Mergers: Less Terrifying Than They Seem

Ortus Group has been assisting companies with mergers and acquisitions for almost two decades. And while mergers can seem unsettling – or even frightening – to those caught up on the inside, the team at Ortus believes that these events can be survived unscathed. More importantly, they needn’t be as traumatic as they often seem at face value.

What’s the impact on the employees when a merger occurs?
Whether you’re reading this as an employee or an owner who is involved in navigating a merger, emotions can run high and need to be mitigated. Employees will experience a kaleidoscope of mixed feelings that can range from doubt, anxiety, anger and more.

Besides the feelings, a merger can sometimes be like the marriage of two very different families. Think about the Montagues and the Capulets in Shakespeare’s “Romeo and Juliet”. These feuding families doomed the relationship between the famous play’s two protagonists, resulting in tragic consequences for everyone involved.

Inevitably, when a merger occurs, the culture will clash to varying degrees. Process challenges are bound to arise, systems will need to be integrated or thrown out and replaced entirely, which necessitates employees and owners alike needing to unlearn and relearn. Feuding may well occur, just as it did with the Montagues and Capulets. All of these issues create challenges to the ultimate success of mergers because of these types of culture clashes.

Although there is no magic formula to fix this, just imagine for a moment if Shakespeare’s famous families had talked things out for the sake of their star-crossed children. The play may have had a very different outcome. The same applies to mergers; communication is key.

Managing the shift in routine
Routine is an important component of most people’s lives. Most of us wake up and go through a daily ritual, even if we don’t do so consciously. For example, one rises with an alarm, scrolls through social media and news sites to see what’s happening with the world, has a cup of tea or coffee with breakfast, freshens up and goes to work.

Most office structures also thrive on routine. Employees arrive at a set, designated time, perform the same function, in the same way, every day, using established systems and reporting structures that have been put into place; and then they go home, only to return and repeat the next day.

When two business entities come together, at least some, if not all, of the status quo and established pattern is thrown into a temporary state of upheaval. New routines are established and new norms integrated. But before a new pattern can be adopted, it needs to be “practised” or at least repeated several times, until it becomes part of the muscle memory.

The way to get the muscle memory trained is to anticipate the change that’s likely to come and to be open minded to it. As an employee, try to accept that your comfort zone may no longer exist and that you’ll have to look for a new one, which may take some time. As an employer, communicate as much information to your staff as is available and legally permissible, to help them find their new “sweet spots” for routine – sooner, rather than later.

Facing insecurity
It’s the elephant in the room. When worlds collide – or two companies merge; uncertainty is a given. The power balance tips and it’s hard to know whose position may be under threat at most levels of the company. Management, though, is sometimes in a more precarious position, as redundancies often occur due to duplication of efforts. The end result may be an elimination of a job as paying two senior people, who are doing the same job, doesn’t make solid business sense and is simply not financially viable.

From a legal perspective, it’s important to know your rights. When a transfer of ownership occurs from one business to another, your terms of employment should also be transferred. The basic rules are laid out in the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). Without TUPE, new management could effectively just swoop in and dismiss anyone they wanted to. In the real world, though, TUPE means that new leadership must accept the same responsibility and liability as previous leadership.

Here’s an outline of what that means:

  • Anyone employed before the merger or transfer of ownership is automatically transferred to the new owner or buyer.
  • Employees have the right to protection against having their terms and conditions of employment changed after the transfer.
  • If any employee is dismissed following and as a result of the merger or acquisition, they (the employee) can claim unfair dismissal.
  • Both companies engaging in the merger or acquisition are legally obliged to inform and consult the affected employees or their proxies/representatives.

So, while insecurity is, in some cases, unlikely to disappear completely, there is a set of rules that grants protection to employees who often feel helpless during these events.

Talk about it
Silos are commonplace. Despite the fact that we live in the communication age, a discussion isn’t always easy. As an employee, before any legal recourse, tension or internal debate ensues as a result of a merger or buyout announcement, speak up to whomever the responsible person in your chain of command may be.

It’s become something of a cliché in corporate manifestos and motivational documents; “There’s no such thing as a stupid question”. When you feel like your job may be on the line, this applies more than ever. Your livelihood may be at stake so engage with your direct superior to allay any fears you might have.

Management is not off the hook either. It is the company leadership’s responsibility to constructively communicate with staff regarding any merger or buyout process that is underway or about to occur. Your communication strategy should be as important as your sales strategy. Surveys show that sub-par communication by employers can actually cost the company money – roughly £8,000 per employee a year in a medium-sized company, in fact.

Besides anything else, where there is uncertainty, morale is lower. And with decreased morale, employers can expect lower productivity. Peace of mind is the most valuable perk any employer can offer staff members. Sadly, many employers neglect to offer it.

Stay ahead of the pack
Ortus Group specialises in executive search, mergers and acquisitions in the legal, accountancy and wealth management markets. Our team can help guide you through what can be an incredibly fraught process, ensuring as smooth a transition as possible for all stakeholders on either side of the management divide. Whether you’re looking to buy or sell a business, or just need some expert advice about what changes you might expect and how this may affect your personal decision making, contact us to help you achieve the best value across the board.