Professors James E. Austin and Herman B. “Dutch” Leonard, of Harvard Business School discuss whether the marriage of a “virtuous mouse” and a “wealthy elephant” work to the benefit of both
Q: How can elephants protect the mouse’s value & brand integrity?
JA/DL: The more effective large companies have recognised that preserving the social icon’s distinctive culture and business approach is essential to preserving its key success factors. Consequently, they retain a large degree of organisational independence so as to prevent “contamination” of the social technology. This stands in contrast to the common approach in acquisitions to integrate and rationalise the assets into the new owner’s systems, structure, and culture. Some of the specific mechanisms used in successful small company-big comapny M&A deals include governance structures and processes that give the “mice” review and even veto power over actions by the “elephants” that might jeopardise those elements that are deemed essential to the social values underlying the brand’s integrity.
Q: What are some obstacles that companies considering these kinds of acquisition strategies need to be mindful of?
JA/DL: Avoid assuming that these acquisitions are the same as others. Failing to understand and appreciate the social value dimension of the mice’s missions or failing to respect their distinctive operating culture can create incompatibility and conflict that will probably cancel the courting or sour the marriage. Don’t look first for cost rationalisations, but concentrate on the top line growth.
Q: So, do such M&A deals create value for shareholders?
JA/DL: The marriages we have studies so far are still in their early stages, so we will need to continue observing how they unfold. Nonetheless, the emerging evidence suggests that both the virtuous mice and the wealthy elephants are well on their way to attaining their respective goals. Scaling is occurring, thereby enabling social entrepreneurs to achieve greater impact. Market penetration and positive financial results are being achieved, thereby meeting the large companies’ aspirations. There have been bumps, but it does appear that the partners are capable of learning and adjusting, and are well on their way to capturing the potential synergies.
Q: How can elephants protect the mouse’s value & brand integrity?
JA/DL: The more effective large companies have recognised that preserving the social icon’s distinctive culture and business approach is essential to preserving its key success factors. Consequently, they retain a large degree of organisational independence so as to prevent “contamination” of the social technology. This stands in contrast to the common approach in acquisitions to integrate and rationalise the assets into the new owner’s systems, structure, and culture. Some of the specific mechanisms used in successful small company-big comapny M&A deals include governance structures and processes that give the “mice” review and even veto power over actions by the “elephants” that might jeopardise those elements that are deemed essential to the social values underlying the brand’s integrity.
Q: What are some obstacles that companies considering these kinds of acquisition strategies need to be mindful of?
JA/DL: Avoid assuming that these acquisitions are the same as others. Failing to understand and appreciate the social value dimension of the mice’s missions or failing to respect their distinctive operating culture can create incompatibility and conflict that will probably cancel the courting or sour the marriage. Don’t look first for cost rationalisations, but concentrate on the top line growth.
Q: So, do such M&A deals create value for shareholders?
JA/DL: The marriages we have studies so far are still in their early stages, so we will need to continue observing how they unfold. Nonetheless, the emerging evidence suggests that both the virtuous mice and the wealthy elephants are well on their way to attaining their respective goals. Scaling is occurring, thereby enabling social entrepreneurs to achieve greater impact. Market penetration and positive financial results are being achieved, thereby meeting the large companies’ aspirations. There have been bumps, but it does appear that the partners are capable of learning and adjusting, and are well on their way to capturing the potential synergies.
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