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5 Common Merger Challenges and How to Navigate Through Them

It is no secret that any changes within a company structure as a result of a merger can be a hotbed for stress and speculation. While mergers can seem strenuous and daunting at face value, they don’t always need to be. 

Ortus Group has assisted firms with mergers and acquisitions for over two decades. In that time, the team found that the smoother merger transitions were possible as long as the management team were mindful of the five challenges and developed strategies to address them. 

BRACING FOR THE REACTION FROM THE EMPLOYEES 

Mergers can bring on a variety of mixed feelings within teams of the firms involved. Emotions ranging from doubt, anxiety and uncertainty can create a very virulent environment for the employees and management team. If left unchecked, it can severely hamper productivity and profitability.

While there is no magic bullet to completely avoid speculation and friction, it is possible to minimise its effects. The key to achieving this is through clear, cohesive and regular internal communications. Be prepared to communicate as much information to the teams as legally permissible and available. 

ADAPTING TO NEW ROUTINES, PROCESSES AND REPORTING STRUCTURES

Whether we are ready to admit it or not, businesses and employees thrive with the predictability that comes with routines, process and clear reporting structures. When two firms come together, the status quo and established patterns can be thrown into a state of flux. As expected, this can create some stifling circumstances when teams from both firms do not align during a merger. 

As leaders of the firm, it is important to maintain vigilance of the murmurs around the workplace as they present good opportunities to improve circumstances for the team. Being open and prepared to listen to employees can immensely benefit everyone in the long term as it can help build trust while paving the way for a more collaborative structure benefits everyone after the merger. 

BEING PREPARED FOR THE EMERGENCE OF INSECURITY 

When two firms merge, it is inevitable that some employees will find it challenging to find their place in the new arrangement. Perceived or not, employees are likely to become more aware of duplication in roles and responsibilities that may threaten their job security. This can be especially precarious for management roles where redundancies as a result of duplication in effort becomes more apparent and it is not viable to retain them in their existing roles. 

From a legal perspective, it is imperative to educate employees of their rights. Terms of employment should be transferred with the transfer of business ownership. The basic rules are articulated in the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). As a result, new leadership must accept the same responsibilities and liabilities of the previous leadership. 

What does TUPE entail:

  • Anyone employed before a merger or transfer of ownership is automatically transferred to the new business owner.
  • Employees have the right to protection against having their terms and conditions of employment changed after the transfer. 
  • If an employee is dismissed as a result of a merger or acquisition, they can claim unfair dismissal. 
  • Both companies in the merger are obliged to inform and consult affected employees or their representatives. 

TAPERING THE “US VS. THEM” MENTALITY

Team in firm collaborative meeting
When teams work in silos as a result of a merger, it can lead to an ‘Us vs. Them’ mentality that is not conducive in the long run.

Amidst the vortex of circumstances that come with a merger, one of the most challenging things to mitigate is the likelihood of teams working in silos. Between feeling a sense of scepticism of the merger, struggling to find their place and feeling insecure about their position, the affinity towards keeping to themselves and working in silos give them a sense of comfort in a situation where they feel they have little control. 

This can create a breeding ground for assumptions that can lead to an ‘us vs. them’ mentality that isn’t conducive in the long run. Before any legal recourse, further tension or internal debate ensues, it is important to encourage line managers to have open communication with their teams and encourage more opportunities for collaboration. 

KEEPING AN EYE ON ENGAGEMENT

It is the company leadership’s responsibility to constructively communicate with their employees on any mergers that are or about to take place. In fact, studies have indicated that sub-par communication from leaders can be unnecessarily costly. It is estimated that poor team communications and sub-par engagement  attributes to losses of approximately £8,000 per employee, per year in a medium-sized organisation. 

When employees do not feel that they are getting adequate transparency during this process, speculation will follow. Where there is uncertainty, morale and engagement will drop. As a result, it is evident that communication and clarity is an integral part of merger and change management. 

FINDING THE RIGHT EXPERTS TO HELP WITH MERGERS 

Ortus Group has more than 17 years of experience in the legal sector with mergers, acquisitions and executive search. The team is trained to provide systematic guidance in what can be a fraught process to ensure smooth transitions for all parties involved and has advised on more than 50 completed mergers.

For more information on how the team can help, please do not hesitate to reach out to us.


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