Even M&A experts like Larry Polhill know that almost half of all mergers and acquisitions “fail,” leaving the combined entity less well-off than before. There are many reasons that this happens, and while some of them might be beyond your control, other causes of failed M&As can be prevented with some planning and careful preparation before the transition. If you are thinking of participating in an M&A, here are some pitfalls to look out for.
Customer Service Gaps
Customers are the life’s blood of any business, and the first priority before, during and after any merger is to make sure that the transition is, from their point, as seamless as possible. Especially while the merger is being conducted, be sure that the customer service teams of both companies have a clear understanding of their respective responsibilities, and a plan of action to integrate potentially diverse corporate policies. Make sure that you are not forced to react to unforeseen complications by ensuring that the plan to support customers through and after the transition is well thought out and vetted by both teams to ensure that all of the contingencies are covered. And don’t forget to keep your customers or clients well-informed. Customers who hear about upcoming changes may have concerns about their orders, accounts or contracts. Be sure that you reach out early and often to keep your customers in the loop, and to assure them that their needs will be well-managed. If there are going to be changes to standard procedures, inventories or services offered, make sure that you let your customers know in a transparent manner – especially if prices will be increasing or services will be reduced.
Staff Problems
One of the trickiest aspects of a merger is involves staff. In most situations, even in “friendly” takeovers, it is the case that one company is perceived as the “winner” – this is an impression that can seep in negative ways into the attitudes of staff on both sides. Staff members from the “winning” company may bring with them a sense of entitlement, expecting, for example, to have senior positions compared to their counterparts in the other company. The “losing” staff may share this concern, and may also have to come to terms with changes to remuneration and benefits, to previously expected career paths, and to a general sense of having been beaten. And staff from both companies will have to make adjustments – a new corporate culture will inevitably rise out of the combination, and everyone will need to find their way in that new context. This can take time, and it certainly requires a conscious effort on the part of the new management team to ensure that a culture of inclusion and equal treatment is established right away. Ideally, this will begin before the merger is formally underway – otherwise, there is a risk that key personnel may leave, taking important institutional memory with them. Once this starts, morale and productivity can suffer. Make sure get ahead of this by listening to and addressing staff concerns.
There are a number of other pitfalls that can impact the success of a merger, but open lines of communication with customers and staff will go a long way towards helping to avoid some of the common causes of M&A failure.