Dr Carola Wolf’s research delves behind the scenes of the acquisition process and highlights how vital casual interactions between middle managers (MMs) are to achieve the anticipated strategic and operational benefits for both firms.
Drawing on interviews with acquiring and acquired MMs involved in cross-border agreements, Carola and Professors Gustavo Birollo (Laval University) and Linda Rouleau (HEC Montreal), present a model that explains how actionable intersubjectivity is developed in the unfolding stages of an acquisition.
They discovered formal, but particularly informal encounters, facilitate getting to know ‘the other’ and acknowledge their needs and concerns during the implementation of strategic decisions made at headquarters.
The study suggests these interactions allow both organisations to strike a satisfactory balance between strategic interdependence and organisational autonomy.
The paper, 'Middle Managers’ Relational Dynamics in the Context of Acquisitions: Balancing Strategic Interdependence and Organizational Autonomy' (published in the Journal of Management Studies), unpacks the relational dynamics between MMs and highlights the benefits of a more bottom-up approach to acquisition integration.
Balancing strategic interdependence and organisational autonomy
While CEOs often hit the headlines for new mergers and acquisitions, these are complex processes involving many internal stakeholders from both firms.
A core challenge is to reach sufficient strategic interdependence – creating joint strategic capabilities – while simultaneously maintaining a level of organisational autonomy that preserves the crucial capabilities of each company.
While senior managers often leave MMs to their own devices, previous research identifies them as key players in this balancing act, leading the day-to-day integration process.
It is generally assumed acquiring MMs focus on generating strategic interdependence, while acquired MMs aim for organisational autonomy.
However, there is limited knowledge on how they interact before, during and after the acquisition, and how they manage to reach this balance.
These questions are crucial to understand how actors with divergent interests and views achieve collaborative and synergistic outcomes in a mutually satisfactory manner.
Developing actionable intersubjectivity
To fill this gap, the research team undertook a fine-grained analysis of narrative interviews with MMs from both sides of international acquisitions1, which unveiled four consecutive and interlinked relational dynamics:
- ‘Dancing from a distance’ – pre-acquisition
- ‘Seducing the other’ – acquisition approval (signing the agreement)
- ‘Confronting the other’ – post-acquisition I
- ‘Co-orienting each other’ – post-acquisition II.
These dynamics emerge at various interaction spaces, allowing MMs to develop actionable intersubjectivity, a core ability to proactively put themselves in the place of the other while accomplishing integration tasks.
As a result, MMs from both ends of the negotiation learn to balance the simultaneous need for strategic interdependence and organisational autonomy.
The team also found that, while intersubjectivity develops in the first two stages, it becomes actionable in the post-integration stages.
‘Dancing from a distance’ and ‘seducing the other’
The complex relationship between acquiring and acquired MMs starts before the purchase agreement is signed, as both acknowledge the presence of the other group when the transaction is announced.
At this pre-acquisition stage, MMs get a sense of the other in occasional, primarily formal encounters, via factory visits, informational meetings and audits.
During these interactions, they search for clues on their counterparts - acquiring MMs seek to contextualise and validate information on the target company, and acquired MMs look for signals on what a joint future would look like.
Despite the limited information, managers generate interpretations of how they believe the other side operates and assess the potential for strategic interdependence.
The signing of the agreement marks the beginning of a new stage in which acquired MMs are left in organisational limbo for several months.
Although encounters between both parties are limited for legal reasons, MMs seek opportunities to meet with host firm managers to pave the way for their integration strategy and target firm managers looking to reduce uncertainty.
While top management establish formal interaction spaces (eg transition teams, events), MMs initiate informal spaces to reach out to the other side.
These include spontaneous corridor talks, unofficial encounters and working teams, etc, where they can interact more openly, allowing both groups to start deciphering how the other thinks.
Interestingly, these interactions are often initiated by acquired MMs to show proactiveness and willingness to start working for the future, and acquiring MMs typically enter this seduction game with open arms.
