Post-Merger: Are you ready?

Volume 16 Letter 2

Many of you reading this have been involved in at least one takeover. Data tells us that most of these have gone poorly and the expected value promised by consultants and senior management largely fails to materialize. Fact is takeovers have a higher probability of destroying value than creating it. Does anyone get it right?

Cemex, the Mexican cement giant, has grown from a small regional player to a global powerhouse in what even they admit is a commodity market. Today’s Cemex emerged from very humble beginnings when the North American Free Trade Agreement (NAFTA) came into effect in the 1990’s. Fearful they would be crushed by larger competitors, Cemex decided to pave their own future and started to grow their business through acquisitions. To survive they needed to grow quickly and to extract value from their new acquisitions rapidly. How did Cemex do it where so many others have failed? Let’s start by listening to what a senior VP at Cemex says about acquisitions:

“An acquisition is inherently very motivating. There’s this feeling of ‘let’s prove it to ourselves, our competitors, and the whole world that we can really extract more value out of those assets than the former owners.’ But you typically need the people of the acquired company to behave differently, and they don’t do that automatically the day an acquisition goes through. You have to train them…..This intensive collaboration is one of the key ingredients of a successful integration. The first three months are key. That’s when you have your best chance — and I mean this in the most positive sense — of getting into people’s heads. That’s your window to make them realize they should change how they think.”

Getting people to change how they thought didn’t mean “The Cemex Way or the Highway” but of course there were changes. For example, Cemex insisted the books be closed within two business days at the end of each month. This was non-negotiable and was rigorously enforced because Cemex felt that having this information readily available would increase the chances for Cemex managers to make the right business decisions. However, it was still a two-way street. Cemex acquisition managers were tasked with finding best practices in the acquired company and making sure they were incorporated back into the rest of Cemex. Luis Hernandez of Cemex stated “That was the beginning of recognition on CEMEX’s part of the importance of global collaboration and knowledge sharing”.

Cemex’s ability to successfully integrate acquired companies is a strategic competitive advantage. What can we learn from Cemex?

  • You have a three-month window
  • Bring original and acquired teams together to develop a common strategy centered on best practices from both businesses
  • Share those best practices with the whole of the organization
  • Training is key

Today Cemex is one of the top three cement companies in the world, continuing to grow and make successful acquisitions by engaging their managers through sharing knowledge and developing strategies collaboratively. Learn from Cemex and create value in your next acquisition!

For more, see CEMEX’s Strategic Mix: An s+b Roundtable and more details see on line Summer 2015 issue of strategy+business.

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