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PT Strategic Development for Managers |
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Improving Performance |
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In one of many
studies documenting failure to find synergies after merging, in
1987 a McKinsey team studied 116 mergers. They defined
success as returning the cost of capital of the acquisition within
three years.
Only 23 percent of the deals they reviewed were successful. |
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Mergers and acquisitions are a fact of life for many, especially those who work in large global companies. Although the newspapers are full of new merger announcements, most such deals do not succeed: the new organization is usually less profitable than the two independent companies.
Why do most mergers fail? Most commonly, a great deal of time and effort are expended on the financial engineering and capital structure of the firm, but comparatively little on making sure that employees from the two firms can work together. The result is often a lack of clear information, poor understanding of what the merger means for employees and often a climate of fear and uncertainty.
What can managers faced with a merger do? We suggest the following strategy:
 | Get the communication strategy fixed. Figure out what employees need to know, when they can be told and how. Brief all managers on the key messages behind the merger, and ensure that all managers, all the time, consistently promote these messages. |
| Plan carefully. Establish planning teams, one per functional area, and give them time and resources to develop complete, detailed plans for the merger. |
| If the new organization will have fewer employees than the sum of the current headcount, establish selection processes and termination packages. Consider the use of an outplacement specialist. |
| Once you can begin implementation, do it. At this stage, speed counts. |
| Provide a few opportunities for employees to get to know their new colleagues. Consider closing for a day and holding a company picnic, sports event, or family day. Provide opportunities at the workplace and outside the workplace for employees to interact. |
Our consultants have worked with several organizations in Indonesia, planning for integration and solving implementation problems. Email us if you are interested in discussing how we can work with you to make a merger less painful and more profitable.