Friday 5 June 2020

How to apply Knowledge Management to Mergers and Acquisitions

Knowledge management delivers maximum value when applied to high value knowledge, to support high value decisions, and in areas where that knowledge is otherwise at risk of being lost. A typical high value area where major decisions will be made is Mergers and Acquisitions. 

Image from wikimedia commons,
Merger of KCR and MTR operations 2007-12-02

Mergers and Acquisitions are high cost, complex operations, where crucial decisions need to be made very well, and yet which happen relatively rarely, so it is easy for tacit knowledge to be lost. People caught up in the high pressure activity can easily forget the detail of how the decisions were made, and fail to pass the knowledge on to future mergers and acquisitions teams.

This combination of high value decisions made relatively infrequently, where human memory alone cannot be relied on as a knowledge store, means that there is great value on documenting the learning for use in future mergers and acquisitions.

In addition, many mergers and acquisitions are conducted for knowledge reasons, in order to acquire competence and capability.

 The approach to KM for Mergers and Acquisitions (and let's include Divestments as well) should be as follows; 

  • Learning Before. Through Peer assists and other knowledge-seeking activities, the M&A team should seek to acquire lessons, guidance, success factors and pitfalls from previous Mergers, Acquisitions and Divestments. They may conduct a Knowledge Gap Analysis, to map out the knowledge they need to acquire, and should create a Knowledge Management Plan for the M&A project. 
  • Learning During. If possible, and for high value Mergers, Acquisitions and Divestments only, a Learning Historian should be seconded to the M&A team to capture lessons, practices and key documents as the exercise progresses, perhaps through a series of After Action Reviews
  • Learning After. Interviews and Retrospects of the key players should be held to determine the success factors to repeat, and the pitfalls to avoid. The focus here will be on capturing tacit knowledge and experience; the 'golden rules', 'top tips', recommendations and advice that will allow success to be repeated routinely. This might include interviewing any external consultants who had been an integral part of the team. 
  • Knowledge Asset. Output from the interviews and the Retrospect should be packaged into a knowledge asset; a web-based package or secure wiki that provides helpful accessible advice for future re-use. This advice will be at varying levels of detail; from the managerial overview of the "top 10" bullet points, down to operational advice. 
  • Post-merger KM framework. If we assume that each of the two merged companies had an approach to Knowledge Management, in other words their own Knowledge Management Frameworks, then after the merger these two frameworks will need to be merged. This should be done through a combination of an external assessment to look for the strengths and weaknesses in each approach, and a set of Knowledge Exchange meetings to decide on a best combined approach. This would be piloted and rolled out like a conventional knowledge management implementation. Of course, the framework chould be compliant with ISO 30401:2018
  • Post-merger Knowledge Mapping. In a knowledge-based acquisition, where one company acquires another in order to gain access to their knowledge, there will have been some pre-acquisition work done to ensure that the knowledge gain is worth the expense of acquisition. However once the deal is done, there needs to be detailed knowledge mapping to identify the critical knowledge areas, to determine how well managed each of these are, and to put in place actions to improve the management of critical topics. After all, if you spent the money to acquire the competence, you would want to make sure this new asset was well managed.

Case History 

The learning approach outlined above was applied by Company A to their merger with Company B, and again with Company C two years later.

In the latter case, 14 of the core acquisition team were interviewed, and lessons were derived on leadership, the team and team processes, the role of the investment bank, the transaction process, communication, and staff issues. One year after acquisition, 31 staff were interviewed to gather lessons on the Integration process. Interviewees included the Chief Counsel, one of the Country unit Presidents, and several other very senior staff. Learnings were captured on topics such as managing the Integration project, dealing with delay, and getting ready for Day 1 of the integrated company.

Lessons from the first merger were used to guide the process for for the second, and lessons from the second acquisition and integration were used to guide the process for several further acquisitions. The value of the knowledge management approach was seen in the reduced involvement of external consultants in successive mergers. Initially the bill to Big 5 consultants had been very high, but this reduced from one acquisition to the next as Company A internalized the knowledge, with savings on external consulting spend in the order of $1 million.

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