In recent years, the announcements of mergers between huge companies have become commonplace. However, not every merger was a good choice. Others could have been a good idea, in theory, however, the actual process of merging the two companies into one cohesive unit was bungled completely. If you are considering a merger, there is a lot of risk to the process you should be aware of.
Do You Want a Merger for the Right Reason?
A merger is not something every company must do. In some cases, not taking on a merger may be the right choice. There is a large possibility of error in regards to the long arduous process of merging two companies into one entity. You need to be sure you want to pursue a merger for the right reasons. For example, your company may be successful on the East Coast and the South. However, you may have no market share when it comes to the West and the Midwest.
Merging with a company that does have that kind of market share in those regions can help you create a company with a national reach. This would also be the case if you want to merge with a company to enter a completely new product category. Overall, you need a very strong rationale for the merger.
Is the Company You Want to Merge with a Good Fit?
Second, just because you have a good motive to merge does not necessarily mean merging with a specific company is a good idea. For one, the company in question may not be a good fit. Finding a company that does make the perfect candidate for such a merger is going to require a lot of research and strategic analysis. For example, the company you want to merge with may be in the same industry as you. However, they may actually have a large debt load.
Merging with that company, in that case, may be more effort than it’s worth if you don’t want to be paying off all that accumulated debt. In other cases, your current company may be superior to the other company in regards to product, processes, talent, facilities, etc. The benefits of a merger may then be questionable since there won’t be much to be gained from your perspective.
Do You Have the Technical Aspects of the Merger Covered?
Merging two companies can be an extremely technical process. You better be prepared to work with a team of lawyers, accountants, and consultants to ensure that the technical aspects of the merger are completed as smoothly as possible.
In certain cases, this may even require the assistance of IT professionals. You, for example, might require cloud migration services to merge the network infrastructures of both companies into a single unified platform. Such endeavors can require painstaking care. Don’t be afraid to go outside both companies to find the assistance you need if you feel you may be out of your area of expertise in regards to managing certain aspects of the merger.
Do You Have a Communication Plan in Place?
According to Harvard Business School, 70 to 90 percent of mergers and acquisitions fail. One of the key reasons behind such failures is the loss of talent from one or both companies. Typically, this happens due to a lack of communication.
The people who left, for example, may have been paranoid about the possibility of their positions being eliminated. However, with proper communication from ownership and management, they may have been more confidant that would not be the case. Attempts at proper communication must also be made to explain the merger to stockholders, business partners, and consumers. The failure of this communication can cause a lot of unneeded problems.
Overall, mergers are not easy. They require months upon months of research and hard work to pull off successfully. Be careful since a majority of such ventures actually end up failing. Make sure you are taking on the merger for the right reasons and that the company in question is a good fit for you. Make sure you have all bases covered in regards to all the technical aspects of the merger and try to communicate effectively with all the parties involved. Doing so will greatly increase your chances of success.
Lizzie Howard is a Colorado native who after graduating from the University of Colorado spends her time as a freelance writer. When Lizzie isn’t writing, she enjoys going on hikes, baking for her friends and family, and spending time with her beloved yellow lab, Sparky.
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