Acquisitions are highly disruptive to both buyer and seller
Those who know a little about mergers and acquisition activity will warn you of the key employee losses and business disruption in the newly acquired firm as it progresses through the selling cycle. However, few think to remind you that similar losses can occur in the acquirer. Loss of key personnel and business disruption in your own business is something to watch out for if you are pursuing an acquisition activity.
Acquisitions are not your everyday transaction. They are very large in comparison to most revenue expenses and generally much larger even compared to large capital projects. Unlike building a new factory or shifting premises, they happen relatively quickly, consume large amounts of senior executive time and can result in significant changes to the acquired business. Where the acquisition involves significant intervention in the operations of the newly acquired business, the loss of senior management time to the newly acquired firm can go on for some time. If some parts of the businesses are merged, there will be significant disruption to both the selling and buying businesses during the integration period.
Senior management are at risk
The sudden departure of senior management for hours and days on end during the negotiation and due diligence period places a burden on their subordinates increasing their workload and working hours. When this is likely to go on for some time following the completion of the deal, some will resent the additional burden and become negative or even resign placing even further pressure on those left behind. The loss of senior management and the additional work for those under them can also result in a lack of attention to the existing business resulting in revenue disruption and a loss of customer and supplier goodwill.
If the acquisition involves some level of integration due to overlapping or duplicate functions, employees of the acquirer may start to wonder about their own jobs. The acquirer is caught between providing assurances to old employees while still wanting to retain the good ones being acquired. While all this is being resolved there is going to be some level of stress and uncertainty within the acquirer’s own staff. Some will find this difficult to deal with and will decide to leave for a more secure position instead of waiting to see what happens. Such departures further increase the levels of stress and uncertainty but also increase the workload for those remaining.
Those who are left bear the burden
If in fact some of the existing employees are made redundant during the merger process, surviving employees will be quickly assessing their own positions and watch carefully the process used to select and deal with departing staff. Any lack of consideration, fairness or equity in these processes will quickly alienate staff who will react negatively towards acquired staff and may decide to resign to seek other employment.
Any disruption within the acquiring business will translate directly to lowering productivity, disruption of customer and supplier relations and thus impact cash flow and profits. The bottom line - any acquisition strategy needs to deal with possible disruption at both the selling and buying business if it is to be successful.
