Deal risk factors

By , on collective leadership capability, leadership, Mergers & Acquisitions (M&A), Potentious, sales integration.

In my last blog, I discussed the background of the Yahoo–Tumblr deal.and how it seemed to fall apart because of the failed sales integration. In today’s blog, I want to discuss the  leadership implications of the deal, and how Yahoo and Tumblr could have have changed the negative outcome by focusing on the foundational aspect of successful M&As…leadership.

Yahoo and Tumblr: M&A Leadership Skills for Sales

In my research on what specific leadership skills correlate to M&A success for acquirers and targets, one of the corporate functions that I analyzed was sales. In many deals, sales team integrations are an area of emphasis, and, yet, like other aspects of M&As can be quite challenging. Depending on the M&A, acquirer and target sales teams can have different incentives, customer sets, and objectives (e.g., expanding into a global region versus expanding into a key demographic).

In a typical acquisition, a lot of time will go into aligning goals/objectives, compensation, and organizational structures. This will include detailed communications and change management plans. If done incorrectly, acquirers risk the two sales teams working with cross purposes and possessing incompatible organizational structures, and having a hard time retaining target sales team members—exactly like what happened at Tumblr.

As I have discussed regarding the impact of collective leadership capabilities on M&As, successful organizations understand which leadership capabilities exist in acquirers and targets and how to leverage such strengths or mitigate risk areas to achieve their M&As’ stated objectives. Yet, it appears that Yahoo and Tumblr weren’t able to make that leap.

During the second phase of my research, I learned what leadership skills exist in acquirer and target sales teams to enable a successful sales integration. Let’s look at what those leadership skills are, and how Yahoo and Tumblr could have done things differently…and how this particular deal could have avoided being as part of the 70% M&A failure rate.

Sales Collective Leadership Capabilities

The most interesting finding from this focus on the leadership capabilities of the sales function is that only one leadership skill is shared among acquirers and targets: “inspires trust.” The other 10 leadership skills are different. One of my primary beliefs when I became a leadership development expert is that different teams bring different leadership strengths to help organizations achieve their business strategies. This perspective is very similar to the findings for M&A sales teams. The $1.1B (USD) question in this case is how do you leverage the leadership strengths successfully?

Acquirer                                                        Target

Manages Execution                                      Builds Plans

Develops Others                                           Knows the Business

Influence Others                                           Motivate Others

Team Leadership                                          Fosters Teamwork

Leads Change                                              Inspires Trust

Inspires Trust

Shows Adaptability

Obviously, no one knows all the details about what transpired during this acquisition. My insights are based on assumptions made in the absence of those details and are based on the facts widely reported by the news media. So let’s start to surmise what might have happened if the M&A leadership skills were properly considered in the Yahoo–Tumblr acquisition.

  • Inspires Trust – The first challenge created by Yahoo was a promise: to keep the two sales teams separate. At whatever point Yahoo decided to change course, its leadership lost the trust of the Tumblr sales team. It is very hard to recover from this bad decision based on the damage that was already been wrought, but moving to undo it would have been a step in the right direction. While inspiring and keeping trust was important for Yahoo, it was also important for Tumblr sales leaders to create trust in the decision—no matter the Yahoo promise. Based on what we know, the steps taken by Yahoo and Tumblr led to a total lack of trust between the two companies that might have been too hard to recover…even with changing course to unwind the integration of the sales teams.
  • Builds Plans and Manages Execution – These two leadership skills mesh well within an M&A context. Whether it is strategic plans, change management plans, or sales plans, all M&As require the development of detailed plans, and then the ability to execute on them and bring them to fruition. With respect to a successful integration plan for Yahoo and Tumblr, bringing the Tumblr sales team into the planning phase should have been right approach because its members knew its business better than anyone. Then, once the integration plan was finalized, leveraging Yahoo’s ability to manage the execution of the integration plan with its larger objectives at front of mind should have been done.
  • Influence Others and Motivate Others – In the case of these two leadership skills, we can surmised that Yahoo needed to do a better job of influencing the Tumblr’s sales team on the merits of the integration, specifically the objectives of the integration and how the integration would affect the team. Considering Tumblr’s part of this M&A leadership equation, if Yahoo did a good job of influencing on the merits and objectives of the sales integration, then Tumblr’s leaders would have motivated their sales team to maintain performance and buy into the integration structure and objectives. Based on what we know and that we can assume, there was likely not much effort in influencing and helping the Tumblr sales team understand the reasons to reverse the initial Yahoo promise not to integrate. This would have precipitated the lack of motivation proven by key Tumblr sales team member departures and the inability to meet revenue targets.
  • Team Leadership and Fosters Teamwork – Team leadership for Yahoo was the ability of leaders to foster an understanding of the consolidated team’s mission and value to organizational goals. While, fosters teamwork was Tumblr’s ability to build an effective sales team committed to organizational goals. Starting with Tumblr, it appears that the sales team was very close knit and focused on its core objectives for the market segment it served. And while Tumblr was committed to its own sales goals, its leaders may have most likely neglected to tie their activities into the larger Yahoo goals—leading to the jeopardy of the integration. For Yahoo, the ability to integrate the Tumblr team and lead it were likely damaged by the loss of the Tumblr sales team lead and then apparently a string of short-term fills to lead it successfully.
  • Leads Change and Shows Adaptability – What was probably the most lacking set of M&A leadership skills for Yahoo’s sales team in this integration were “leads change” and “shows adaptability” as the integration progressed. Yahoo, like many acquirers, likely believed that once the decision was made and communicated, everything would fall into place successfully. For successful change to occur, teams have to be prepared for change—and then quick wins are needed to sustain the change effort. Whether this happened or not, we don’t know. However, we can surmise by the failure of this particular integration, that the ability of Yahoo leaders to successfully lead this change was suspect. With respect to “shows adaptability,” Yahoo leaders had to be able to adjust to changing conditions, particularly when it became apparent that the sales integration was creating adverse effects on team morale (exemplified by the departures of key Tumblr sales team members) and negatively impacting Tumblr revenue numbers. The inability of Yahoo sales leaders to adapt and show flexibility during the integration created damaging effects.
  • Know the Business – Ultimately, Tumblr knew its business and business model better than anyone. For a successful integration to occur, Yahoo should have leveraged that knowledge to maximize Tumblr’s sales strengths within its specific target audience.

For acquirers and targets alike, a deal like this one doesn’t have to end in failure if a targeted focus on M&A leadership skills is taken. Ultimately, Yahoo and Tumblr probably shared equal responsibilities for the deal’s failure, and a contributing factor was the lack of knowledge of their collective M&A leadership skills that would have allowed them to leverage their strengths and mitigate their risk areas.

So the question you should ponder is whether as you approach your M&A deals, does your sales team, whether acquirer or target, have the right sales M&A leadership skills?

Change the mindset. Change the model. Change the outcome.

Dr. J. Keith Dunbar is founder and chief executive officer of Potentious. He can be found connecting and sharing knowledge about M&A leadership on Twitter and LinkedIn.

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