Synergon Capital and Beauchamp. "Can this merger be saved?" by Sarah Cliffe

Table of Contents

I. List of Tables

II. List of Diagrams

III. List of Abbreviations

1. Case Study Analysis
1.1 Introduction
1.2 Description of Synergon Capital
1.3 Description of Beauchamp, Becker & Company
1.4 Anticipated Merger
1.5 Key Problems
1.5.1 Lack of Strategy Adaption
1.5.2 Lack of Awareness for the Company Culture
1.5.3 Lack of Communication
1.5.4 Internal Problems at Synergon
1.5.5 Lack of Change Management
1.6 Problem Conclusion

2. Recommendations
2.1 Immediate Actions
2.1.1 Forming a Guiding Coalition
2.1.2 Withdrawing Changes
2.2. Next actions
2.2.1 Investigation
2.2.2 Introducing the Principles of Change Management

3. Conclusion

VI. Bibliography

Abstract

This paper will analyze the case study “Can This Merger Be Saved?” written by Sarah Cliffe and published in the Harvard Business Review in 1999. The case study describes the problems the U.S. financial-services giant Synergon Capital (abbreviated with Synergon) is facing while acquiring the British financial-services provider Beauchamp, Becker & Company (abbreviated with Beauchamp). The case study ends after a meeting between Julian Mansfield, the managing director of Beauchamp, and Nick Cunningham, his counterpart at Synergon. In this meeting, Mansfield expresses his dissatisfaction with the previous integration process and threatens to leave the company. Mansfield has been identified as the key success factor of Beauchamp and his withdrawal would signify the failure of the merger. Before the next meeting, Cunningham needs to find a solution to save the merger. This paper will identify key problems jeopardizing the merger and provides recommendations for Cunningham as an attempt to turn the critical situation around.

I. List of Tables

Table 1: War or violence associations connected with the company culture of Synergon

Table 2: Objectives of the merger

II. List of Diagrams

Diagram 1: Key problems of the merger

Diagram 2: The congruence model of change

Diagram 3: Process of successful change management

III. List of Abbreviations

Synergon: Synergon Capital

Beauchamp: Beauchamp, Becker & Company

1. Case Study Analysis

1.1 Introduction

The case study “Can This Merger Be Saved” revolves around two companies - the U.S. financial-services giant Synergon Capital and the British financial-services provider Beauchamp, Becker & Company. Synergon has acquired Beauchamp intending to expand its business to Europe and to receive access to valuable customers. In return, Synergon aims to increase Beauchamp’s business and provides capital and expertise they were lacking before. Approximately two months after the merger, Julian Mansfield, the managing director of Beauchamp, confronts Nick Cunningham, his counterpart at Synergon, with his frustration about how the integration of both companies is currently handled. With Mansfield threatening to leave the company, Cunningham is facing serious discrepancies that would lead to the failure of the merger. The main reason contributing to the crisis is Mansfield himself since he has been intensified as the key success factor of the company and is indispensable for an accomplished merger.

This paper provides a case study analysis by identifying the key problems that are jeopardizing the merger. Moreover, immediate recommendations as well as further actions are presented to save the acquisition.

1.2 Description of Synergon Capital

Synergon Capital is a U.S. financial-services giant with a strong focus on growth by acquiring new companies. They are targeting “small companies with established market positions and poor management.” (Cliffe, 1999, p.1). Their strategy is to quickly terminate the operational business in the acquired company, release the personnel and benefit from existing contracts. One can conclude, that their strategy has nothing to do with integrating the acquired company, instead the company is squeezed out to increase Syneron’s market share even further. This behavior is also reflected in the company culture which is described as a “rough culture” (Cliffe, 1999, p.2). Employees are expected to compete with each other, pressuring acquired businesses and working overtime. It is also striking that the company culture is often associated with the fields of war and violence. Table 1 shows several examples of war and violence associations used in the context of the company culture. Considering the company culture, it is no surprise that Synergon has a turnover rate of 21% and that managers usually leave the company after six years (Cliffe, 1999, p.3).

