Where Mergers & Acquisitions go wrong

Where Mergers & Acquisitions go wrong

Group of business persons handshake in the office

Mergers and acquisitions can be exciting, momentous achievements but also delicate processes. Miss one detail and the whole deal turns sour. As such, diligence is the name of the game. No stone can be left unturned when you merge with or acquire another company. 

If you’ve worked in the corporate world long enough, you’ve probably been affected by mergers or acquisitions. Some of you might have negotiated the deals themselves! They happen all the time, but some run smoother than others. 

In fact, most mergers and acquisitions fail. According to the Harvard Business Review, 70-90% are unsuccessful. When mergers and acquisitions don’t go according to plan, the entire company bares the weight of the consequences. 

But where exactly do these deals go wrong? Well, the possibilities are endless, but in our experience, it usually comes down to a lack of due diligence and poor planning. In this blog, we’ll explain the most common mistakes we’ve seen in mergers and acquisitions so that you can steer clear! 


Poor cultural compatibility

Integration tends to be a point of high anxiety during mergers and acquisitions, and for good reason. Overlooking or misunderstanding the combined company culture can be disastrous. As such, when you mesh two organizations together, you need to be aware of potential areas of friction. 

For example, do your companies align on remote work versus in-person? If not, you’ll need to figure out how to accommodate the employees in your new environment or replace those who leave. Otherwise, you’ll stare down a talent drain that could set your company back. Other cultural considerations include:

  • Will the acquired business’s employees move onto your benefits? How will they react to their new benefits? 
  • Is one company more casual than the other? How can you set expectations around dress and conduct for incoming employees without alienating them?
  • What expectations do the new employees have around career pathing? How will you accommodate them into your structures? 

If you’re merging with or acquiring an unrelated company to your own, you’ll face slightly different questions. Those deals usually occur with conglomerate-modeled companies with diverse portfolios of businesses under their umbrella. In that type of acquisition, the company’s employees generally continue working in their roles about the same as they had. 

The crucial consideration here is how much autonomy they can expect moving forward in their roles. Perhaps you’ll oversee more than they’re used to. In that case, prepare to explain why you’ve decided this is needed. 

These are just a few questions you must ask and answer during mergers and acquisitions. Sometimes, the answers aren’t easy. However, experienced HR professionals and consultants guide companies through these issues carefully and proactively.  


Business people chatting at corporate event, meeting after mergers and acquisitions


Undiscovered fines and penalties

Surely you’ve thoroughly maintained accurate payroll records and done your best to steer clear of legal issues. But how certain are you that the company you’re acquiring has done the same? Now, this is not to suggest any malicious intent on anyone’s part; sometimes, companies lack the internal support to stay on top of these issues. 

However, misclassified employees or unpaid overtime are just a couple of the common issues we see that undermine deals. When you acquire a company or merge with one, its liabilities are part of the package. The fines and penalties that follow those payroll errors hurt. For example, if the mistakes are deemed unintentional, one part of the penalty is 1.5% of each misclassified employee’s wages plus interest. However, when intentional, that jumps to 20% of employee wages. 

On top of payroll errors, mergers and acquisitions often derail over legal issues like ongoing lawsuits. Not every case is made equal. Still, you don’t want to be blindsided by something serious that you had nothing to do with. So do the requisite digging on the HR and legal side, or have dedicated experts handle that discovery process.


Shot of two business colleagues shaking hands during a meeting in the boardroom


Lack of retention or succession strategy

Once your merger or acquisition is complete, you’ll have a large influx of talent to sort through. Unfortunately, in our experience, the people side of things doesn’t get the attention it demands. But we cannot encourage you enough to spend serious time ironing out your talent plan post-deal.

Of course, every acquisition is different. For example, when you bring on a company with very similar services or products to your own, some redundancies must be sorted out. Service-based companies may need every employee they can get to keep up with the new business they’re acquiring. Likewise, organizations buying a SaaS business, for example, can’t play fast and loose with engineering talent, or they risk setbacks that could take years to recover. 

Get your retention strategy ready. Identify top talent and influential voices on your new team, and do everything you can to keep them on board. It’s beneficial for culture, but it’s also critical to the success of your new product or service line. If retention seems unlikely in crucial positions, work on a succession plan as soon as possible. 

Who has the skills to step into a potentially pivotal, vacant role? Of course, your HR team plays a significant role in this process. But, essentially, don’t lose sight of what you’re buying; talent often plays a more prominent role than businesses expect. 


ADDA smooths out mergers and acquisitions!

We want your mergers and acquisitions situated nicely in that 10%-30% success rate. Luckily, ADDA’s consultants know what it takes to get good deals over the finish line and how to drive successful integrations afterward. So if you’re ready for a second set of eyes on your merger or acquisition, schedule a call with ADDA today! 

Fill out the form to learn how our business solutions can help you today!


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