How to merge not clash

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Thanks to a buoyant economy, most workers will be looking forward to a particularly festive party season over the coming weeks. But for others, the approach of the new millennium brings with it the prospect of unemployment.

Companies of all sorts seem determined to mark the end of an era by merging with or taking over rivals. Hardly a day goes by without a rumour or announcement of some kind. And, with the desire to cut costs a driving force behind this trend, redundancies are inevitable.

Nor do these job losses always come at once. It has long been recognised that about half of deals fail to meet the objectives set out for them at the start. And when executives begin to realise they are slipping behind their targets, one of their first impulses is to seek to cut costs still further.

But why - despite the constant practice - do organisations apparently not improve in what is an increasingly crucial part of business life?

According to Richard Schoenberg, of the management school at London University's Imperial College, a large part of the problem can be put down to what is known as "culture clash". According to his recent study of 129 companies, the greater the difference in management styles between the two companies, the worse the subsequent performance was likely to be.

The research examined 129 companies three to five years after a merger or acquisition and measured performance against 15 criteria, such as growth in market share and increased access to new technologies, as well as traditional financial measures, such as profitability. The study focused on cross- border deals, but found that the "difficulties in the area of culture" that Dr Schoenberg talks about can apply to the corporate style as well as national attitudes.

He suggests that companies can go some way towards dealing with the national issues by, for example, recognising the "obvious symbolic significance" of ensuring there is equal representation of both nationalities among senior executives and putting in place the same employment conditions across the combined company.

But he also draws attention to the fact that management style has four main components - approach to decision-making, degree of formality, extent of participation and attitude towards risk. The research found that the last aspect was "the critical component" influencing future performance. Accordingly, companies planning acquisitions need to carry out due diligence in this area as well as the more traditional financial and general commercial checks.

The need to look at how companies are run as well as how they perform is also recognised by Michael Greenspan, a partner with the organisational development consultancy Kiddy & Partners, which as part of its role does just that. That way, he says, "you get an assessment of the people you're buying as well as the business you're buying".

Roffey Park, the management development and research institute based in West Sussex, has produced a guide for surviving mergers and acquisitions. Among the points covered in the booklet, designed to help line managers, human resources specialists and individual employees cope with what can be a troubling period, are handling rumours and speculation, identifying the skills and types of behaviour needed to thrive and spotting the symptoms of "merger clash".

For `The Roffey Park Mergers & Acquisitions Checklist' by Marion Devine (pounds 10), tel: 01293 854065; e-mail: pauline.hinds@roffey-park.co.uk

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