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Table 1: War and violence associations connected with the company culture of Synergon; based on Cliffe (1999, p.1-2)

1.3 Description of Beauchamp, Becker & Company

Beauchamp is described as “a British financial-services company with a great history, strong profits, and an extraordinarily loyal client base of wealthy individuals” (Cliffe, 1999, p.1). In contrast to Synergon, Beauchamp is customer orientated. This can especially be seen in the way salespeople work since they are given the responsibility to make credit decisions without any further approval (Cliffe, 1999, p.3). It is important for the company to create a work environment that is characterized by teamwork. For instance, employees receive the opportunity to work in different departments (Cliffe, 1999, p.2-3). Certainly, this makes it easier for employees to understand internal processes but also enhances their sense of belonging. Furthermore, Beauchamp rewards its employees for their efforts with an attractive bonus program and free lunch at its own cafeteria (Cliffe, 1999, p.3). The company culture is primarily shaped by Julian Mansfield who can be considered as the incarnation of the company. Nick Cunningham, as well as his boss J.J. d’Amato, have identified the managing director as the key success factor of the company, this is demonstrated in the following text extracts: “But the acquisition made Nick nervous because it would only work (..) if Julian Mansfield (…) stayed on board” (Cliffe, 1999, p.2) and “If Mansfield walks, you walk out right behind him.” (Cliffe, 1999, p.2). In contrast to Synergon, Beauchamp has a turnover rate of only 4% and managers stay on average 21 years with the company.

1.4 Anticipated Merger

Before discussing the key problems presented in the case study, the anticipated merger is briefly outlined. In the introduction, the objectives leading to the merger have already been summarized. An overview of the objectives can be found in table 2.

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Table 2: Objectives of the merger; based on Cliffe (1999, p.2)

JJ. d’Amato is the supervisor of Nick Cunningham and has contributed largely to the decision to merge with Beauchamp. Although Cunningham has highlighted how Beauchamp differs from previously acquired companies due to its unique customer relationships, d’Amato pushed the acquisition further. In contrast to past mergers, his strategy is to refrain from intervening in Beauchamp’s business operations. This strategy is apparent in the following text sections: “We won’t force them to change that much.” (Cliffe, 1999, p.1) and “We will leave Beauchamp alone (…).” (Cliffe, 1999, p.2). Even though Cunningham communicated his concerns, he is in charge of helping Beauchamp to grow. To succeed, d’Amato appoints him three tasks:

1) The income of Beauchamp should show an increase of 20% after the first year and should double during the first three years (Cliffe,1999, p.2).
2) Negative press coverage about Beauchamp is not acceptable (Cliffe,1999, p.2).
3) Synergon wants to have access to Beauchamp’s clients with the help of Julian Mansfield (Cliffe,1999, p.2).

Cunningham emphasizes that the merger would only succeed if the customers of Beauchamp remain happy and Mansfield, as the key success factor of the company, stays with the company (Cliffe, 1999, p.2).

Even though, Mansfield has described the set targets as “absurdly high” (Cliffe, 1999, p.2), he considers them as manageable and therefore, it can be concluded that the anticipated merger is realistic and the decision to acquire Beauchamp is reasonable.

1.5 Key Problems

In this chapter, key problems are discussed that have contributed to Mansfield’s threat to leave the company which would signify the failure of the merger. Certainly, there are several problems presented in the case study but due to the scope of this paper, the key problems are limited to an amount of five. The five key problems are summarized in diagram 1.

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Diagram 1: Key problems of the merger

1.5.1 Lack of Strategy Adaption

The first problem deals with Synergon missing to adapt their strategy according to the new circumstances of the merger. Usually, the company focuses on small companies with poor management aiming to benefit from existing contracts and gradually, closing the business operation and releasing the personnel (Cliffe, 1999, p.1-2). The management of Synergon is showing no interest in integrating the acquired company and therefore, they are neglecting the unique company culture as well as the requirements from the management and the employees to operate successfully. Beauchamp differentiates himself from previously acquired companies by being customer-centric. Changing this focus signifies the destruction of established relationships and results in a loss of loyal customers. Cunningham has recognized the difference and has expressed his concerns “(…) our cultures are completely different. We don’t play the same game.” (Cliffe, 1999, p.1). His supervisor failed to take his concerns seriously and has attempted to reassure his subordinate: “We won’t force them to change that much.” (Cliffe, 1999, p.1). Instead of adapting the integration strategy by refraining to intervene in Beauchamp’s business operations as promised, they were following their usual strategy of assimilating the newly acquired company.

