by David Taylor

Created on: December 09, 2007

Mergers and acquisitions are a widespread phenomenon all over the world. Studies of mergers from an economic perspective, however, have shown that the outcomes are generally disappointing. Research illustrates that most mergers and acquisitions actually fail regardless of the method used to measure the success (e.g. shareholder value, profitability etc.).

So, we should consider what factors can make merger work:

1. Focus on Employees and Communication: Typically, the benefit of any merger - as touted by business leaders - comes down to synergies, largely from resultant reductions in the workforce. Considering, though, that mergers are primarily implemented by those employees being merged (and potentially laid off) illustrates the enormous challenge management has in delivering on their promises.

"A merger is a significant event for both the organization and its employees and implies a long-term process of change and integration (Cartwright & Cooper, 1990, 1996). It is, however, relatively recently that research attention has turned to the contribution that psychology can make to a better understanding of the merger phenomenon. Employee problems' have been estimated to be responsible for one-third to one-half of all merger failures (Davy et al., 1988)."(1)

However, only relatively recently has the employee aspect of mergers been given attention in practice or literature. More recent research now focuses on the psychological and behavioral aspect of mergers and acquisitions, because these activities necessarily involve considerable organizational change from integrating the organization's functions.

To make the merger work (despite the tendency for managers to become distracted by the details of the acquisition) it is important that they make an effort to interact more with their employees. Managers can help employees deal with the merger. Even at the earliest stages, when they cannot provide a great deal of information or answers, managers can help by listening and re-assuring employees of their worth. By making themselves available to employees and showing an understanding for the employee's anxiety the manager can help mitigate the negative fallout and contribute to success of the merger.

2. Preparing Culture: Culture clash has been defined as the changes in both groups that occur as a result of the contact between the cultural groups. The greatest problems occur in situations where members of an organization have strong feelings towards maintaining their own separate

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