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Advice Line | Bob Lewis » Can this merger succeed?

March 19, 2007 | Comments: (0)

Can this merger succeed?



Dear Bob ...

My company recently merged with another company. By all accounts, it seems to be a good fit. There seems to be little overlap in products between the 2 companies.

I've heard many people say that they've seen good and bad mergers. My question for you is what are the qualities of good and bad mergers, so I can keep an eye out.

So far it's been good. There has been good communication from the executives. But a lot of the things the employees want to know about, they can't tell us yet.

Thanks,

- Merged

Dear Merged ...

Assuming we're talking about a "real" merger, where the two companies plan to combine as much of their operations as possible and not simple have common ownership, I think there are just a few things to look out for:

  • Cultural compatibility: This is the biggest barrier to successful mergers. If the two companies have radically different styles, the chance of succeeding at combined operations is low. Overcoming radically different cultures requires very strong leadership.
  • Avoiding the perception that one of the two merging companies is the winner: Usually, the employees in the two companies that are merging will feel a sense of rivalry with each other. To combat this, the leaders of the combined companies must make decisions that are very clearly in the best interests of the new, merged company and not merely the preference of whichever of the two ends up with more clout in the combined operation.
  • Quick establishment of the new organization's identity: It's hard for employees to let go of their loyalties to their old employers. Unless the leaders of the new company establish a strong identity ... yes, and brand ... for the new corporation for employees to latch onto, they'll spend too much time and energy being unhappy about what they are leaving behind.
  • A sense of opportunity: Closely tied to creating strong identity for the new company is creating the sense among employees that this gives each of them more personal opportunity than they had before.
I'm sure there's more, of course. But if the above seems to be the case, then the merger has a very good chance of succeeding (at least, it would seem to based on what I know about the subject).

- Bob

Posted by Bob Lewis on March 19, 2007 08:35 AM


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My (as well as my peers') experience in mergers have never followed the path Dr. Bob described. Can't quibble with the answer, per se -- you asked for chances of an optimistic outcome, and the good doc provided an optimistic answer.

Problem is, despite companies' best intentions in a merger, culture is a very strong force which will not change quickly or easily. And that natural tension will cause a period of uncertainty and difficulty in the organization -- if you can weather that, there often is opportunity.

I think the two misstatements in the advice (IMHO) are that there's such a thing as a merger of equals and that a merged company can create an identity/culture.

There's never a merger of equals -- that's a diplomatic euphemism. There's always an acquirer and acquiree. Can't figure out who's in each role? Peruse the post-merger org chart and gague where the key decision makers came from.

Second, when two companies with existing cultures merge, an organization cannot simply create an identity or culture. Companies will sincerely try to do that, but will fail. The reason is that the longer employees are with a company, the deeper that company's culture is ingrained. The deeeper its ingrained, the more resistance to change there will be.

Usually, a new culture will *evolve.* This involves a few things -- many employees leave post-merger, and are replaced with people who don't have a history with the prior culture and are more adaptable to a new culture. And the two pre-merger corporate cultures eventually blend into a hybrid culture. The one exception is where there's a very clear distinction between acquirer and acquiree -- the acquirer's culture will be the culture.

Not trying to be the rain on the parade, but rather, if you see what I've described happening -- accept it for what it is. Its usually a natural cycle in mergers and not necessarily merger mismanagement. And if you follow Dr. Bob's mantra of "I don't have problems, I don't cause problems, I can help solve your problems," have an open mind and willingness to help out, you will very likely find many opportunities within the new company.


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