Corporate mergers are about more than numbers and market opportunities, which is why CEOs need to think about the long term fit of two corporate cultures as well as the financial and market aspects. Here are four bases to touch on the "people side" of merger and acquisition due diligence that CEOs should never overlook.
Employees become naturally fearful when mergers and acquisitions are rumored. Will the employees retain their jobs? Even if they do, will it be the kind of jobs that they are used to? They are all too aware that the executives exiting from their company, once it is acquired, will receive sweetened deals in the forms of settlements, a responsible position in the new organization, or a combination of both. But where are employees left?
In the not-for-profit credit union world, it is standard to retain employees for at least two years after a credit union merger. In some cases, these employees are "tried out" in the new organization — and if they do well, they are retained long term. The key here for both the acquiring and the acquired organizations is to know what exactly is going to happen to the employees on both sides of the merger — and to be transparent and tell them. I know of at least one merger that was so incredibly "stealth" that it took a major lawsuit and several extra years of employee and management maliciousness before the organization got through it.
Who is going to sit on the board after a merger or acquisition completes? Often, the acquired organization gets at least one seat on the acquiring company's board. For the CEO, this can be easier said than done. Do you alter your board organization to include more seats? How will the votes be distributed? Will all board positions be voting positions? Are incumbent board members replaced? Because of potential political fallout and a need to retain the highest caliber talent on the board, this should be a major political line item in any merger or acquisition evaluation.
3: Customers and other stakeholders
There are those outside of both companies who have been loyal customers and stakeholders for years. What is going to happen to them once the two companies merge? The CMO and CEO should be integrally involved in this area of strategy — because you could very well lose customers as a consequence of ineffective "advance messaging" to them on what is going to happen to services, products, retail outlets, etc.
Most organizations know how important it is to get IT in on early evaluations for potential mergers or acquisitions because different organizations invariably have different systems, and at some point, these systems must come together. However, it is equally important to pay the same amount of attention to daily operations. How similar are both business and IT governance standards (and work ethics) between the two organizations? Are operations in manufacturing, sales, and the back office sufficiently similar so that work processes do not have to be redefined and employees retrained?
The bottom line
Organizations considering mergers or acquisitions should have these "people centric" line items on their merger and acquisition checklists — but many do not. The political fallout from a corporate move like this can be major, which is why organizations that perform their due diligence with attention to people as well as to markets and numbers succeed most often.
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- The web side of acquisitions: Five questions you must address
- Avoid rocky vendor-client relations during M&As by planning for bumps in the road
Mary E. Shacklett is president of Transworld Data, a technology research and market development firm. Prior to founding the company, Mary was Senior Vice President of Marketing and Technology at TCCU, Inc., a financial services firm; Vice President of Product Research and Software Development for Summit Information Systems, a computer software company; and Vice President of Strategic Planning and Technology at FSI International, a multinational manufacturing company in the semiconductor industry. Mary is a keynote speaker and has more than 1,000 articles, research studies, and technology publications in print.