1.5.2 Lack of Awareness for the Company Culture

The company cultures of both companies could not be more different. Whereas Synergon is heavily influenced by competition and pressure, Beauchamp focuses on teamwork and building strong relationships with their clients (Cliffe, 1999, p.3). When the new changes for Beauchamp were announced, the integration team of Synergon failed to conduct proper due diligence and thereby, ignored the unique customer culture. This becomes apparent by introducing “multiple approvals before granting customer credit” (Cliffe, 1999, p.3). This approval process does not correspond to the way salespeople are operating. The case study describes that employees are trusted to decide on credit decisions without any approval from a supervisor (Cliffe, 1999, p.3). The consequence of ignoring the company culture becomes apparent by a loyal customer complaining about the new time-consuming approval process which caused a missed credit deal resulting in a loss of revenue (Cliffe, 1999, p.3).

1.5.3 Lack of Communication

Several text extracts are revealing a lack of communication between both companies and Synergon internally. For instance, Beauchamp’s employees are requested to fill out documents for Synergon. These employees have not even introduced themselves nor explained to them the purpose or any instructions (Cliffe, 1999, p.3). In the case study, it is mentioned that 14 different people from Synergon are asking for material (Cliffe, 1999, p.4). This is an undeniably evidence showing the failure of communicating among Synergon’s employees. Furthermore, the Beauchamp’s management board was not included in the process of defining the integration phase and text extracts reveal their dissatisfaction with the enforced changes (Cliffe, 1999, p.3). The arising tension could have been avoided by consulting Beauchamp’s management board and trying to reach an agreement that would work for both parties. Julian Mansfield plays a crucial role in a successful merger and not consulting him in important decisions shows how Synergon is feeling superior towards the acquired company.

1.5.4 Internal Problems at Synergon

There are also internal problems at Synergon that have caused the tension between both companies. Even though Nick Cunningham addressed valuable concerns considering the merger, his boss J.J. d’Amato trivialized them and pressured him to proceed: “Stop being such a wuss. Let’s just do it.” (Cliffe, 1999, p.3). The lack of a strategy adaptation was already mentioned before, but important to emphasize at this point again is the decisive role d’Amato played in pushing the merger forward. D’Amato made promises that were simply incompatible with their usual way of operating by ensuring “We will leave Beauchamp alone.” (Cliffe, 1999, p.2). Ignoring valuable concerns from subordinates and ignoring the external environment is irresponsible and could result in damages affecting the company. Moreover, a text extract indicates that due to his high workload, Nick Cunningham has not sufficient time to concentrate on his assigned tasks and thus, he contributes to the crisis. The case study mentions a brief initial meeting between Cunningham and Beauchamp’s management board shortly after the merger in which important content was replaced by small talk (Cliffe, 1999, p.2). The second meeting was scheduled after two months due to time capacity problems Cunningham were facing (Cliffe, 1999, p.2). The long period between the two meetings is excessively long, especially because Cunningham failed to inform the management board about the components of the upcoming integration phase (Cliffe, 1999, p.3).

1.5.5 Lack of Change Management

The merger between both companies is lacking principles of change management or any form of official leadership. Synergon failed to provide a guidance for Beauchamp’s employees explaining to them the upcoming structure of the merger, the way both companies will cooperate and how the communication will be handled. Furthermore, no one is leading the merger by monitoring the progress and intervening in case of any deviations. A central part of change management is to create a vision that ensures that everyone understands in which way they are contributing to the merger and why the new changes are necessary (IUBH, 2019, p.92). In the explained case study, both companies are confused and have no comprehension of their counterparts. An example is the described situation between Mansfield’s executive assistant and an employee at Synergon who is intimidating the assistant to receive an urgent sheet (Cliffe, 1999, p.3). The confusion contributes to employees losing faith in the company and could result in important personnel leaving the company.

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