Management M-A Buy-In

Quick Summary: Employee communications with first level supervisors or managers is critical.

Abstract:

As important at communications from the CEO to the company’s employees is, real, personal communications occur between employees and their immediate supervisors.  Mutual trust at the employee-manager level is absolutely essential to maintain a positive and productive environment.  With the first wave of rumors regarding a potential merger transaction, employees will immediately turn to their supervisors for answers.  An “I don’t know either” response will not be acceptable to either party.  Senior management must acknowledge this situation and keep the entire management team abreast of the latest available information whether it is complete or still unresolved.

As soon as the Board or owners or others who have a controlling interest in the companies make the decision to consider an M/A transaction, managers from both companies need to be involved.  As previously mentioned, the rumor mill WILL appear as soon as more than two people start discussions.  It will be the employees, not the managers, that will hear the rumors first.  Brave employees will, behind closed doors, ask their managers to tell them what is going on.  An “I don’t know” answer, although true, will never be believed.  As soon as that occurs -- and it will -- the manager(s) will be an awkward position.  As discussed in the article in this collection, 2.030203, “There are only two kinds of people,” managers and employees alike with quickly join one camp or the other: “Critics or Creators.”  It is imperative that the companies quickly win over the management team to ensure that they become creators and support the discussions. 

Trust is fragile and easily lost.  Employees turn to their immediate managers for guidance.  Managers, In turn, are used to providing that guidance.  When they don’t know, they can easily become defensive and even resentful for being placed in an awkward “I don’t know position.” 

The management team, not the investors or owners, are the movers and shakers that lead to success or failure.  They will naturally, have many questions, their smiles or frowns and increased or unusual closed-door meetings will determine employees’ attitudes and actions.  Aside from being managers, first and foremost they are individuals with many questions about their own roles as well as those of “their people.”  Their questions must be acknowledged and answered with the best available information.  Even if the answers are not known or are subject to change, candid responses, with the caveat that many of the answers will probably change need to be given. 

The influence of managers on employees goes well beyond their direct actions and the information passed along to their subordinates.  That influence, either directly or indirectly, will impact the company’s business partners, customers, prospects, and even their competitors. These other groups will hear the “news” whether it is factual or not.  There will be no void; someone will fill it, one way or the other. 

Although managers and employees alike will be most comfortable with definitive news, either good or bad, it will be impossible to resolve all issues early in the discussions.  A simple but effective method to help set the stage for the constant change in answers that are likely to occur is to repeatedly make the statement that “This decision is final -- until we change it.”  This oxymoron response will be remembered and help everyone to keep the highly dynamic situation in the proper perspective.

The following is a list of questions that will almost certainly be asked by managers.  Many definitive answers will be unknown, and many will be controversial to some individuals.  The key to getting through this period of uncertainty is truthful responses.  As a word of caution, publicly traded companies must adhere to strict Securities and Exchange Commission Rules and Regulations regarding the disclosure of information.  Legal Counsel from both companies as well as outside parties will provide compliance guidance.  However, avoid the carte blanche, convenient but simplistic advice of “Do not say anything to anyone” advice that attorneys may recommend.  Common sense must prevail.  No company can survive or even operate in an absolute and total risk-free environment.

Some of the questions that WILL be asked include:

  1. Who will be THE CEO that has ultimate decision-making authority?
  2. Who will head up each department of the business?
  3. Is there a clear reporting structure for the planned combined operation with names and titles shown that will be shared with all employees?
  4. Since there will be duplication, who will be "promoted" and who will be "demoted"?
  5. Will various functions such as accounting, payroll, sales, marketing, human resources, benefits, and customer service be combined?  Where and when?
  6. Is it planned to reduce headcount and operating expenses?  If yes, have a work transition plan and timing been developed?
  7. What type of severance packages will be offered to any terminated employees due to a reduction in force?
  8. What will happen to previously granted stock options and the option vesting schedule?
  9. Who will have signature authority for what?
  10. Will employment contracts for key personnel be required?
  11. Is there a time table to begin the integration of the various functions?
  12. Are processes documented so that they can be shared?
  13. What are the metrics that we can create and monitor to determine if the merger is meeting expectations?
  14. Is it planned to expand operations beyond the combined service area of both companies?
  15. Will compensation levels for all employees and managers be reviewed and will adjustments be made?
  16. How will differences in job titles and job descriptions be handled, by whom and when?
  17. Does either company have variable compensation programs that can be combined?
  18. Do both companies operate with about the same level of technology?
  19. Will there be combined staff and other operational meetings? If so, where and how often?
  20. Will websites and marketing collateral material be combined to be consistent?

Clearly, the answers to these questions cannot be known early in the merger discussion phase.  However, just because they cannot be answered, it does not mean that they will not be asked and be on virtually everyone’s minds.  Bringing the management team together and sharing the list of questions with whatever level of preliminary answers are available will be a positive step forward.  The process will help to help restore trust which invariably will have been shaken when the first wave of rumors surface.

 

Article Number : 7.030301   

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