Mergers and acquisitions can make companies stronger by expanding their consumer base, reducing marketplace competition, and creating value greater than each company offers individually. But as a business owner, understanding the human side – how a merger or acquisition can impact your team – is just as important.
Before you enter into any deal, it can be beneficial to find ways to maintain employee engagement, motivation, and overall satisfaction amidst such a significant transition.
All About Mergers and Acquisitions
Mergers encompass more than just a financial transaction; they represent the blending of assets, cultures, and strategies. Office buildings, factories, equipment, operating procedures, and employees come together to ideally create a sum that’s greater than its individual parts.
Most significantly, companies that merge gain the benefits of each other’s distribution channels and customers. For example, if a U.S.-based company acquires a company in Vancouver, Canada, the larger company may gain access to production and distribution channels in a new region. It can now expand across borders without the expense of building new factories or even marketing to the new consumer base.
Stockholders from both companies often receive shares in the new entity, though the exact ratio can vary based on the merger’s terms. Since shareholders have the assets of both firms behind their investment, stock values may rise. And, after combining operational costs, the new company’s overall expenses may go down with the potential for profits to rise.
In an acquisition, one company purchases the assets of another. The acquiring and acquired entities can vary in size and scope, but larger companies often acquire smaller companies. Post-acquisition, the roles of C-level executives from the acquired company can vary. They might stay on in consultative roles, join the board of directors, or even maintain their current positions if the acquiring company sees the value of their knowledge and experience.
Other times, after helping smooth the transition of an acquisition, the executive of the acquired company will step away from the new organization. This is usually laid out in the terms of the acquisition.
Benefits of Mergers and Acquisitions
While the saying “two can live as cheaply as one” might oversimplify things, the core idea mirrors a primary advantage of mergers and acquisitions: achieving greater efficiency and scale. Here are some additional benefits of M&As to consider:
- Revenue may increase as redundant costs, like duplicate departments or operations, are eliminated.
- Potential market share grows through expansion into new regions and leveraging loyal consumers open to new products emerging from the merger or acquisition.
- Reduced competition can increase profit margins and spur business innovation.
- Companies can tap into fresh resources and talent pools that were once exclusive to the other entity.
- Brand visibility may increase.
- Stock prices may rise as a result of the combined assets and reduced costs.
- The cumulative effect of the above benefits often paves the way for smoother incremental growth.
How Mergers and Acquisitions Affect Employees
The impact of mergers and acquisitions on employees can be stressful, regardless of what benefits they and the company receive. Managing the effect of mergers and acquisitions on employee performance can help business owners mitigate some of the common challenges of these types of deals. For instance, potential disruptions in team dynamics, poor employee management, or uncertainty looming over job roles can undermine the anticipated advantages of the M&A.
Let’s look at some of the effects of mergers and acquisitions on employee performance and how to help retain and motivate employees in the face of change.
Job uncertainty
Employees may see their work friends and colleagues laid off and begin to think about their own job security in the new corporate structure. Don't leave them uncertain about their future. Communicate about new roles and layoffs as quickly as possible to minimize uncertainty.
Competition over teamwork
Employees from the two organizations might initially see each other as rivals instead of teammates. Such rivalry can undermine cooperative efforts, leading to inefficiencies. It’s crucial for management to foster workplace collaboration from the start – by organizing joint workshops, collective training sessions, or mixed team projects, for example. These approaches can help break down barriers and cultivate teamwork.
Bridging distinct corporate cultures
After a merger, you don't want one company’s culture to overtake the other. For instance, if one company tends to be casual while the other is more buttoned-up, consider adopting a classic business dress code, but implementing casual Fridays to keep a piece of the former company culture alive. Consider team-building exercises, an after-hours party or a group event such – as a ballgame or picnic – to help employees from both companies get to know each other better.
It's also important to promote an ongoing dialogue. Soliciting employee feedback and having open channels for communication, for instance, can help make sure all employees feel heard. It also provides a proactive opportunity to promptly address any potential cultural conflicts.
Decreased employee motivation
Change, in any of life’s settings, can be difficult for people. As frustration with new roles and new co-workers or management increases, that can lead to a drop in employees’ drive to succeed and perform above (or even at) the required levels. To combat that, consider rewarding individuals and teams who are seamlessly adopting the new culture, rules, and processes, and working together with their new co-workers. Small gift cards or even public recognition through a corporate chat channel goes a long way toward maintaining motivation and encouraging other employees to embrace the evolving organizational landscape.
The Bottom Line
Mergers and acquisitions may be one of the most stressful experiences employees have to face. But the long-term benefits of successful mergers and acquisitions for management, stockholders, and for the company’s bottom line may outweigh the short-term challenges, making it a strategic way to grow a budding business.
Images: Getty
