Achieving Post-Merger Harmony

When two companies meet to discuss the possibility of merging together, a likely question that will be on everyone's lips is: how long will it take to complete the transaction? But that is only half the battle. Equally, if not more, important is how long it will take to integrate the two companies once the merger has gone ahead. Time is money, and integration needs to be effected in as efficient a manner as possible. In eighty per cent of all merger announcements, executives list growth as a priority. This will, however, be difficult to achieve without first setting in place a swiftly-effective strategy for ensuring a harmonious transition. An acquiring company will pay a premium for its target, above and beyond its shareholder value. Thus the shareholder value of the consolidated company is vulnerable. In the three years following a merger, only twelve per cent of companies grow more quickly than they had before, and many solid performers slow down.

To avoid revenue slowdown, executives must prioritise the company's customers and make sure they do not suffer the effects of the cost-cutting that is common after a merger. Cost-cutting can prove difficult, both because of the management time such strategies inevitably eat up, and because acquiring companies often find they do not understand their target as well as they initially thought they did. Whilst all of this is going on, therefore, as much time must be spent on ensuring quality customer service as possible. Customers who go elsewhere are difficult to win back. The company's sales team are the key to holding onto customers, as they are the ones who will be in touch with the customers, articulating the benefits of the merger, and retaining their loyalty. It follows, then, that rather than focusing on the legal and operational details that most executives prioritise in the days following a merger, the primary task should be to win over the sales team. They should be regarding as front line employees, and they should be the first to hear the details of the merger. Customers are sure to go elsewhere if the sales team are distracted by internal considerations, such as rumours and uncertainties about what the merger will entail. Good salespeople - and other employees as well - will receive job offers from competitors in the first few days after the merger is announced, so a good executive will already have a plan in place to retain them. This may include financial incentives, but it is just as important to implement a well-constructed communications effort in order to dispel the uncertainties inevitably generated by the merger upheaval. A clear map for integration must be made available to employees - a blanket email, or message on the company intranet, is not enough. In a merger, the CEO's of both companies should meet with employees - particularly customer-facing employees - as soon as the merger is announced, in order to explain it, and answer any concerns.

Rumours and gossip can do untold damage to an organisation, and are completely avoidable, simply by the CEO effecting prompt and direct communication with employees. A well-informed sales team, in particular, will then be able to communicate effectively with worried customers and will be in a position to re-assure them, and thus retain their custom. All of your employees will want to know how the merger affects them personally. Which departments will be merged? Will there be redundancies? How many? As soon as the merger is announced, these details must be made clear.

It is important, especially where employees are concerned, to establish which of the merging companies will be in charge, if the transition is not an actual takeover. For example, which technology system will be used? Who will be staffing the various departments? Smaller companies are of course easier to integrate than larger ones, as they require less management time and are not so complex in their structure as larger companies. The AOL/Time Warner merger is the classic example of a disastrous big deal. Yet, some of the world's most successful companies make acquisitions in their hundreds. Many companies would not survive without making acquisitions, as organic growth is nowhere near as fast as the growth that can be anticipated from a well-executed merger. Choosing a good-sized, compatible business that enhances your company's natural strengths is the best plan for a successful acquisition, coupled of course with an effective strategy for handling the transition period. Implement a swift, clear, and detailed integration plan that allows for clear communication with employees, and you will circumvent many of the major problems that can often beset a merger.

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