Mergers and acquisitions are some of the most expensive and complicated business transactions that occur. Both organizations involved can benefit from a merger, but there is often a period of instability for the resulting merged organization.
If you have recently received an offer from another business that you believe would help your company achieve its long-term goals or you have started thinking about acquiring another company, it’s important to recognize the ways in which a merger could negatively affect your business. Addressing the three issues below in the planning stages of a merger can help reduce the strain on your organization during this time of transition.
1. Unexpected costs and liability
Trying to combine two businesses can often be a very expensive process, even when the companies involved have a specific plan in place and intend to control costs whenever possible.
If the other business involved in the merger has recently manufactured multiple batches of defective products or allowed sexual harassment to occur without properly addressing it, for example, the combined organization may have to face liability for those issues. The careful performance of due diligence before a merger can help an organization identify liability risks and better estimate costs accordingly.
2. The loss of key staff members
Workers tend to fear for their futures whenever the organizations that employ them change dramatically. Some employees may worry that their positions will soon become redundant and that they could lose their jobs in a large-scale layoff. Workers are often in a disadvantaged position during layoffs because there is suddenly a glut of skilled workers on the market. Workers worried about such a future may plan their own strategic exit after hearing about the merger to avoid losing their career momentum.
3. A clash of corporate cultures
The bigger and older a company is, the more likely it is to have a very distinct culture. Workers who have come to understand and trust that culture may be very resistant to change.
Especially when companies decide to combine previously separate workforces or to change policies throughout the organization after a merger, workers may have a hard time adjusting. Management and Human Resources teams can expect an uptick in conflicts and should prepare accordingly.
Businesses that approach mergers and other large transactions with a measured approach are often better able to profit from such transactions. Having the right support can make it easier to effectively address major issues that your organization may face in an upcoming business transaction.