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Impact Of Mergers And Acquisitions On Employees

Written by: Gauri Kacherikar, Executive Contributor

Executive Contributors at Brainz Magazine are handpicked and invited to contribute because of their knowledge and valuable insight within their area of expertise.


I’d like to preface this by saying I have been a part of 2 mergers and acquisitions, and the article below is based on my experience, and you may have some different perspectives on the same topic.

Mergers and acquisitions have been an integral part of the business world for centuries. With the help of mergers and acquisitions, companies develop and enhance themselves, create a competitive advantage for themselves, and have the upper hand while competing with other companies in the market.

When two companies come together, it is interesting to observe how mergers affect employees. This is because there is a sudden cloud of uncertainty that envelopes the employees at the middle and lower tier of the management hierarchy. Which companies work culture should be followed? What are the new rules and policies? Should we do this or that? Who should I report to? What is expected out of me? What are the new evaluation strategy and reward systems? Such questions create much confusion and chaos in the workplace. An array of unanswered questions leads to instability as employees fear losing their jobs or are unable to cope up with such a drastic change.

What Happens To Employees When Companies Merge?

Feelings Of Anxiety And Alienation

There are very few instances when a merger or acquisition doesn’t cause disruption of some kind to the workforce. The likelihood of layoffs cannot be denied post a merger or acquisition. It is only natural for employees to feel threatened by the expansion of the workforce prompting the imminent decision of ‘cutting flab’ from the coalition. The workforce may feel disengaged and start quitting the company. The dissatisfaction adversely affects the productivity and output level.

Threat To Job

Mergers and acquisitions end up having an unfavorable effect on employees who experience difficulties in working together with the new addition to the workforce. It may even lead to non-cooperation with the other merging company’s employees. In a merger and acquisition, one company is likely to have a stronger foothold in the market than the other, giving rise to a power struggle. In such a case, employees tend to overlook the achievement of organizational goals and only strive to maintain job security. Employees of the merging or acquiring company, however, have the edge over those working for the acquired company as they may be rewarded with an increase in remuneration and better job position. It gives them a sense of having the upper hand, yet, the fears of mergers cannot be neglected.

If an employee, who would otherwise make a valuable contribution to the merged entity - feels that their job is under threat, they may decide that it’s safer to accept a position in a company that can guarantee their job for the foreseeable future than one that can’t.

It has been fun to experience both, and there are pros and cons to it. The key important thing to note is Mergers create larger companies and, on balance, larger companies create more opportunities. Mergers are also a sign of a company’s growing ambitions, and by sticking around, you will have the opportunity to piggyback on those ambitions. Benefits are likely to include better salary and benefits, enhanced share options, new roles opening with the company, new opportunities to train and upskill, and even an enhanced image of the company.

How Is Business Impacted?

A merger can affect the customers of the involved business entities on several levels, including the price of the product or service, the quality of the product or service, the level of satisfaction the customers receive from the company, and the options the customer has when conducting business with the company. Customer satisfaction or customer service is another factor that varies with a merger. In some cases, a newly merged company may experience problems at the customer service level.

In many cases, integrating the operations of two companies proves to be a much more difficult task in practice than it seemed in theory. This may result in the combined company being unable to reach the desired targets in terms of cost savings from synergies and economies of scale.

What Works Well For Both Customers And Employees?

Communication, communication, communication.

A change is never easy. Change Management is the key. Companies overlook the impact that an acquisition will have on their people.

This is an oversight that can have grave consequences as one of, if not the biggest, value generator in most companies; managing people through acquisition is essential. That’s as much the case for the people leaving the company as those remaining.

One of the most commonly cited motivations for performing M&A is the ability to achieve synergies. Unfortunately, most synergies go up in smoke because they’ve been over-optimistically estimated since their conception. But even those that do make sense have a tendency of disappearing as soon as the integration process begins. Overcoming this is one of the keys to achieving more value in the integration process. Be clear that ‘achieving synergies’ is not just about identifying them.

The Culture Shift

In one study, culture was found to be the cause of 30 percent of failed integrations. Companies with different cultures find it difficult, if not often impossible, to make decisions quickly and correctly or to operate effectively.

Defining a new culture may not solve the purpose. It should not be taken for granted. It must become a business process that is rigorous, structured, and accountable. Try not to hold onto the old values of each respective company, but rather unify all constituencies around something new, fresh, and exciting for the future. Rewrite and socialize the new cultural manifesto and statements, and celebrate how it came together and how it will contribute to future success. Identify Senior leadership to take responsibility for the communications plan and be front and center and own it. Communication is not a task that can be delegated to lower-level functional people. There should be a systemic, sequential, tactical communications plan with a set timeline for full integration and measurement to gauge the buy-in. Communicate regularly and frequently using all new technological innovations and techniques such as social media, online platforms, gamification, and web-based employee forums. Attempt to brand the cultural communications platform with logo lockups and icons.

What Do Successful Integration Leaders Do Differently?

1. Inspire

Successful integration leaders motivate others while asserting themselves in their leadership roles. Integrations are tough, tiring, and often tedious. Being able to provide a clear pathway while continuing to motivate teams to work hard, often on top of “day jobs,” enables leaders to achieve a diverse set of integration goals on predetermined timelines.

2. Crisis Handlers

With integrations, the unexpected happens. Being able to react to crises when they arise and be decisive about how to handle them enables integration leaders to stay on course when the inevitable occurs. Providing the necessary leadership to work through the situation and get the integration back on track is a key skill set of successful integration leaders.

3. Change Agents

Integrations are synonymous with change — no matter the integration strategy. Successful integration leaders seek out change and recognize that doing things differently is often a key reason for the deal itself. Proactively embracing change (versus shying away from it) enables the leader to get things done differently than in legacy organizations. In fact, successful change agents bring an impatience to getting changes executed and provide the energy to make the changes happen.

4. Growth Seekers

Successful integration leaders possess an innate drive to achieve, which helps to sustain them and others over the long haul. They also need to inspire growth in others by challenging old approaches that some may seek to maintain. Knowing when and how to challenge and prod others to get out of their comfort zones is a key success factor.


M&As are considered important change agents and are a critical component of any business strategy. The known fact is that with businesses evolving, only the most innovative and nimble can survive. That is why it is an important strategic call for a business to opt for any arrangements of M&A. Once through the process, on a lighter note, M&A is like an arranged marriage. Partners will take time to understand, mingle, but will end up giving positive results most of the time.

Adidas & Reebok

Adidas-Reebok is one such merger where both the companies managed to create a portfolio of new offerings while keeping their individuality intact. Sales revenue increased by 52% in 2006, representing the highest organic growth of the Adidas group within the last eight years. It was the first time in the group’s history that it crossed the benchmark of EUR 10 billion. Proper communication, clear strategies, and effective implementation did the job.

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Gauri Kacherikar, Executive Contributor Brainz Magazine

Gauri Kacherikar is a global business leader and has extensive experience working with the Nordics. She comes with unique capabilities and has led businesses across diverse sectors, including Public and Healthcare, Financial Services. She believes her learnings from the Stockholm School of Economics have contributed to her futuristic approach and thought leadership.

As a Coach, she brings an uncanny ability to nurture, coach people to achieve their goals, and advance their career paths. Her mission is to empower women to grow as successful entrepreneurs/corporate executives. Her signature program, "MidLife Energizer," has helped women transform their lives and dreams to find their purpose. "Build Your Executive Presence" is another program that has assisted women in their career trajectories. She has been recognized by the Swedish Royal Family for her gender equality initiatives and is a winner of the Sandvik India Diversity Awards.



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