Finding Success in the M&A Leadership Game
It is hugely refreshing to find an M&A success story. In fact, M&A success stories are damn hard to find. I am sure that they exist, but M&A failure makes for great media stories and therefore consume the headlines.
This is why, in an active period of digital capability acquisitions, the Wal-mart-Jet.com deal is so…so refreshing.
In late 2016, Wal-mart bought Jet.com for $3.3B (USD). At the time, it was the largest for an online start-up. It was and continues as an important part of Wal-mart’s digital strategy to try and mitigate the ambitions of “Evil Corp,” better known as Amazon.
A common deal objective of any deal is the retention of talent. In start-ups, we are conditioned to think of them as a much different culture than “traditional” companies like Wal-Mart, GE, or Ford for example. Such was the case with Jet.com. With Wal-Mart was based in Bentonville, Arkansas the idea that major culture clash could exist and impact the success of the deal was a real threat
That threat showed itself in Wal-Mart’s policy that doesn’t permit office drinking. It was a topic of discussion between Wal-Mart CEO Doug McMillon and Jet.com CEO Marc Lore, who took over as lead for Wal-Mart’s e-commerce group. McMillon and Lore agreed to a compromise that would stop their Thursday evening happy hours in the office. Instead Jet.com would move the happy hour to a local bar/tavern. This was intended to preserve important areas of the Jet.com culture. This concession allowed Jet.com to pay for the happy hour, something that Wal-Mart’s conservative culture and low-cost mentality didn’t allow. As imagined, this had a dampening effect on the deal almost immediately.
In a future conversation between McMillon and Lore, McMillon wanted to know if Wal-Mart was “hugging” too tightly or too little. Lore indicated that integration was going well, yet there was a steady reduction in attendance of the Thursday happy hour offsite.
In a key decision, Wal-Mart shifted course. It allowed Jet.com to start hosting Thursday happy hour again at the office. This new-found flexibility showed itself in other e-commerce acquisitions like Moosejaw and Bonobos as indications that Wal-Mart wanted to protect these entrepreneurial start-up cultures and thus talent retention.
Wal-mart Ups Their M&A Leadership Game
If we look deeper at how this particular deal transpired during integration and focus on the leadership factor, we see can see this deal from a much different aspect.
- Build Trust – Wal-Mart decided that talent was important in this deal. By reversing their previous decision in the Jet.com office happy hour, Wal-Mart built new trust with their acquisition’s employees. The kind of trust that is hard to achieve and easy to lose.
- Use Sound Judgement – Wal-Mart leaders took new information regarding the offsite happy hour and lack of attendance and used their judgement to make a different decision. When weighing the costs of changing their approach to Jet.com’s office happy hour versus the benefits of re-establishing the office happy hour, Wal-Mart succeeded in building trust capital.
- Show Adaptability – Wal-Mart showed exceptional adaptability. Key aspect of adaptability is learning and applying that learning. In the case of moving to a digital business strategy and acquiring online commerce start-ups, Wal-Mart effectively took new information and applied that learning.
- Influence Others – Wal-Mart and Jet.com, in this case, effectively influenced each other. Jet.com influenced Wal-Mart to make a change to their policy and Wal-Mart did the same internally once the decision was made to reverse course.
- Lead Change – Both Wal-Mart and Jet.com leaders showed capabilities to lead change once the original decision was made and then reversed.
The Lesson Learned
By effectively leveraging leaders with the right skill sets, Wal-Mart and Jet.com prevail and turn a potential M&A failure into a huge M&A success story. However, the story is positioned as a clash of cultures. In fact, we are conditioned to think of M&A failure as failure of cultural integration. The reality is M&A failures are leadership failures.
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Dr. J. Keith Dunbar is founder and chief executive officer of Potentious and recognized expert in M&A leadership