Some say that the reason why some M&As don’t succeed is because board members can’t agree and have too many differences. But research shows that is not a good indicator, it is an easy one to see but the real problem is distance. It is whether you have moments on your board where you feel safe, connected and really sure that you are being heard and understood. When you have such moments, it is okay to have differences. If you don’t feel safe and connected on your board, the chances of the M&A failure are much higher. This is because when human beings cannot connect with people they depend on they find it alarming. Not because we are immature or unsophisticated but because we are human beings. We are born to bond. Research shows that when we form safe connection with people we depend on, it makes us stronger and provides us with a sense of secure base and the courage to take risks.
As human beings we long for connection. It is wired in our brain as part of our survival code. We need to know that the people we depend on will be there for us when we need them and thus, when we can freely express ourselves and ask questions, our brain stays calm and connected. When we can’t or don’t feel safe to do that, our brain sees it as a danger cue and triggers a fight-or-flight response. As a response, we either start to argue or shut down and the board starts a negative cycle that gets its own momentum and leads the M&A process on a path of a disaster and we don’t understand what’s going on.
The most common negative pattern starts with one person complaining, criticizing, and getting very angry and the other defending, stonewalling, and distancing. One starts to push and the other starts backing off. The more one backs off, the more the other pushes and they get caught in a cycle that pushes each person away and they start to think of the other person as dangerous, as an enemy and they start to respond to the other person as dangerous and as enemy. Since emotions are contagious, these types of interaction patterns create distress for the rest of the board and leaves the board disconnected.
In order for us to feel safe to take risks and explore new possibilities, such as M&As, the brain needs reassurance that we are not alone and that our board members will be there for us when we need them, such as to answer our questions and address our concerns.
One thing that board members don’t realize is the impact they have on each other. As an example, think of the time when you feel stressed or worried and as you talk to one of your board members, it soothes your nervous system down, it changes the hormones that are released in your blood, it reduces the cortisol level (a stress hormone), your heart rate slows down and the whole body responds and calms the brain which allows you to regain your emotional balance, continue with your task at hand, be open to new experiences. By staying accessible, responsive and engaged, you will be able to co-regulate each other’s emotions and keep the board focused on keeping the board together.
This is what happened to Allergan when they were fending off a hostile takeover attempt by Valeant and then subsequently merged with Actavis. The board leaned on each other and retained communication internally about their stress, fear, and anxiety. This gave them the strength to say no to Valeant and find another company (Actavis) that ended up making shareholders $25 billion more than the original offer.
As you approach M&A deals, besides the technical aspects of the deal, pay attention to emotional distance. It is essential that your board members feel safe, connected, and supported. It is okay to have differences as long as you are maintaining emotional safety. One way to ensure this safety is to bring on professionals that can help you in navigate emotions in the boardroom. Paying attention to board relationships, valuing them, and understanding how alarming disconnections are for human beings is the first step towards creating emotional safety.
This kind of stress can (and often does) tear boards apart, especially when directors are unsure of their role or fiduciary responsibilities.
Bringing on legal counsel during these situations will help board members remain independent and provide the board with important information about their responsibilities which will add to emotional safety. It may seem like unfamiliar territory, but the research shows that when we can create emotional connection and feel safe with the people that we depend on, we can resolve any difference which will lead to many successful mergers and acquisitions.
To learn more about emotional safety in the boardroom, please contact [email protected].