Making the Deal Real: How GE Capital Integrates Acquisitions

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IDEAS AT WORK

The work starts well before the ink is dry.

Making the Deal Real:
How GE Capital
Integrates Acquisitions

by Ronald N. Ashkenas,
Lawrence J. DeMonaco, and Suzanne C. Francis

L

IKE THE PROCESS BY WHICH A CHILD LEARNS TO WALK,

J most business innovations emerge from dozens of trial-and-error

experiments; from seemingly random actions that eventually form a pattern; from hundreds of small, almost imperceptible adjustments tbat eventually result in a solid step forward. This has been true for developments ranging from lean manufacturing to concurrent product development to business process reengineering-all now wellaccepted innovations that emerged from dozens of experiments until they crystallized to form a methodology others could follow. ARTWORK BYJENNIFER RENNINGER

165

IDEAS AT WORK

MAKING THE DEAL REAL: HOW GE CAPITAL INTEGRATES ACQUISITIONS

An exception to this rule thus far
has been innovation relating to acquisition integration-the process by wbicb one company melds witb
another after the deal is done. Most
acquisitions and mergers are onetime events tbat companies manage

challenges facing husinesses today.
Industry consolidations, the globalization of competition, technological developments, and other trends bave touched off an unprecedented
wave of mergers and acquisitions
that shows no signs of abating. According to figures from
tbe Securities Data Company publisbed in the
New York Times, tbe dollar value of U.S. mergers
and acquisitions announced in 1996 alone
grew more tban 27% to
$658.8 billion from $518
billion in 1995.

No wonder most managers
tliinkabout how loyel
acquisilionsoverwith-nol
to do them belter.
witb beroic effort; few companies go
tbrougb tbe process often enough to
develop a pattern. Thus it tends to he
seen not as a process-as sometbing
replicable - but only as sometbing to
get finished, so everyone can get
back to husiness.
Tbe tendency to see integration as
a unique event in an organization's
life is magnified hy tbe fact tbat acquisitions and mergers often are painful and anxiety-producing experiences. Tbey involve job loss, restructured responsibilities, derailed careers, diminisbed power, and

mucb else that is stressful. No wonder most managers tbink ahout bow to get tbem over witb-not how to
do them better the next time.
Improving tbe acquisition integration process, bowever, may be one of the most urgent and compelling

Despite this enormous growtb in
merger activity, acquisitions tbat
appear to he hoth financially and
strategically sound on paper often
turn out to be disappointing for
many companies: the acquiring
company takes too many years to realize the expected synergies or is unable to get people to work togetber productively or puts the companies
togetber in sucb a heavy-banded
way that the unique capahilities of
the acquired company (its best people and most valued customers, for example) melt away. Perhaps that's
why a study reported last January in
the Economist of 300 major mergers
conducted over a ten-year period hy
Mercer Management Consulting
found tbat in S7% of tbese merged
companies return to shareholders
lagged hehind the average for their
industries.

Ronald N. Ashkenas is the managing partner of Robert H. Schaffer &> Associates, a management-consulting firm based in Stamford, Connecticut. He has led transformation efforts at several public-sector and

Fortune ^oo companies, including
General Electric. Lawrence J. DeMonaco has been a human resources executive with GE for 20 years. For the past 4 years, he has
been a senior vice president of human resources for GE Capital, responsible for HR activities outside the United States. Suzanne C. Francis is a senior partner with Robert H. Schaffer &? Associates. For the past 5

years, she has worked with GE Capital to develop and apply its acquisition integration process.

Given tbis confluence of eventsa growing numher...
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