Many times mega-corporate acquisitions and mergers have a tremendous impact on how the media portrays such operations. Traditionally, headlines focus on how, according to Wall Street, finances will be improved, paying special attention to appreciations, services and possible growth rates and returns. Suzzanne Uhland has covered this part thoroughly in previous articles; however, many other authors seem to forget about the human factor when addressing this topic—which is always involved within these operations. What about possible decreased productivity and overall low morale? Such question ought not to be disregarded, given that both things are somewhat of a byproduct of both mergers and acquisitions. Many of these corporate operations fail simply because executives lack experience, and often attempt to put together two different corporate cultures and ecosystems. What about the impact on employees who end up losing their jobs? Or the ones left behind after announcing future layoffs? Moreover, what about the more than likely increased workload? How can survivors cope with such drastic change and perform well enough when the juncture is no less than uncertain?
The aforementioned aspects can be always found in both mergers and acquisitions. The media, however, never pays attention to it. Remember the time when Procter and Gamble acquired Gillette? Nearly 6,000 individuals lost their jobs, and such thing was rarely headline material. But why does this happen, given that many things are at stake for both companies and their employees? The reason is actually quite simple: today’s business community, as its predecessor, solely focuses on costs. They, in fact, seem to be fond of the idea that companies have the right to cut workers and save money while at it. Besides, it seems to also be difficult for companies to ponder the associated costs of laying off employees, facing low morale and subsequent chaos. All these things actually appear when announcing mergers and acquisitions, and all issues come from restructuring. Since the investment community does not pay attention to these costs and are not willing to measure them, they simply overlook the fallout—and that, as mentioned above, accounts for the vast majority of cases where mergers and acquisitions rarely work.
Additionally, large corporations often overlook the effects of layoffs on much smaller communities, as they do not pay a vital role in today’s fast-paced economy. Corporations used to pay attention to local and smaller economies, but changes in corporate governance focus primarily on the benefit for their shareholders. When it comes to the simple well-being of the people who have spent even decades working for one side, they simply do not care enough, or not at all.
Nevertheless, they—corporations—actually should. Mergers and acquisitions often bring along layoffs, which can definitely be a devastating and dramatic experience at many levels, especially of psychological and physical nature, for those who result losing their jobs.
People, whenever they are fired, often experience several symptoms such as increased stress and can get sick more easily. Studies have shown that even rehiring employees is worse than simply sending out a warning notice.
Aside from the aforementioned consequences, another aspect that often goes unnoticed is the possible and potential loss of corporate knowledge when employees are laid off. At first sight, both mergers and acquisitions seem as the perfect opportunity to increase their capabilities and their knowledge, but since they have to decide between two individuals—as this operation results in having two employees for the same position—, the risk of losing talent is quite high. And the process, as stated, is far from being pleasant. Some corporations have managed to reduce the risk associated with this issue by carrying out rather small acquisitions; however, when it comes to merging much larger companies, the result is somewhat unavoidable.
Institutional knowledge can be interpreted in two possible ways: one refers to the idea of both knowledge and skills of the information that results relevant for corporations; whereas the other one refers to the intrinsic knowledge of how things are done and carried out within a specific business. Oftentimes, both natures change after mergers and acquisitions. Aside from coping with the consequences of laying talent off, sometimes the new company needs to cope with the incapability of survivors to adapt to a new corporate juncture and ecosystem. Both are huge barriers companies do not factor when considering this approach to gain more market share and expand their businesses in a specific region; it even results problematic to maintain a competitive advantage if surviving employees are not capable of performing under new regulations, thusly making mergers and acquisitions a rather unwise decisions if the idea is to overpace competitors. Be that as it may, all of these aforementioned aspects ought to be considered when pondering whether or not acquiring a new company or merging two together is the most adequate choice.
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