Can a merger ever be a truly equal marriage?

When you’ve been around for a few years, change is often hard to achieve organically. Different challenges don’t grow on trees. At the same time, however, there’s the longing for something new – the ambition to take the business to the next level.

It’s too early to predict the long-term outcome of our merging of Creative Hands and Summerhouse Communications to form Natural Associates (News, DW 25 July). Yet the premise on which we’re founded is balance.

To begin with, it was important to be complementary businesses. Creative Hands, which I ran for nearly eight years, focused on consumer brand strategy and identity work. We’d reached a point where we needed something else – a ‘kicker’ – but we weren’t sure what.

Summerhouse, with 12 years in corporate print and literature design, was looking for a partner of similar size, with a portfolio that offered something different. Its managing director, Will Peskett, had already begun researching potential collaborators, approaching six other consultancies on the basis of size, location and the quality of their websites.

While a business fit was necessary, it quickly became clear that the personality fit of the major players on both sides was absolutely paramount.

The courtship phase – from first meeting to launching the new company – lasted about eight months. Peskett, the other Summerhouse director Linda Vaux and I spent a lot of time discussing the motivation for the deal. How did we run each company? How did we get new business? What was our creative ethos? We soon realised that we shared the same philosophy.

Employee consultation was vital. It’s impossible to keep secrets in a small business. Also, by setting up joint working parties, we ensured everyone had ownership of the new company from the outset. Developing new branding helped, and we spoke to every member of staff individually about their concerns and aspirations. But the hardest part was maintaining momentum when meeting our daily business obligations.

Our approach was fairly atypical in putting together the documentation. We wanted to keep legal and external involvement to a minimum. Personal contacts delivered a sound commercial lawyer, who came up with a satisfactory framework without getting bogged down in legalese. We took separate legal and accounting advice but thrashed out the details between us. This was proof of how well we could all work together.

The merger was self-financed. Besides legal fees and some systems upgrades, stationery was the only additional budgetary concern.

The whole process was incredibly time-consuming. Property could have been an issue but was resolved by moving in together at Summerhouse’s London premises.

There have been teething troubles with things like e-mail and we’ve postponed reviewing our other systems until the autumn. Although we both ran lean operations before, coming together has already cut overheads and will – hopefully – boost profitability.

There are three areas you that must get right for a merger to be successful: the cultural fit, the commercial fit, and the new consultancy’s working practices.

Trying to integrate two businesses in the same country is actually more difficult than it is between countries. Perhaps, as they say with the transatlantic relationship, it’s the problems of a common language. At any rate, no matter what you do, there will always be two cultures, two ways of working, two systems that have to go into one.

There’s no such thing as a proper merger. One methodology usually ends up dominating – whether it’s one side’s creative approach and the other’s financial or management expertise. You might modify it slightly, but that’s the reality. What’s important is to work it through in a logical, systematic, non-emotional way.

My role within Enterprise IG is to provide a sort of Acas service, a point of conciliation and impartial advice on these matters – like a non-executive chairman. Smaller businesses may not have that luxury. In their position, rather than use consultants who charge by the hour, I’d be tempted to approach a good business person within the industry, who has the requisite diplomacy skills. I wouldn’t use lawyers and accountants except for the factual integration. You need someone to guide you through the cultural issues.

With two of everything – two chief executives, two creative directors and so on – you can imagine how difficult that is. The leadership structure needs reformatting and you have to get the right procedures in place to assess duplication at every level. Diligence is required to harmonise things like account management, billing and proposal writing.

More importantly, there will be two different concepts of creativity – how ideas are generated, how they are presented to clients. When intergrating, the core rule is to go slow. The only reason for doing it fast is if you’re in financial difficulty, in which case it’s likely to be a disaster.

You can never talk to staff enough. Mass briefings can be counter-productive. It has to be one-to-one or in small, informal groups to convince them the merger is well thought-through and in their best career interests. But the real bear-trap of the process is if it deflects attention away from clients. For smaller consultancies, 80 per cent of revenue will come from five or six clients. Explaining the changes to them is not the problem, it’s continuing to deliver a service during the merger.

Overall, I wouldn’t underestimate the difficulties of merging creative businesses. You only have to look at ad agencies to see there tend to be more failures than successes. The point is, you learn from your mistakes, not from what you get right.

Practical questions

Who brings what to the table?

How can you align your strategic agendas?

Are you duplicating, complementing or evolving responsibilities?

Do you need to reassign roles?

How do you spread and measure best practice?