The Clash of Titans: Lessons from the Boardroom
“Let’s do more, together.”
If that sounds familiar, it’s likely because it was the ANC’s 2024 general election slogan. Somewhat ironically, and arguably not in the way they would have wanted, they got their wish.
A failure to secure an outright majority ushered in the formation of the Government of National Unity (GNU) – a coalition of 10 of the 18 parties with seats in the National Assembly.
This collaboration between traditionally disparate parties across the political spectrum was unchartered territory; for the first time in 30 years of democracy, the ANC would have to share power.
And yet, despite protracted negotiations over the cabinet formation, and fierce competition for key ministerial positions, initial feelings were that the GNU was a good thing. There was a general, if cautious, joy that the ground-breaking power-sharing agreement would herald the start of true co-operation between our political parties. Surely that could only benefit all South Africans in the long run?
If the turbulence that followed in the wake of the squeaking-through of the budget in the National Assembly last week is anything to go by, I’m now not so sure.
After a fiery debate, MPs approved the budget by a measly 12 votes – 194 to 182. The DA immediately announced it would challenge it in court. DA finance spokesperson Mark Burke argued that a recommendation by parliament’s finance committee that Finance Minister Enoch Godongwana try to find an alternative to the staggered VAT increase was not worth the paper it was written on.
Trouble in paradise, indeed.
But disagreements in mergers such as the GNU are not limited to governments; the floor of the corporate world is littered with failed mergers and acquisitions.
Cast your mind back a couple of decades to the Daimler-Benz and Chrysler merger of 1998. Unhappily for both companies, their short-lived union is regularly used in MBA courses as a classic example of how clashes of culture almost always lead to a failed deal.
Many experts believe the cultural differences of these two motor industry behemoths were too great for a merger to ever have been considered.
Decision-making, for example, was a fluid, unstructured and creative process at Chrysler; at Daimler-Benz, it was highly methodical. In addition, the hierarchy at Chrysler was flat, while at Daimler, it was definitely top-down.
There are many more areas where cultures clashed, but the end result was inevitable:
Within 10 years, Daimler sold 80% of Chrysler for $20 million less than they paid for it.
Insurmountable cultural differences also signed the death warrant of the marriage between AOL, a U.S.-based internet service provider, and Time Warner, a US cable TV company.
The ink on the contract was hardly dry when the dot com bubble burst, leaving neither company sure where the future of the media landscape lay.
The merger limped along for 9 more years before finally falling apart in 2009.
In another example, the ill-fated 2013 merger of Microsoft and Nokia started out as a way for the software giant to begin producing its own mobile phones. But, although it once enjoyed rarified air as the world’s largest handset manufacturer, Nokia failed to keep up with new technology and developments.
It eventually closed down in 2015. Microsoft lost $7.6 billion and laid off over 15 000 Nokia employees.
Of course, there are, thankfully, many other mergers that have resulted in wholes much greater than the sum of their parts, and which are still successful years later.
Still considered the biggest acquisition in history, the 2000 takeover of Mannesmann by Vodafone was worth close to $400 million in today’s money. It set the scene for numerous subsequent mega-deals in the mobile-telecoms space in the years to come.
In 2017, a “merger of equals” took place between the Shenhua Group, China’s largest coal provider, and the China Guodian Corporation, one of the country’s top five electricity producers.
The goal of the mega-merger was to create a balanced energy portfolio between coal power and renewable energy, bringing the company in alignment with China’s broader environmental and economic objectives. It created the world’s largest power utility company by installed capacity, and it’s still going strong today.
So, what makes some mergers so successful, and some abject failures? And what pointers could our struggling GNU pick up from the corporate world?
As you might expect, business mergers fail when the anticipated benefits don’t materialise. In the corporate world, this could mean anything from strategic misalignment, high staff turnover or a decline in product/service quality, to financial losses and failure to invest in growth opportunities.
Business experts will tell you that the success of any merger hinges on thorough preparation and due diligence up front.
This simply wasn’t possible for South Africa’s GNU. I think it’s safe to say that a coalition government would never have been volunteered by any party, but their hands were forced by the outcome of last year’s election.
Under pressure to get their ducks in a row and start delivering on their pre-election promises, the parties lacked the luxury of time. Sitting around a table bashing out “Strategic objectives,” “Potential synergies” and “Mutual objectives” was simply not on the agenda.
It might be being unfair to suggest that the most pressing concern was who was going to get the biggest slice of the power pie, but then again, it might not…
Either way, it’s too late now to focus on what didn’t happen before the GNU was formed. What’s important now, as all good leadership and business coaches are fond of telling us, is what we do next.
If we can learn anything from successful corporate mergers it’s this:
- Be transparent: Open and honest communication – internally between the different groups in government, and externally to the people they serve – is paramount and non-negotiable.
- Be inclusive: Identify and acknowledge potential cultural clashes and create a new, unified culture built on respect and an understanding of the values a diverse government can offer.
- Be strong: Strong leadership, especially in the challenging times in which South Africa now finds itself, is critical. People have to believe that positive change is coming, that servant leadership is possible, and that their votes on election day were not wasted.
An eye-opening report from respected global management consulting firm McKinsey and Company analysed a decade’s worth of large deals made by 2 000 global companies.
It found that the first 12 to 18 months after close were the most important when it came to the merger’s ultimate success or failure. In that time, investors were able to see whether companies can make real organisational changes, deliver on the synergy targets, and maintain revenue growth.
This is, I believe, exactly where we are now with our GNU. The rest of the world is now watching us very closely to see whether we’re likely to succeed or fail – and thus whether or not we’re worth investing in.
We haven’t yet reached the critical 18-month “cut-off,” so we still have time. But it’s running out fast.
Can we put aside individual egos and agendas and find new ways to work together for the common good of all South Africans? Can we identify which processes need to change, and find the resources to facilitate the necessary leadership and behavioural shifts to make that change happen?
As DA federal chair Helen Zille said, “We know that being in a coalition requires compromise. You can’t get it all.”
Because when politicians get it all, the people they were put in power to serve get nothing.
South Africans deserve a lot more than that.