3 Merger Mistakes to Avoid

If you're thinking about acquiring another company, or are looking to get acquired, here are three major merger mistakes to avoid.

Elliot Markowitz

January 7, 2015

4 Min Read
3 Merger Mistakes to Avoid

There are many reasons two companies merge—to acquire certain complementary expertise, gain access to a particular client set, expand into unrepresented regions or markets, leverage economies of scale or to just plain eliminate a competitor. But whatever the reason, merging two organizations is not easy.

The ultimate goal should be to take the best of both organizations to form a stronger unit, but that is not always the case. Everything needs to be evaluated, from IT to financial to sales structure to even geographic locations. Culture is critical. What you need to understand as a business owner is that although mergers should result in a bigger, stronger and a better represented business, it actually can backfire if it's not handled correctly and the acquired talent will end up leaving the company.

Employees are the lifeblood of any business. A merger or acquisition brings uncertainty to your existing and newly acquired workers. Uncertainty brings anxiety and that brings a lack of productivity. The difficulty lies in keeping all your employees motivated during the transition process. The best way to do that is through regular, updated communications and making sure the newly acquired employees feel they have access and input.

If you're thinking about acquiring another company, or are looking to get acquired, here are three major merger mistakes to avoid. These have less to do with what is being bought and for how much and more to do with making sure that, once a deal is realized, it goes smoothly and the combined organization is better than the two separate parts.

Mistake No. 1: Looking at spreadsheets and not the people — Too many times organizations look at spreadsheets to determine who stays and who goes. They draw a line in the sand at a certain salary level or title and make critical decisions before even knowing what everyone does. Here’s a news flash: Spreadsheets don’t tell you the entire story of an employee’s value and capabilities. All too often, the best and most valuable employees are either let go or leave during a merger because they were never given the chance to represent themselves and the new employer didn’t give ample time to get to know them. Smart companies realize they are not just buying assets; they now have access to the people who made those assets a success, and look to leverage the talent they now have.

Mistake No. 2: Forcing your culture upon the newly acquired workforce — There always are areas of overlap when two companies combine—accounting, IT, HR and other administrative functions. However, one area that is usually different is culture, and perhaps the most critical is the day-to-day work environment or culture. While all employees know change is coming, the biggest thing they fear is a radical culture shift. Most people can deal with their manager or colleagues and even responsibilities changing, but they are more concerned about their work environment because that impacts their daily lives.

Another news flash: There is a reason the acquired company was desirable, and a lot has to do with productivity of their employees. Will they still be able to work remotely? Will they still be able to have flexible hours if they have children or are a caregiver? Can they still dress casually on Fridays—or any day, for that matter? These may seem trite, but to individual employees these are huge daily changes that will impact how they approach their jobs. Quality of life and a balance between work and private life are critical. The lead company needs to evaluate carefully the culture of what it is acquiring and support what has worked if it wants to retain the talent.

Mistake No. 3: Keeping people in the dark — Silence is deadly. The minute a merger or acquisition is announced, fear starts running through an organization. As a business owner you can try and minimize it by telling your employees not to talk to each other about it or if they have associates in the other organization to not reach out to them yet, but that is a waste of time. People are going to want information—any information. Productivity will slow. Don’t kid yourself: You are talking about people’s livelihoods here. Unless management gives frequent updates then employees will try and update themselves any way they know how. They will talk to each other. They will talk to people they know in the other organization. They will talk to former employees. They will search out information on the top-level managers and learn about their track records.

All of this is counterproductive and can be avoided, to an extent, by regularly communicating with employees. Smart business managers will reassure their existing and soon-to-be employees and update them on the acquisition process. Smart business leaders also will take the time to get input from their new employees before making decisions, demonstrating their value and willingness to listen. There always are details you can’t share, but don’t let that stop you from communicating at all. Even a little update goes a long way to remove fear, uncertainly and doubt.

Mergers and acquisitions in every industry is fact of life. However, there are smart ways to go about making the transition smoother and keep your workers motivated, and there are critical mistakes to avoid. It all revolves around people. It always will.

About the Author(s)

Elliot Markowitz

Elliot Markowitz is a veteran in channel publishing. He served as an editor at CRN for 11 years, was editorial director of webcasts and events at Ziff Davis, and also built the webcast group as editorial director at Nielsen Business Media. He's served in senior leadership roles across several channel brands.

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