Managing Relationships During a Merger or Acquisition

Posted on 10.24.17

Managing Relationships During a Merger or Acquisition

By Amy R. Menefee, CPA, CFE, Business Assurance & Advisory Services Senior Manager | Mergers & Acquisitions Team

Being merged or acquired is a big step for a business.  In order for the company to be ready for this type of transaction, there is typically years of preparation.  Most of that preparation has probably been focused on tangible aspects of the event, like financial data, proposals, agreements, and due diligence.  But what about the people aspects of a merger?  Oftentimes, this is put on the back burner until all the negotiations and legal aspects to completing the transaction are finalized.  However, the relationships are some of the most important aspects of the business and can sink or swim the future of the company.  Both internal relationships with executives and employees, and business partner relationships are crucial to success.  This article focuses on relationships with executives and employees.

The first step, which generally starts during the due diligence process, is to identify key executives and employees and start piecing together which executives and employees should be retained for the new combined company. At this point it is important to begin to build relationships with these key executives and employees.


EXECUTIVES

Relationships with executives start during the due diligence process.  It is important during this time, prior to the transaction closing, to have some face to face meetings with the new executives and to be as transparent as possible. 

Post acquisition, it is important to keep that transparency and set expectations.  Because you are dealing with a new combined company, building a new strategic plan is important in order to get everyone on the same page and to be clear about the common goals.  In addition, it is likely that processes will be changing to keep the best of both companies.  Make a clear path for what is expected going forward and when updates are expected and reports are due, and make a schedule to check in via conference calls and/or meetings.

EMPLOYEES

The most challenging and important part of keeping strong employee relationships in the pre-acquisition period is knowing when and what to communicate.  After all, nothing is a done deal at this point, so any communication has some speculation involved.  Providing information that is a “guess” may make employees uneasy and lead to perceived broken promises later.  Therefore, it is best to communicate only when necessary and give only the relevant information. 

Post acquisition, communicate changes and developments as quickly as possible and try to see the situation from the employee perspective so that you are able to anticipate and answer questions effectively.  Some personal employee concerns may include changes in benefits, working space, and job security.  Some job specific employee concerns may include combining information technology systems, whether benefit plans will be combined and new operating processes and procedures.  If you are able to answer questions regarding these concerns in detail, it helps to avoid confusion and prevents employees from leaving because they feel their job is in danger. 

Make employees strategic partners.  Merge the employees from both companies together as quickly as possible.  Discuss the strengths of each company and how the employees will benefit from having additional resources and expertise.  Evaluate employees from both companies in a fair and equitable way, so that if staff reduction needs to occur, it is done effectively, keeping the best people from both companies.  Give the employees from both companies time to adjust and realize that people may be less productive than normal for a short time until they work through the challenges the merger creates, and expect that you will lose some good people who are not comfortable with the new structure.

Combining two companies is challenging but it is important to keep in mind the people aspect of the transaction.  The best way to safeguard employee morale is to keep employees informed with accurate information and make them feel like an important part of the team. 

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The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.

Posted by: Amy R. Menefee, CPA, CFE

Amy is a member of Keiter's Not-for Profit, Manufacturing, Distribution & Retail, and Mergers & Acquisitions teams. She serves clients in a variety of industries including: not-for-profit, manufacturing, distribution and retail, insurance, and waste management. Amy has extensive knowledge in areas of finance including financial review and analysis, the audit process, financial reporting, and Sarbanes-Oxley set-up and testing.  Read more of Amy’s insights on our blog.