Personal Challenges of Acquisitions

Mergers and Acquisitions (M&A), or Murders and Executions, a consolidation of companies where one acquires another, or several companies merge in one, brings many strategical benefits — expansion into new markets, diversification of services, and increased market share to name a few. Corporate strategy gets reshaped, and the organization sets out on a new journey, towards elevated efficiency and profit.

Yet, like any enterprise, when experiencing a progressive change, adjustments across many domains need to be made — strategic, structural, and cultural.

Strategic challenges are easy to quantify, as they stem from economic prediction models and research, both made on the basis of rational calculations. On the other hand, the structural and cultural challenges are often underestimated, or worse, neglected, as the attention is mainly focused on strategic fit rather than organizational.

The sweetest part of the Delira & Excira belongs to the investors and leadership of the transaction parties. For the staff, however, it may bring many negative aspects of the unknown, which will not manifest until much later in the post-acquisition phase, resulting in decreased morale, productivity, and eventually, an exodus of key talent. Many officials overlook this issue because of a false assumption of being able to rehire missing resources promptly.

Therefore, while facing strategic challenges with the outside world, it’s equally important not to overlook personal issues that may unravel within.

Let’s take a more detailed look at some of them.

Cultural differences

What is company culture? Everything that plays out in the workplace. It’s the genetic code of the company that has been developing since its inception — vision, values, systems, beliefs, assumptions, habits, and the list goes on. It guides performance through shared motivation and commitment, it affects decision-making and leadership style.

Nowadays, employees care a great deal about company culture, thank God for that! Thus, the key factors that shape it must be taken into account during the merger, especially the differences in management style and various backgrounds the staff members are coming from. Communities are more important than hierarchies!

Culture drives and directs employees’ work. Conservative teams will hardly find a common ground with creative and daring innovators. Autocratic leaders will immediately fail when bossing around teams that follow a territorial approach. American managers who take all-hands meetings as a theater performance, filled with smiles and cheesy buzzwords, won’t satisfy East-European realist who expect a clear status update.

Executives, HR department, Employee Experience division, or whoever takes the responsibility for taking care of the staff, must take the necessary actions to reconcile different cultures, bring people together and help forge positive relationships.

Complicated processes

Organizational changes are difficult to cope with, especially when they were dictated by the parent company. Smaller companies are accustomed to a high degree of freedom and creative thinking, while bigger companies prefer relying on layered workflows.

Budgets for minor activities can no longer be discussed over a cup of coffee with the department leader, but through a cascade of overworked executives. Collaboration tools need to be unified, often in the interest of licensing policy rather than their usability. Holding a party in the office now requires signing a 10-page agreement filled with corporate jargon, and so forth.

Strict policies may be very painful for people of an open mindset who manage things on the fly, and an extra effort must be made to clarify the need for new changes — adjusted work schedules, reporting relationships, compensation, reward systems, and new collaboration tools. The parent company can’t expect the acquired company to take in new policies overnight.

Apart from that, is it really necessary to have everything unified? A merged company can still maintain a certain degree of flexibility and freedom.

Loss of commitment

When a smaller innovative company gets acquired by a larger corporation, it may sound like a dream — years of effort have finally begun bearing fruit, and the community is excited about future opportunities. Yet, it may be the beginning of the end of everything they have been pouring their soul into. Yesterday, you worked for something meaningful to you, to your team, your community, your company, your country. Today, you are working to make your investors rich. How can one capitalize on that?

Commitment and satisfaction are very important factors that influence employees’ retention, and the loss of either can have various consequences.

All updates about new changes, challenges and opportunities, must be given frequently and clearly, all concerns should be identified through continuous feedback and treated seriously. Important facts mustn’t be kept back from the staff, not even coincidentally. The mission statement must be well established so that it won’t fade away easily.

Retention is an issue of almost every merger, yet in many cases, it can be at least partially prevented. Lost trust in the organizational goal doesn’t need to be the end, as long as the people stay true to each other, and their leadership.

The worst-case scenario happens when the old leaders fail, reporting decisions of the executives rather than driving actual decisions: “Sorry, we have to do it that way because the executives wanted it that way.” Then, employees will lose trust and sometimes even feel betrayed by their leadership, for not providing enough support and assertiveness in difficult times.

Identity

Merged companies will inevitably lose certain elements of their identities, which can also manifest in their perception by the market. Rebranding is a common technique the mergers use to regain market share.

On the outside, it’s about changing a few colors, the logo, and other visual components. Inside, however, it’s a very complex process that involves combining several separate histories, cultures, and identities, while trying to find the middle ground.

The new brand must be built with a view toward how it will be understood and accepted by employees, which requires their active involvement (user-testing, surveys, etc). Brand perception is very subjective and more open to interpretation, that’s why it’s important to be mindful of the opinion of the staff.

The leadership team and others within the organization provided positive sentiment around the logo. Thank you. Director of Marketing of a company I worked for, after being challenged for dubious rebranding.

Hasty rebranding may hurt the image of the new company and infect its employees with disappointment.

Layoffs

Merging several companies involves merging respective departments, roles, and teams. Inevitably, some people may find themselves doing a duplicate job, which causes excessive costs, and a further need for reorganization, or even layoffs.

Layoffs are very dangerous if there is no clear vindication of them. Rumors will fly all over the place, which can create distrust and uncertainty in the workplace. Deciding who stays and who goes is a tough process that requires the utmost transparency and courtesy. In addition, employees are not resources, and their impact on the company values isn’t solely materialistic.

Moreover, if there is a certain duplication of roles after an acquisition has taken place, why not start thinking about how to make new exciting roles where the people whose job has rendered itself redundant could thrive?

Wrap-up

Every merger is a difficult process that needs to be taken seriously at each management level. There will always be the good and the bad. What is important is to encourage the good and have people acknowledge that they are working on something meaningful, striving toward a common goal.

Top officials of the newly forged organization must do the very best to create an attractive workplace, in terms of opportunities, recognition, and a sense of identity. Communication channels need to be open in the early stages and used as often as possible, to identify concerns that unravel and take actions to address them.

Finally, I would like to recommend 2 amazing books that go a bit deeper into the topic:

The art of M&A, Alexandra Lajoux, 2019
Mergers and Acquisition for Dummies, Bill Snow, 2011