During these pre-integration stages ‘the other’ becomes present in the managers’ thoughts, which is essential to recognise the possibility of establishing strategic interdependence between merging firms.
This emergent intersubjectivity among MMs from both organisations sets the foundation for their relationships during the post-acquisition stages.
From confronting to understanding ‘the other’: the impact of informal interactions
The official takeover starts the implementation of the integration plan (post-acquisition I), where the two groups of MMs work together, but with a significant change in the balance of power.
As the acquiring side now formally holds sway, the relationship built in the previous stages moves into a more confrontational pattern.
Acquiring MMs are pressured by their superiors to implement the integration projects swiftly, often neglecting the acquired MMs’ efforts to adjust the new strategy to the local context.
Although acquired MMs try to provide feedback at every interaction (eg sharing operational performance indicators, highlighting customer needs, etc), these attempts are usually unsuccessful.
This imposed unilateral vision of strategic interdependence is often ineffective, as it neglects the acquired firm’s need to keep a degree of organisational autonomy, to deliver the benefits envisioned in the original agreement.
Although some acquisitions get stuck at this point, MMs who overcome these challenges do so when their relational dynamic becomes more collaborative.
When acquiring MMs actively participate in integration projects, both groups enjoy privileged interaction spaces to co-experience the practical day-to-day struggles around concrete problems.
At this point, informal interaction spaces2 become more prevalent and important, allowing managers to temporarily abandon their official positions, fostering collective engagement in the integration process.
These spaces are forums to gain a practical understanding of how operations and processes can be integrated, thereby adapting and challenging the mandate received from top management in more formal spaces.
Without these informal interactions, it would be impossible to develop knowledge of how the other thinks and works in specific circumstances and achieve actionable intersubjectivity.
Co-orienting ‘the other’ and regaining operational autonomy
At the post-acquisition II stage, a new co-orienting approach consolidates MMs’ understanding of the position of ‘the other’.
Even when they do not agree, MMs jointly re-negotiate the strategic interdependence between both organisations.
On the one hand, acquiring MMs recognise the importance of protecting the target organisation’s day-to-day operations, including the need to ‘back off’ to maintain certain boundaries and preserve their unique strengths.
On the other hand, acquired MMs back up their acquiring colleagues’ work by adopting and adapting to integration changes, as well as accepting necessary trade-offs3.
By building an ability to act together, MMs engage in a ‘we’ relationship that is nourished by the practical experience they extract from their interactions.
As a result, they can balance the need of both organisations, seize the impact of their possible actions on both sides and generate plausible solutions that acknowledge the specific capabilities each organisation brings to the transaction.
Why does this matter?
The study challenges the idea that the relationship between MMs is static and predetermined during the pre-acquisition stage, as normally requested by the top.
The investigation stresses that balancing strategic interdependence and organisational autonomy requires managers to remain flexible, to adapt to the contextual reality and opportunities.
Specifically, it highlights the value of informal interaction spaces created by MMs throughout the acquisition process, as they have been found to be a fruitful breeding ground for actionable intersubjectivity – a prerequisite for reaching the right balance between strategic interdependence
1 The purposeful sample included a similar amount of acquiring and acquired MMs distributed across 24 acquisitions in different activity sectors (insurance, banking, equipment and engineering, consulting, food industry, automotive industry, brewery, information technology, petrochemical, chemical and biotechnology) in North America, South America and Europe. All selected MMs played an important role during the acquisition and were experiencing different stages of the acquisition process at the time of the interviews.
2 Examples in informal interaction spaces at this stage are informal conversations, implementation of integration projects including project meetings, conjoint planning, conjoint field work, conjoint supervision of progress and conjoint start-ups.
3 For example, the acquirer’s procedures (including clear documentation processes) and the acquired firm’s pragmatism to support and push customers’ projects forward.
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Senior Lecturer in Strategy |