What are “mergers” and “acquisitions?”
A merger occurs when two companies voluntarily agree to amalgamate into one new organization. These companies tend to be approximately the same size and boast an equal number of customers.
An acquisition involves one company purchasing all or the majority of the shares in another company in order to take control of it. “Acquisition” generally refers to an amicable transaction, while the term “takeover” refers to a more hostile acquisition without the target company’s consent.
In Canada, the Competition Bureau has authority over all mergers, enabling them to review a merger and decide if it can go through or not. This is done to negate a loss of competition that harms consumers.
Read more: An introduction to mergers and acquisitions
Why do mergers and acquisitions take place?
Peruse your neighbourhood grocery shelves, and you’ll encounter several merger and acquisition examples. Many Canadians vividly remember when Tim Hortons and Burger King merged. Kraft Foods and H.J. Heinz are now Kraft Heinz. And who can forget the unification of Shoppers Drug Mart and Loblaw?
Why do companies decide to merge with or acquire other organizations? In the current competitive market, there are many reasons for two companies to join forces and become one. Some of the most common reasons for mergers and acquisitions include:
Entering a new market
Is your business looking to become bi-coastal? Perhaps you wish to do business on a new continent? A merger or acquisition could pave the way to conquering new markets. For example, if you sell gas in Ontario, the fastest route to expanding west may be to join forces with a prairie-based fuel company. This same principle can be applied to entering a foreign market as well.
Staying ahead of competitors
When two companies become one, the result is one less competitor in the marketplace. This leads to an increased market share for the newly formed entity. However, this decrease in competition could capture the Competition Bureau‘s eye, causing them to question if your merger will negatively impact the price, quality or selection of products available to the consumer.
Lowering Costs
One large company can operate more cost-effectively than two halves. Thanks to greater buying power, raw goods become more affordable. With one less major competitor fighting for market share, advertising costs decrease. Furthermore, by eliminating the duplication of roles, payroll expenses are also lowered.
All of these savings can enable your organization to achieve “economies of scale.” This is when a company is able to reduce its cost-per-unit through both lowering expenses and increasing output.
Acquiring new technology
Building a state-of-the-art facility or retrofitting an existing one with new technology can be a costly endeavour. Sometimes, it makes more fiscal sense to simply buy another organization that has exactly what you need. Perhaps this coveted technology is a product. Why invest time, money and human resources into developing your own version of a product when you can acquire the company that already has it? Mergers and acquisitions can often take place over something as seemingly simple as technology.
How do mergers and acquisitions impact employees?
In order for your organization to thrive following a merger or acquisition, it is imperative that you understand how this restructuring will affect your workforce. This knowledge will equip you to formulate ways to pre-empt possible pitfalls and focus on the benefits. Here is a look at the positive and negative effects of mergers and acquisitions on employees:
Positive effects
- Career advancement. When a company’s size dramatically increases, new departments and positions often form. This can equate to an increase in management or supervisory roles. If new products or services have been introduced as a result of a merger or acquisition, employees may also be presented with the opportunity to embrace exciting new career paths.
- Development of new skills. With an influx of new career paths, employees may be presented with the chance to develop new skill sets. This could take the form of learning new systems, embarking on management training, understanding new products or services, or simply mastering new tasks that are now part of the job. Navigating a merger or acquisition in itself can also elevate soft skills like collaboration, adaptability, creative thinking and communication.
- Increased employer resilience. When two companies unite forces, this typically results in a single entity that is better positioned to compete and survive in the marketplace. This can result in greater job security for those whose employer was previously struggling.
Negative effects
- Job loss. The most obvious downside to a merger or acquisition is the thing employees fear most — job loss. Overlapping roles and redundancies can lead to a decrease in your workforce. Even those who retain their positions will be disheartened to see colleagues and friends lose their jobs, resulting in substantially lower morale.
- Change overload. Your workforce may become overwhelmed by the large number of changes they must navigate. Not only has your organization restructured, but their position has likely undergone significant changes as well. Gone is the status quo. This can leave employees feeling fearful, insecure and exhausted.
- Corporate culture clashes. Every company has its own corporate culture. Attempting to merge two individual company cultures can be tricky, especially if they differ greatly. If your team has worked together for a long time, they also have a shared history. By introducing new people, former social norms and routines no longer apply.
- Lower morale. The above-noted negative effects can all contribute to a substantial decrease in company morale and a growing sense of disillusionment. This can quickly spread through your organization, leading to a deeply fractured team.
How can you help your team navigate these changes?
You can equip your team to successfully navigate a merger or acquisition, fostering a stronger and more competitive organization. Here are some steps you can take to better ensure a smooth transition:
Communicate
It is important to stop the rumour mill in its tracks, and the best way to do this is to provide as much information as you can as soon as possible. Make yourself available to address your team’s concerns. You may even wish to hold “Question and Answer” sessions to give employees the chance to pose frank queries. By providing honest and timely responses, you can alleviate fears, dispel untruths and better sustain company morale.
Keep these lines of communication open throughout the transition. Not only do your team members have valuable insight into the practical elements of merging roles, but by including them in the decision-making process, you can allay their fears and make them more comfortable with this transition. It is important, however, to touch base with them after the companies have merged to measure their job satisfaction and identify ways to improve upon changes.
Read more: How to improve your workplace communication skills
Stay positive
Your team will be watching organizational leaders closely to gauge their reaction to the upcoming merger or acquisition. As such, it is imperative that you maintain a positive state of mind. Present the other company in a positive light, highlighting favourable aspects of their brand and products. Illustrate the benefits of these two organizations uniting forces. By focusing on the positives, you can make your team feel much more comfortable with this transition.
Merge company cultures
It is important that one company’s culture does not erase another’s. If the two cultures are very different, it is best to reach a compromise by blending aspects of each to create a new culture. For instance, if one culture is denim-and-tees casual and the other is more suit-and-tie formal, you may wish to introduce a business-casual dress code. Keep your team involved in the process of creating this new culture. It may also prove helpful to engage in team-building activities to boost employee morale and engagement. A company picnic or a similar social event can unite workers from both organizations.
Read more: Organization culture: importance and types
Identify commonalities
When two companies become one, workers tend to focus on how each entity differs rather than what they have in common. Be sure to highlight the values that both organizations share. By establishing this common ground, employees will be more likely to collaborate with one another and work toward shared goals. This could prove a valuable first step in uniting your team and keeping employee morale high.
Undergoing a merger or acquisition is no easy feat, but you can successfully guide your team through this organizational transformation. It’s all about open communication, maintaining a positive attitude and finding common ground.
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