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The Acquisition Blues

December 12, 2011, 06:40 AM
Topic: Careers

I’ve recently worked my way through two company acquisitions. The first:  my husband’s company (I’ll call it “Company X”) was acquired. The second:  I consulted for a small company acquiring another local, small company. Obviously I don’t know first-hand Company X’s thought process, but they claimed they wanted all decisions to be transparent – they didn’t want employees to be worried about their jobs or to be stressed – they ensured employees that they would be treated with the respect they deserved. The company I worked for felt the same way and, like Company X, declared so publically. Both handled the transition differently – both ended up with the same outcome:  major stress among the employees and employees leaving. Is it possible to acquire another company without ostracizing the employees?

Company X finalized the acquisition and announced that they would be carefully reviewing the processes of all departments to determine if, how and when any changes would be made. Consultants were deployed, employees were asked to prepare reports and make presentations, management meetings were held and held again. In the interim they held a few “town hall’ meetings where employees were given updates on the merger of the two companies and were given the opportunity to ask questions. Frequently there were no answers immediately available because decisions had not yet been made. Meanwhile, on the employee side, lots of anxiety started brewing stoked by coffee pot meetings and one-on-one meetings where stresses, rumors and concerns were voiced. The internal employee “open jobs grapevine” reached Indy 500 speeds. Employees started leaving at an alarming rate, including my husband who left a good 5-months after the acquisition announcement, at which time no determinations had been announced regarding changes or layoffs. A year later Company X has done some reorganizing of the acquired company, employees are still leaving and word on the street is that the atmosphere has become "toxic”.

The company that I consulted for took a different approach. Negotiations were kept totally secret until one week prior to the public announcement when only top management of both companies were informed at a two day offsite meeting. By that time, the negotiations team (consisting of the CEO/President and the CFO’s of both companies) had already drafted a model of what the merged company should look like. This two day offsite meeting was to confirm their thoughts and/or to make changes.
The President of the acquiring company told me that he wanted to ensure that employees were respected and that there was no undue stress put on them by the acquisition. To that end, he decided to make decisions regarding changes prior to the acquisition, and to announce and enact them at the same time the acquisition was announced. Future changes with an estimated timeline would also be announced. Until the day of these announcements, employees had no clue as to what was coming. The announcement was then made at an all-hands meeting. Employees were encouraged to ask questions.  Minutes after the meeting, layoffs ensued and those that would be affected by later changes were apprised of their status. Just like the acquisition described above, employee anxiety peaked, but this time immediately – no stoking required – it took off like a wildfire. It took several weeks, but employees started leaving. The exit interviews illustrated that employees felt the acquiring company did not understand the organization and processes of the company and had not taken the time to learn them, as exemplified by making changes so rapidly.

With these two examples in mind, and plenty of others that we have all heard about, are there lessons to be learned about handling acquisitions? Yes, not the least of which is that there will always be unhappy employees – no matter what you do. However, that does not mean that management shouldn’t take measures to control the emotional climate.  

When planning an acquisition, set-up a timetable: allow enough time for discovery (what organizational changes are required), but not so much that it allows for employees to feel disassociated with the new company or for panic to ensue. Likewise, don’t make changes so quickly that employees feel their responsibilities and allegiance are being disregarded. Though we don’t like to hear it, the business organization is not a democracy: management holds the responsibility for decisions and it is no different during an acquisition. So management: listen, digest, ask questions, then take the bull by the horns and make the decision. Don’t wait for buy-in from everybody around you because you won’t get it from everybody. Just make sure they are on-board with enacting your plans.  And always communicate, communicate, communicate to all employees. Make sure direct reports are communicating to your employees when you aren’t. But you must have something to communicate, therein lies the importance of timely decision making.

It is human nature to want to know where we are going, how we are going to get there and what we are going to do while there. Employees are no different: they like to have direction, they work better having an allegiance to that direction as well as knowing what is and will be expected of them. With this knowledge, employees can determine quickly if it is not the correct direction for them and if they should therefore make a change. Obviously there are many other aspects of an acquisition that can affect employee morale, but attention to these factors will help to pave the way – both for employees and employers.

Gni Grossman
Founder | GG Companies
Gni Grossman is a principal at GG Companies, a human resources consulting and executive recruiting firm. She started this company after over twenty years as a human resources generalist with corporations such as The Hay Group and De Lage Landen and 5 years focusing on recruiting for the equipment finance industry at Molloy Associates, Inc. Gni holds a Bachelor’s Degree from the Johns Hopkins University.

Readers may contact Gni Grossman at and/or contact Gni at 781-859-5157.

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