FREE ESSAY ON DESCRIPTION OF MERGERS

DESCRIPTION OF MERGERS

Company mergers and the effect on employees and consumers.
Context:
? Employees
? Management
? Consumers
Direction:
? On-line research (On-line Magazines, News Groups)
? Human Resources
Why the topic is important:
? Mergers have affected our group, and it is a growing trend in the American businesses
today.
Relevant Terms:
Merger
A merger is achieved when a company purchases the property of another firm, thus
absorbing them into one corporate structure that retains its original identity.
Consumer
Consumers are everyday people who buy goods for personal use. Consumers have the right to
question object and boycott companies who are not in their best interest.
Culture 
Company culture is the DNA of an organization, not always visible, but it controls the
form and function of such elements as decision making, communication style, reward and
recognition methods, reporting hierarchies and leadership values.
A lot has been written about the financial aspects of merging companies. Less attention
has been focused on the human element. More and more firms risk similar fates as the
nation continues to experience a boom in mergers and acquisitions. Last year there were
11,655 domestic mergers and or acquisition deals for a staggering $1.6 trillion,
according to Securities Data Company, a research organization in Newark, NJ The number of
deals has more than doubled since 1990, when 5,654 transactions were reported. 
In most merger and acquisition cases, the parties involved follow a well-established
mating ritual called due diligence, which allows them to explore the merits of the
marriage. Behind the scenes, lawyers, accountants and high-priced financial analysts join
with top executives to make sure the move is strategically and financially smart. 
Although predicted synergy's point to handsome profits down the road, when the earnings
reports start rolling in, the outcomes are often disappointing. Seven out of ten mergers
and acquisitions do not live up to their financial promise. Forty seven percent of the
acquired executives leave in the first year; and seventy five percent leave in the first
three years, according to Mark Herndon, regional service leader, mergers and
acquisitions, at Watson Wyatt Worldwide in Dallas. 
The major cause of failure may have nothing to do with the financial or legal details
that have been so carefully ironed out between accountants and lawyers. "People think
that if you do the financial deal, the soft and squishy stuff will fall into place," says
Tom Davenport, a partner at Towers Perrin in San Francisco. "Not true. It's the soft and
squishy stuff that will make or break the deal."
After understanding the steps for a merger, the major considerations associated with a
firm's culture are the chemistry or compatibility of the individuals and do they share a
common philosophy of how to do business. Stating the common goals for two or more diverse
groups is a lot easier than achieving those goals. Cultural goals such as quality client
service and teamwork are generally common to most firms, but how they achieve those goals
may differ dramatically. 
To determine if potential mergers complement one another and if a common operating
culture exists a these questions must be addressed:
? How do partners show their commitment to quality client service? 
? Are there major differences in the compensation systems of the respective firms, as to
partners' earnings and staff salaries? 
? What are the work ethics prevailing in each of the firms? 
? What are the competencies of personnel? Are they comparable? 
? Do the available technical resources in each firm complement one another? 
? What is the turnover rate for staff and administrative personnel? 
? Have there been partner departures, voluntary or involuntary? 
? Are there any client specialties or special services? 
? How comparable are the average total hours worked, as well as chargeable and billable
for like personnel categories? 
? How does the investment in computers, office equipment, and other office facilities
compare? 
? What direction is the marketing effort taking, how much is being spent, and are there
any benchmarks? 
Is a merger still a merger when the respective sizes of the firms are ninety percent and
ten percent? Is it just an acquisition, where the ten percent should quietly accept the
culture of the ninety percent? 
Whether you call it a merger or an acquisition, each firm has its own culture, and the
smaller entity, if substantially different from the one around it, will continue to
survive as a discordant subculture, unless an effort is made to integrate all the
players. Frequent mergers leave little opportunity for establishing a value-added firm
culture. The surviving firm's culture is absorption, which sooner or later like
overeating will probably be self-destructive. 
If we truly believe that people are our most important asset we need to treat them that
way. A merger or an acquisition gives us an opportunity to do well by our people by being
honest with them, keeping them in the loop, and giving them all the information we can as
early as we can. 
Get people in both the merging company and the company being absorbed together as early
as possible. Discuss the issues that were the perceived potential benefits behind the
merger openly and frankly. If Company A's strength is sales and they are absorbing
Company B in part because of B's distribution capabilities, make sure A's distribution
people know to listen to B's distribution people and B's sales force understands the
opportunity to learn from A. 
You probably need to reduce the number of people. Cost savings through combining
redundant tasks is a common goal for mergers. The trick is to release the individuals
least equipped to contribute in the new organization and to hold on to the best people.
Make sure the evaluation of "best" looks at both companies' people equally. After all,
you don't want to lose a great person from Company B so you can keep a mediocre person
from Company A. 
Be honest with people. We all appreciate frankness. We may not like to find out that our
job is going away, but we would much rather hear it up front than to find out when we get
our two weeks notice from someone who has been telling us all along our job is "safe". 
Merging two companies with their different policies, procedures, and culture will create
stress for all the people involved. The survivors from both companies will have to deal
with new people, new procedures, possibly more work, and the loss of previous coworkers
and friends. 
Be realistic in your work flow planning. Plan for people to be less productive than
normal as they deal with the changes. Expect to lose some good people who are not
comfortable with the new organization. Give yourself and your department time to work
through the changes and get back up to full speed.