"Any way to govern a country must first enrich the people."
In the capital market, this sentence can be changed to another version: "Any way to govern an enterprise must first govern power." The acquisition of controlling rights is not just a transfer of shares, but also a revolution in corporate governance. Once the controlling rights change, the company's strategic direction, board composition, and even corporate culture will undergo tremendous changes.
So, what changes will occur in corporate governance after the acquisition of controlling rights? Is it a phoenix nirvana, or a management disaster? Today, Goheal will take you to an in-depth interpretation of the governance storm after the merger and acquisition.
1.Controlling rights change: board reorganization or management "big change"?
The first shock of corporate governance is often the change of the board of directors. The replacement of controlling shareholders means the redistribution of board seats. New shareholders usually hope to bring in "their own people" to ensure that the company operates as planned, while the original management may fight to the death and try to maintain the old power structure.
Case: Musk acquires Twitter, and the board of directors "reshuffles"
In 2022, Elon Musk acquired Twitter for $44 billion. After completing the change of controlling rights, he directly fired Twitter's CEO, CFO, and legal director, and almost all board members were replaced. After the acquisition, Musk quickly implemented reforms, including layoffs, adjustment of content review policies, and introduction of paid certification models, which directly subverted Twitter's operating model.
So, what are the common patterns of board changes after the acquisition of controlling rights?
1.) Complete blood replacement model-the new shareholders quickly clean up the original board members and take full control of the company (such as Musk's acquisition of Twitter).
2.) Gradual adjustment-the new shareholders retain part of the original management and gradually adjust the company's strategy to reduce shocks (such as Microsoft's acquisition of LinkedIn).
3.) Two-tier governance structure-retain part of the founding team as consultants, and the new team gradually takes over (such as Disney's acquisition of Pixar).
Goheal's point of view:
1.) Although a complete blood replacement can quickly implement a new strategy, it may cause employee unrest and cultural conflicts.
2.) Although gradual adjustments are mild, if the execution is insufficient, it may lead to obstacles to reform.
3.) The best model depends on the acquirer's goal: short-term turnaround or long-term operation?
2. Strategic adjustment: Will the capital "new boss" change the company's direction?
The acquisition of controlling rights often brings about major adjustments to the company's strategy. The new shareholder may overturn the original business layout, or even divest the loss-making department and introduce a new development path.
Case: Disney acquires Fox and integrates the film and television empire
In 2019, Disney acquired 21st Century Fox for US$71.3 billion. After the change of controlling rights, Fox's business was reintegrated, a large number of non-core assets were sold, and some businesses (such as Fox News) were divested. After the acquisition, Disney integrated Fox's film and television content into Disney+, strengthened its streaming strategy, and comprehensively confronted Netflix.
Strategic adjustments after the acquisition of controlling rights usually have the following situations:
1.)Business integration - merging similar businesses to form a larger market share (such as Facebook's acquisition of Instagram).
2.) Asset divestiture - selling non-core businesses to improve operational efficiency (such as GE's split of energy business).
3.) Market expansion - using the resources of the acquisition target to enter new markets (such as Tesla's acquisition of SolarCity and entering the solar industry).
Goheal Tips:
1.) If there is no clear strategy after the acquisition, the company may "lose direction".
2.) Blind integration or excessive cost cutting may cause resentment from the market and employees.
3.) Successful strategic adjustments need to be based on the company's own resources and market positioning, rather than blindly pursuing short-term returns.
3. Cultural conflict: Can the new owner tame the "old ministers"?
Even if the board of directors is smoothly adjusted and strategic changes are promoted, the most difficult problem to solve is often the conflict of corporate culture. Changes in management will directly affect the trust of employees. Whether the new owner can make employees buy in determines the success or failure of the merger and acquisition.
Case: Daimler-Chrysler merger, cultural conflict caused management chaos
In 1998, Daimler (Germany) acquired Chrysler (USA) in the hope of creating a global automotive giant. However, the two companies have very different management styles - Germans focus on process management, while Americans emphasize innovation and flexibility, which eventually led to many internal conflicts in the management. Nine years after the acquisition, Daimler had to sell Chrysler.
How to reduce corporate culture conflicts?
1.) Set up a cultural integration team - the original company and the new shareholder team jointly manage corporate changes (such as Microsoft's acquisition of GitHub, allowing it to remain independent).
2.) Gradual management changes - avoid one-size-fits-all reforms and allow employees to adapt (such as ByteDance's acquisition of Musical.ly and the gradual merger of TikTok).
3.) Employee incentive mechanism - through equity incentives, bonuses and other means, ensure that the original team is willing to stay and cooperate with the new strategy.
Goheal suggested:
1.) After the acquisition, how to appease employees is more important than formulating a new strategy.
2.) Corporate culture integration is not a matter of one day or one night, it requires patience and strategy.
3.) If cultural conflicts are not handled well, even the best strategic adjustments may fail.
After the acquisition of controlling rights, will corporate governance usher in a new life or a disaster?
After the acquisition of controlling rights, the changes in corporate governance are often comprehensive: board reorganization, strategic adjustment, cultural integration, any link improperly handled, will trigger a chain reaction. Successful mergers and acquisitions in history often benefit from a sound governance model, while most failed cases die from improper integration.
Which acquisition cases do you think have the most successful governance changes? Which cases are a disaster?
Welcome to leave a message in the comment area to discuss!
[About Goheal] American Goheal M&A Group is a leading investment holding company focusing on global mergers and acquisitions holdings. It is deeply engaged in the three core business areas of acquisition of listed company control, mergers and acquisitions of listed companies and capital operations of listed companies. With its deep professional strength and rich experience, it provides enterprises with full life cycle services from mergers and acquisitions to restructuring and capital operations, aiming to maximize corporate value and achieve long-term benefit growth.
