Mergers and acquisitions provide strategic growth opportunities for the emerging corporate entity; but they also increase the prospects of job losses.
About a decade ago, my former employer (a banking organization) was acquired by another banking organization. A few years after the acquisition, over 75% of the legacy employees from the acquired bank have been sacked, forced to resign or frustrated out of the new organization. Disengaging legacy employees appears common among corporate organizations engaged in mergers and acquisitions. For instance, among the over two dozen banks that survived the banking reforms in Nigeria, disengagement of legacy employees and unprecedented employee turnover have remained constant factors in their survival strategies. This article explores the reasons for the high rate of disengagement of legacy employees post-merger and acquisition.
Mergers and acquisitions are strategic growth opportunities
Organizations engage in mergers and acquisitions to grow their businesses, maximize resources, and to enhance competitiveness in the marketplace. Mergers and acquisitions may also help organizations to lower cost, enhance technological capacity and to develop a wider and more attractive product range. Corporate organizations may engage in mergers and acquisitions to widen their geographical spread or to seek opportunities in new markets. If properly managed, mergers and acquisitions present beneficial growth opportunities; but achieving these may come at a great cost, which includes job losses.
Mergers and acquisitions processes lead to job losses
In mergers, the overriding aim is to form a single corporate entity, stronger and better suited to withstand competitive challenges. Corporate mergers encompass a series of activities aimed at streamlining the operations of the new organization and strengthening its competences. It involves setting up a unified business structure to enable the organization to develop avenues to harness new market opportunities. Although a merger is basically a union of equals, the prospect of job losses is usually high. This is so because the post-merger processes described above may involve employee redundancies, disengagements, and outright layoffs.
Job losses post-acquisition is equally high. In an acquisition, a stronger company takes over the weaker one, including its structures and employees. Acquisition negotiations usually involve agreements which aim to reassure employees of acquired companies of the safety of their jobs. Despite these assurances, however, some acquiring partners prefer to disengage legacy employees for other reasons. Therefore, if your organization is a weaker partner in an acquisition arrangement, it stands a bigger risk of losing a lot more of its employees than the acquiring partner. I will explain in the ensuing paragraph why there are usually more job losses post-acquisition.
Reasons for high rate of job losses post-merger and acquisition
An unusual atmosphere of calm and trepidation usually permeates corporate environments post-merger or acquisition. Legacy employees struggle to adjust to new business environments, new lines of reporting, policies and managerial set up. Legacy employees also struggle to adjust to new forms of workplace relationships and organizational structure. They are usually very apprehensive about their job security and how the emerging policies of their new organization might shape their career future.
The fears exhibited by legacy employees about their career future are genuine. Acquiring partners normally believe and unwittingly act in manners that suggest that their own employees are better than employees from the acquired company. They also believe that their own employees are in a better position to understand and apply their policies for the good of the organization. Acquiring companies dread the cost of retraining employees from the other organizations and reorienting them to their culture and traditions. Sometimes, acquiring companies may keep legacy employees on terms and conditions that make it expedient for such employees to leave on their own.
How post-merger and acquisition behaviour of legacy employees put their jobs at risk.
As stated above, post-merger and acquisition arrangements involve a series of realignments and restructuring processes. These processes may lead to job losses. However, it is improper to situate the blame for job losses entirely on these processes or the management of acquiring organizations. The post-merger or acquisition behaviour of some legacy employees frequently put their jobs at risk. Such behaviour usually arise because of the clash of organizational cultures. The situation often described as ‘culture shock’ leaves many legacy employees disoriented, frustrated and disgruntled.
How culture shock impacts on legacy employees
Employees suffering from culture shock usually undergo physical and emotional discomfort. They often exhibit strange and uncompromising behaviour towards their new organizations. Some legacy employees, rather than establishing their competences and capabilities in their new organizations, sit back, brood over their situations, or complain. They complain about loss of their positions in their organizations. They compare every action of their new organizations with that of their former organizations. Indeed, some legacy employees expect their new organizations to recognize and reward them for past performances at their former companies.
Disgruntled employees are toxic to the culture and operations of every organization. If allowed, they may unwittingly become very resistant to change, thereby constituting themselves into cogs in the progress of their new organizations. Disgruntled employees exert negative influences on the rest of the workforce, and this is often a major concern to organizations. Thus, they would rather disengage such employees than have them create disaffection among other employees.
Mergers and acquisitions have become vital strategies for corporate growth and development. But here’s an unwritten message from these practices: If your company has been acquired or a weaker partner in a merger arrangement, your job may be on the line.
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