good laughs.

After the bluffing and the posturing, after the due diligence and the Antitrust review, after the champagne and the press conferences, the three organizations need to launch the real campaign: building a program of curious and respectful knowledge sharing.

 (See also Knowledge Jam: Three Disciplines to Beat the Merger Performance Odds," Ivey Business Journal, July/August 2011.

Katrina Pugh is president of AlignConsulting, a firm that helps organizations plan business and technology change by channeling insight into action. For more information about “Sharing Hidden Know-How,” visit the Amazonor Jossey-Bass website. You can also connect with Katrina Pugh on Twitterand LinkedIn

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