Date Added: April 2006
On many occasions, due diligence is not completed to the extent it should be - especially related to people and organizational culture. With acquisitions at an all-time high, careful selection is even more important because there is no such thing as a sure thing when acquiring a company. Small errors or quick decisions can lead to a poor strategic fit or overpayment, resulting in a failure to meet acquisition business objectives.
If the integration is intended to be a complete alignment of two companies, another issue that may arise is when the two corporate cultures interact, and the acquiring culture and behaviors are not integrated soon after the acquisition. Allowing an acquired company to "stand alone" after an acquisition makes it difficult to fully integrate and achieve cost efficiencies. Waiting may force an extreme overhaul in the strategy and people, which will prove costly and inefficient. Immediate integration will put the new company and its employees at ease. Your corporate culture must be enforced early and reinforced continuously. Newly acquired employees face much uncertainty after being acquired. It is very important to listen to the Voice of the Employee during these times of change.
Regarding value destruction, those without comprehensive due diligence and integration processes, can result in lost market share, lost productivity, lost margins, increased labor costs, downsizing, stakeholder defections, lost customers, unwanted turnover and low employee morale. Oftentimes, due diligence focuses only on the financials and overlooks the lack of employee talent bench-strength necessary to lead integration efforts.
How do companies really know that an acquisition is right for them? They must be sure that customer relations will not change and there is no noticeable change in the products or brands (assuming things are running well), which may lead customers to believe something is different. In fact, customers expect more value for their dollar after acquisitions. Negative customer reactions impact the workforce. Some employees act with distrust and anger towards management, feel uncertain with their job security and may fear a loss of personal influence or lack of career opportunity.1
After being acquired, employees experience a feeling of heightened insecurity, leading to isolation and thoughts of "What about me?" The success of an integration depends on employees' state of mind. If "What about me?" lingers in the minds of employees, productivity likely will stall, along with integration efforts. When employees begin to feel a part of the "new" organization, a powerful identity has been forged. People have an inherent need to belong, and if an integration is done well, they will feel part of something even larger. This is why it is very important to acquire the "right" companies, which fit your culture.
1 Andrews, Jim. "Worker's Identity Issues Influence the Success of Integration Efforts in Mergers and Acquisitions." SHRM Information Center (2005).