Winning - Jack Welch [81]
Given the overlap in products and markets, you would think that the integration of these two companies would proceed swiftly, especially with those cost reductions so obvious. But New Holland was a company with a European parent, and its leaders were cautious about taking over an American enterprise on its own turf. Moreover, Fiat had paid a large premium for Case. That redoubled New Holland’s trepidation. My old friend Paolo Fresco, the former vice-chairman of GE and at the time of the deal the chairman of Fiat, remembers the impact of the premium this way: “We didn’t want to rock the boat or sink it with too many changes—we’d paid too much for the company to let that happen.”
Fiat made the CEO of Case the head of the new company. In addition, most of the positions in the new organization were filled with Case managers, including COO and CFO.
Needless to say, the integration was rocky. The integration team did make one big decision—to keep two brands and two distribution systems. But most everything else was left up in the air.
When the market for farm equipment tanked in 2000, and with the integration stalled, the merged company tanked with it. In crisis mode, Fiat sent a new CEO, Paolo Monferino, to the United States, and he launched the integration the way it should have been on day one—quickly and decisively. The then-CEO of Case, Jean-Pierre Rosso, was made chairman. Ironically, Fiat had been afraid of making that change, but once it did, its managers quickly saw that Jean-Pierre was a perfect fit for the job and that he was happy to fill its role. He was strong with customers and an excellent industry statesman. All that timidity had been unnecessary!
When Congress passed the Farm Bill in 2002, the fully integrated CNH Global N.V., as the company was renamed, was positioned to take advantage of the market upsurge. But as Paolo Fresco notes, “We lost at least a year and maybe more because of our cultural uncertainty.”
The Case New Holland story is not unique.
Back in 2000, GE tried to buy Honeywell—a deal, as some might recall, that never received European Union approval. But in the seven months that we awaited the regulatory OK, teams from both sides worked hard to merge the two companies.
Part of that process meant looking closely at the progress of Honeywell’s own merger with AlliedSignal in 1999. The two companies had been together for a year at that point, so we expected to see notable progress.
Instead we were shocked to find that AlliedSignal and Honeywell managers were still “in discussions” about the merged company’s values and behaviors, and both sides were still pining for the way they used to do things. The AlliedSignal people had an aggressive, numbers-driven culture. Honeywell’s managers, however, liked their company’s more consensus-based approach. The merged company’s CEO, Mike Bonsignore, was disinclined to make a choice between the two ways of working. And so, well after the deal was signed, they still had two distinct companies operating side by side, with little integration.
Integrating at the right speed and with the right level of forcefulness will always be a balancing act. But when it comes to this pitfall, at least you know when you’re off track. If ninety days have passed after the deal is closed and people are still debating important matters of strategy and culture, you’ve been too timid. It’s time to act.
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The fifth pitfall is the conqueror syndrome, in which the acquiring company marches in and installs its own managers everywhere, undermining one of the reasons for any merger, getting an influx of new talent to pick from.
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If acquirers are often too timid when it comes to integrating