This article along with the next two articles discuss the employee responses that will occur when the word leaks out that an M/A transaction is being considered. The articles discuss the realities that will occur, the need to acknowledge the event, and the employee anxiety that will naturally surface.
As was discussed in other articles in this chapter, employees will know when any M/A discussions begin. Apparently “little things” such as closed-door meetings or phone calls, strangers showing up, trips to different destinations, off-site meetings, or requests for more detailed or different financial information will set the rumor mill wheels turning.
The rumors will travel faster than a speeding bullet breaking the sound barrier. You will feel the impacts before you even hear the sound. Think of the rumors as the beginning tremors of an earthquake. Some will sense it and then feel it before others. It will quickly shake the operational foundation of the organizations. Just like an earthquake, you cannot stop the rumors as they occur, you can only respond to them to minimize the damage.
Even in the best case, merging two companies is analogous to combining two ships at sea. Both ships have to continue moving – even if the seas are rough. The ships cannot return to port and move into drydocks. Like the ships at sea, both companies have to continue on their journeys to their planned destinations. Only now, their attention to their plans will be diverted.
No matter how seasoned the management team is, every M/A transaction is different, if for no other reason than different individuals will be involved. Initial owner/investor discussions will envision a bright, long-lasting future similar to a young couple walking down the aisle. Senior leaders can easily move their mindset from if the deal should be done to when the deal is done. To help avoid this shift in mindset, a list of “go/no-go” business criteria should be developed very early in the process that includes milestones to ensure that the opportunity is being fairly evaluated. This activity, based on business issues, should be well underway before attorneys, CPAs and others who are focused on the structure of the deal become involved. These necessary specialists will unconsciously be making a presumptive close that the deal is done.
The heavy lifting of resolving the business issues must be done before the deal is finalized. Attempting to resolve these issues after a letter of intent is signed or the transaction is complete will prolong the period of uncertainty and will result in missed financial performance, and most likely, the consequences as outlined in the article, 7.030206, “Why Mergers Fail.”
As listed in that article, Isaac Newton’s Laws discuss the tendency to resist change and the need to overcome the current momentum. All individuals within the impacted organizations will comply with Newton’s Laws to some degree. There are two elements to the word “merger.” First, it starts with the letters “m” and “e” or the word “me.” All individuals will immediately and continually think of the impacts of the merger on them personally. The second factor is the tense of the word “merger”. The issues that arise are not with the merger. Instead, they need to be addressed during the merging process. How those issues are handled as they arise will determine the success of the merger after it occurs. The planned transition determines the success of the transaction.
Some individuals, for their own personal reasons, simply will not be able to make the transition. Some will quit and leave. However, some will quit and stay! The individuals that quit and stay can easily poison the atmosphere, impacting many others. These situations need to be dealt with quickly and decisively. This situation is markedly different than the inevitable culture clash that will occur. No two organizations are exactly alike. Differences need to be acknowledged.
It is common for employees to begin to focus on not making mistakes for fear of retribution. Their “logic” is that if they do nothing, they will not do something viewed as being wrong. Normal decisions won’t be made; “by the book” will become the norm, even minor risks will not be taken. The end result is that “business as usual” won’t be! Productivity will plummet and business results will drop. Individuals will then become more concerned and conservative and the downward spiral will increase. Management, at all levels, must be aware of this natural tendency and openly discuss it with everyone and actively resist the “do nothing” mentality when (not if) it occurs.
The “realities” discussed in this article are very negative. However, unless specific action is taken, they will occur. There is no magic wand that can be waved to avoid them, but all of them can be minimized with careful consideration of the “me” in the merging process.