Last Updated on December 15, 2022 by Anda Malescu
What is the Impact of mergers and acquisitions on employees?
During any merger and acquisition effort, the impact of mergers and acquisitions on employees and their morale can be significant irrespective of the location of the target company. Some of the challenges faced by employees include stress, frustration, fear of job loss and competitiveness. This is especially the case for employees that are not on the deal team and who have only limited amounts of information available to them regarding their roles in the post-closing organization.
In order to minimize the impact of mergers and acquisitions on employees and create sustainable value after the closing, it is important for both Buyer and Seller to strategize and implement a strong and effective plan in a lot of vital areas, especially with respect to the employees. A series of emotional and psychological factors must be considered, and strong leadership is needed to guide affected employees through the process. The success of a merger and acquisition deal is determined by how the parties deal with their employees before, during and after the transaction.
The Buyer and the Seller must understand and address the human fears, psychological issues and uncertainty facing employees on both sides of the transaction. In particular, the Seller should communicate to its employees about the transaction and offer clear and consisting information regarding the deal, even if some of the data shared involve bad news. Once word of the merger or acquisition gets out to the Seller’s employees, the uncertainty associated with change is likely to spread throughout the organization and lead to insecurity and fear of job loss at all levels of the company.
The Seller’s employees will inevitably start asking themselves what does the future hold for me? is my job on the chopping block? what would my role be in the new organization?
The employees’ constant concern with their future can affect the seller’ performance and result in a negative impact on productivity and the merger or acquisition transaction. Even more, the stress and fear of job loss may result in talented employees leaving the company to seek jobs elsewhere.
On the other hand, during due diligence, the Buyer should collect information about the talent and culture of the Seller and assess the employee benefit plans and liabilities, compensation programs, employment contracts and policies, and others. For the Buyer, the personnel evaluation provides insight into the value and general state of the workforce and can help the Buyer devise an effective plan to reduce the number of disgruntled employees and other expensive surprises.
Open communication with employees on the side of the Seller combined with thorough assessment of the workforce on the side of the Buyer can reduce the culture clash between the two groups of employees involved and help deter employees from leaving the company. With efforts from both parties involved, the two groups of employees will get to know each other and enjoy new opportunities. Of course, it is important for management to recognize this and provide new opportunities for employees to get to know each other, to openly address concerns and to work together toward building a new culture aligned with the new company.
Contact us or schedule a consultation with your business attorney in Miami, Florida USA, to help you execute a plan that addresses the impact of a merger and acquisition transaction on employees.
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