The Forgotten Risks of M & A

During a merger and/or acquisition everything we do seems to increase in intensity and volume. It is at times of heightened stress that we have a tendency to overlook or even forget key aspects of the task at hand. 

After having participated in many mergers and acquisitions (acquiring and being acquiring) we have experienced the “forgotten risks” of mergers and acquisitions.  

When we say forgotten, it may be that management has not truly forgotten these two risks, but they never seemed to have as high of a priority as others. There were, and are, good arguments for their lower prioritization. We would encourage management to rethink that prioritization and include these two risks in merger and post merger plans and focus. 

Culture risks:  

In the excitement of acquisition, or fear associated with the same acquisition, we often forget that mergers of processes, management teams, Board of Directors, and even staff are not the only mergers of consequence. Any merger or acquisition by definition changes the culture of the resulting organization. Failure of management to consider culture impacts may be short sighted.  

There are many instances of lagging employee turnover after mergers. Unfortunately much of these late stage turnover events include highly regarded skills that the new organization does not necessarily want to lose. But, because of culture changes, these skills migrate to competitors.  

To mitigate the risk of skills and employee loss management may want to consider ensuring that cultural aspects of the companies involved are well understood and considered and the new corporate culture evolves.  

We know that not every culture meets the requirements of all employees but a little more attention by management to this aspect of a forgotten risk will make it easier to mitigate unnecessary employee migration and loss of skills that could help the merger succeed. 

Staff Risks: 

The other poorly prioritized or forgotten risk is the risk associated with staff morale and contribution. We know that mergers and/or acquisitions generate stress levels throughout the work place. Many management teams try to provide comfort by telling existing employees that the merger is good for the company and that most of them will not be affected. 

The problem with that approach is that employees define “most of them” ad meaning that their own position will be terminated or they may have to move to a new location, or they may not have opportunity for advancement in the new organization.  

These concerns are real and ultimately prove too often to be true. Regardless of what management tells staff, jobs are lost, advancements are curtailed or people are asked to move to a new location when offices or branches are closed or consolidated. This impacts management’s credibility for several years after the merger. More importantly, staff morale sinks and customer service is negatively impacted.  

While all of this stress and certainly the results of the merger or acquisition may not be able to be changed leadership can manage the process better.  One suggestion that has provided positive results in the past is when Human Resources includes in the M&A plan specific steps to mitigate miscommunications, address real employee concerns, facilitate exit from the company with dignity and not solely focus on alignment of job definitions, pay scales and job grades, which is what they tend to be regulated doing. The value of employees should be the driving force behind intention and unfortunately it seldom is.