Keeping Acquired E-Teams Together

by Florence Stone

Will Ben Cohen and Jerry Greenfield leave Ben & Jerry's Homemade Inc., now a division of European conglomerate Unilever? That's the question an article in The Wall Street Journal recently asked following comments from the two-counterculture founders that they might quit. But that question raises another, more pervasive question, one companies that have acquired or are thinking of acquiring entrepreneurial businesses, including dot-coms, should be asking themselves: How do we keep intact the management teams of any business we acquire?

These entrepreneurs are not only the inspiration behind the businesses, but they also bring knowledge of the industry and of the business units to a successful acquisition. Let's not forget, either, the respect with which employees and customers hold for them. So the loss of senior management of an acquired business could significantly impact its future success.

In the News

In the case of Ben & Jerry's, the statement came after Unilever, which acquired the Vermont business last April, announced it had selected Yves Couette, a veteran of Unilever's international ice cream operations, to take over as the culturally responsible firm's chief executive officer. Cohen and Greenfield had wanted the position to go to Pierre Ferrari, a former Coca-Cola marketing executive and a long-time member of Ben & Jerry's board when it was an independent company.

Did the two Vermonters see Couette's appointment as a threat to the company's folksy and socially aware culture they had built over 11 years? In their statement, Cohen and Greenfield did not mention Ferrari by name but said that their candidate for the post was someone with a clear and established commitment to their social policies. In suggesting they might leave, they also acknowledged that Unilever had the legal right to manage the firm in the manner it saw fit.

In the Beginning

Cohen, a potter, and Greenfield, a would-be doctor, began their business in a converted gas station in 1978 in Waterbury, Vermont. Using high-profile marketing tactics drawn from the 1960s protests and ice-cream flavor names like Wavy Gravy and Cherry Garcia that reflected the heyday of the hippie movement, they generated their first followers. When Pillsbury-owned Haagen-Dazs locked their firm out of supermarket cooler space, it fought back with ads that asked, "What's the Doughboy afraid of?" It beat the giant firm, firmly establishing a place in dairy cases across the United States.

But the company continues to take pride in its Vermont roots, supporting local family farms, even though it has meant paying higher prices for its milk. This was one of several conditions in the sale to Unilever, an Anglo-Dutch conglomerate whose goal in acquiring the ice cream concern is to expand the brand internationally -- beyond the United Kingdom and Japan where it has already made forays to more European countries, including Germany, where the ecology movement is growing.

Socially responsible, Ben & Jerry's Homemade donated 7.5 percent of its sales, which last year totaled $237 million, to liberal causes. The firm operates out of five towns, and employee committees in each location determine distribution of company tithe to local causes. Worker benefits at the company are considered the best in the state.

In the Merger Agreement

Besides agreeing to continue to donate the same percentage of pretax dollars to charity and purchase dairy products from Vermont farmers, Unilever reportedly guaranteed not to lay off any personnel for at least two years, to make an annual $5 million gift to the Ben & Jerry Foundation, which supports causes ranging from battered women in Vermont to farm workers in Florida, and to undergo a yearly audit of its worldwide operations in terms of issues such as environmental impact, supervised by co-founder Ben Cohen.

While those at both Unilever and Ben & Jerry seem to be in agreement that Unilever has lived up to its promises to date and has not interfered with management since the acquisition, Cohen and Greenfield would seem to have their doubts about the future. And if they leave, Unilever, which paid $326 million for the firm, could have a serious problem on its hands. In The Wall Street Journal report, John McMillian, a food industry analyst with Prudential Securities, Inc., was quoted that the loss of the two quirky founders "could spell trouble for Unilever.... This company has been built on their spirit," he said. "Hopefully, Ben & Jerry's won't become the next Snapple," referring to the iced-tea and fruit beverage maker whose sales plummeted after it was acquired by the Quaker Oats Co. in 1994.

In Perspective

We won't know right away if Ben and Jerry follow through with their threat. But the situation is not an unfamiliar post-deal dilemma. Admittedly, Ben & Jerry's -- and Ben Cohen and Jerry Greenfield -- are unique in the realm of management. However, in any acquisition, the fact is, there will always be key people in an acquired organization that the acquirer wants and needs to keep. The challenge is to first identify who they are, then devise ways to make sure they stay on as enthusiastic, committed employees.

"Often, one of the greatest challenges for the buyer is the post-closing integration of the two companies," writes Andrew J. Sherman, author of Mergers and Acquisitions: From A to Z. Post-closing challenges raise a wide variety of human fears and uncertainties that must be understood and addressed.

Many of the fears result from expectations of downsizing in both the acquired and acquirer firms. But that issue seems to have been addressed in the Ben & Jerry deal, at least for the first two years. And, in general, the trend appears to be declining. For instance, in 1996, there was a record $658.8 billion worth of merger transactions. Instead of laying off employees, companies held on tight. Only 8.9 percent of 477,176 job cuts occurred that were related to mergers, according to outplacement firm Challenger, Gray & Christmas, a decline of 46 percent from the year before, when 16.4 percent of 439,882 cuts were the result of mergers.

For those leaders and key followers who might jump ship once an acquisition is announced, timely communication of their worth to the new merged business is essential.

Mark N. Clemente and David S. Greenspan, of the firm Clemente, Greenspan & Co., and authors of the book Winning at Mergers and Acquisitions, recall one situation in which a senior manager of a major systems integration firm was kept from job hunting by the simple act of the CEO personally calling the manager to say that he was aware of his standing in the firm and of his past contributions. The deal hadn't been closed yet but it was public knowledge, and the CEO encouraged the manager to be patient because the acquired firm was weeks away from making decisions on the roles and responsibilities of various managers until after the closing. The manager wasn't given a guarantee but the CEO had shown he recognized the manager's accomplishments. That made him stick around. And it was worthwhile; there was an important new role carved out for the manager, which he jumped at.

Another problem is the psychological consequences of selling, according to Sherman. I'd say that this would seem to be cause of the Ben & Jerry situation, and might be found in dot-com acquisitions and other small business acquisitions in which the sellerˇs founder stays on board. The seller is so accustomed to managing the business that he or she may not be open to changes in strategies or policies implemented by the buyer (think Couette instead of Cohen-Greenfield-backed Ferrari).

To minimize the likelihood of such situations occurring, companies in the merger game need to anticipate problems involving attitudes, and corporate culture. If cultural differences are not uncovered during the due diligence process and incorporated into the terms of the deal, there will be problems in time. Sherman recommends that managements of both the acquired and acquirer recognize that neither one's culture can predominate and figure out how to combine the two cultures in a way that will satisfy all.

Corporate culture is such a personal concept that it won't be easy for negotiators to get their arms around it, but failure to do so and incorporate it into the merger plan can create issues that linger for years and ultimately contribute to disappointment on many levels, not to mention ROI.

Florence Stone is director of membership programs for AMA and an author of numerous articles and nine books, including Coaching, Counseling & Mentoring and How to Resolve Conflicts on the Job.