Mergers and acquisitions occur every day. Some reorganizations are successful, while others fail. The success or failure of the transaction may depend on negotiations between the two companies or the execution of the transaction and its implementation. How can a company overcome some challenges seen during this process to solidify the new business?
The Effect on Employees
Mergers and acquisitions can harm employees. This one step could lead to the downfall of the company if the employees aren’t considered. They may see co-workers being laid off and wonder if they are next. At times, the employees from the companies might compete against one another rather than work together as a team.
Differing company cultures can lead to a decline in employee morale during mergers and acquisitions. In addition, employees may be frustrated with their new roles and see a drop in their motivation as a result. The problem may be with the new co-workers or the incoming management team. All of these things can negatively affect employee performance.
Work with mergers and acquisitions specialists to minimize these effects. These specialists deal with similar situations regularly. They can help business owners and employees overcome these challenges and come together to benefit the newly formed organization.
Develop and Execute an Implementation Policy
During a merger or acquisition, an implementation policy must be developed. This policy must be prepared well in advance of the merger or acquisition. Cultural alignment plays a major role in the success or failure of the transaction, as does communication throughout the process. Ensure there are leaders in place and they have the resources needed to carry out the policy. In addition, the leaders must ensure the implementation closely follows the developed policy.
Bring together a team responsible for implementing the policy. Have a time frame for the implementation along with key metrics. It’s helpful to have overarching goals the combined company should achieve. At this time, a sound cost estimate is also needed. Two-thirds of M&A reorganizations lack this plan, which hurts the combined company. Don’t make this mistake.
Outside Factors
A company looking to complete a merger or acquisition might find factors beyond its control that influence the outcome of the transaction. Legislation, for example, can either ease the process or halt the transaction completely. The size of each party’s market share often plays a role in this.
The current economic climate might also affect the transaction. When the economic climate is healthy, the odds of success increase. Both parties will feel more confident taking this major step. The same is true when legislation is favorable to the transaction.
Acquisitions in a new territory must be carefully considered. These markets may come with several challenges, such as geopolitical risk, different currencies, and more. These factors are beyond the control of the company looking to acquire a new business and may make the acquisition unfavorable.
Mergers and acquisitions aren’t easy. In fact, up to 90 percent of these transactions fail to produce the expected returns. While some factors are beyond the control of the parties involved in the transaction, others aren’t.
All parties need to understand what is involved in a successful transaction. A third-party specialist is of significant help at this time, as they handle these business deals regularly. They ensure nothing is overlooked so the combined company has a higher chance of success. That is what all parties want in the end.
