Challenges of mergers and acquisitions
For an SME, a merger can make very good business sense. The combined strength of two companies can provide rewards in terms of economies of scale, market share, a wider reach and improved productivity. A merger could help you get into different markets, allowing both companies to expand into different areas without the need to start from scratch and build up a client base.
However, although mergers and acquisitions can ultimately be good for business, they pose a lot of challenges that you will need to consider if you want to get it right. It could be quite beneficial to seek objective and practical advice from an expert.
However well you think a merger is going to work, you must always do your due diligence in advance to make sure your new partnership is based on strong business and financial foundations. This could involve a thorough audit and assurance check before any documentation is signed.
One of the main problems that can occur from two companies coming together is that you will have twice as many directors and managers! The combination of doubling the management team and bringing together their different leadership styles could result in a much slower decision-making process. The new leadership and decision-making structure needs to be clearly defined as uncertainty about who is responsible for what will end in chaos, and that is not good for business.
Possibly the greatest challenge to a successful merger is people. The changes will bring with them uncertainty and resistance that will need to be managed carefully. There could be a lot of problems caused by bringing two distinct company cultures together and many mergers and acquisitions have failed because of HR issues. It could well be that you lose key talent because of the uncertainty beforehand, or personality clashes once the merger is complete. To make the new business work, you must effectively manage the changes in order to get buy-in from staff in both companies.
Communication plays an absolutely key role in the success – or otherwise – of a merger. Change is unsettling for everyone concerned and, if you are not careful, will cause rumours to circulate that could cause a lot of trouble amongst your staff and clients, with the potential to sabotage the success of the merger. To avoid this happening and to allay people’s fears, you must keep everyone informed at all times, letting them know how changes will affect them.