Mergers & Acquisitions

Managing Mergers & Acquisitions

Managing Mergers & Acquisitions

You started your company some five years ago. It has made significant headway providing e-commerce solutions to many small enterprises. The financials are excellent, and the forecast for the next two years, at least, is exciting. You went public just a year and a half ago.

The bigger fish in the sea started noticing your company’s performance. Pretty soon, there was a phone call, followed by a series of meetings. Then the cat is finally out of the bag. You’re going to be acquired by a more prominent company. And that, as they say, is how the cookie crumbles, in the wonderful world of business.

Even if your company is doing fine, other companies take an interest, because they want to add your product line and services to their portfolio. As a pragmatic executive, you realize the value of having better resources in moving your company to a new direction and enhance your research and development initiatives. Still, M&A (mergers and acquisitions) isn’t an easy thing to go through?

Some Context on M&A in America

It’s a reality, and you know at the back of your mind, when you started your little enterprise, that this could happen. Even the big companies are also eaten up by bigger ones. Disney acquired the assets of 21st Century Fox. Verizon bought Yahoo!, the Internet juggernaut of the 1990s.

There were nearly 15,000 M&As in 2018, representing more than $1.931 trillion. As of August 2019, the number is at 7,112, which is valued at $1.189 trillion.

Mergers & Acquisitions

Rolling It Out

It’s a big challenge for the acquiring company and the one being acquired. As in any union, like marriage, the most crucial component is communication. Typically, the one acquiring takes the lead in planning a communication strategy. But there is still a transition phase that allows the acquired company to provide input. Here are some of the areas that should be handled with care and precision.

  1. Due diligence. Put people first. While the financials and assets are indeed the crucial aspects of the merger, both parties need to plan for their people. Not having a clear plan on how to communicate what will happen, elevates anxiety, and paves the way for a culture of cynicism and doubt. Redundancy would be inevitable and is difficult, especially if you are at the receiving end of it. But the leadership team must have the foresight on how to do this, from the total cost of the packages to the timing of implementation.
  2. Change management process. Think of this as the expression “softening the blow.” There should be a change management plan put in place that would address, among others, shifts in roles and responsibilities of employees, alignment of compensation and benefits, and recruitment. Remember that for many, the ground from underneath them has shaken. They will find relief in knowing that there is a plan in place that will manage all the different changes.
  3. Managing personnel inertia. With all the changes, some may choose to fly under the radar with a “wait-and-see” attitude. This is not good as the company still depends on employee actions to meet the financial bottom line. Be ready to be pro-active in stimulating performance. This could be done by providing training or other staff development activities.

You need to show fairness and be honest about the process. Covering things up or withholding information will open a whole new can of worms.

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