A merger occurs when two or more companies combine their business and assets. The companies lose old identities to make a new one. On the other hand, an acquisition occurs when one company acquires a given number of shares in another to get control. In either transaction, a new ownership and management structure is established.
The objects of Mergers and Acquisition (M&A) as tool of business restructuring is to help companies acquire new technologies or products; improve processes and productivity, while reducing overall expenses. While mergers and acquisition may or may not necessarily achieve all these, its effect on employees is permanent. Change is often difficult for employees, especially if they are not directly involved in decisions that impact their jobs. To this extent organisations should strive to share as much information as possible about what is happening and, most importantly, how the changes will affect individual employees.
The most obvious concerns for employees during this process are job loss through redundancy and culture change. However, the management can mitigate the effects of M&A on employees by focusing the following areas;
1. Loss of job by way of redundancy
Redundancy is a commonplace occurrence in M&A. This can lead to loss of job or a shift in the roles of employees of the merging organisations. While it is impossible to avoid layoffs, reducing uncertainty among employees is critical to managing the process. The employees who are likely to lose their jobs should be told well in advance and the procedure of redundancy as outlined by the law. Section 40 of the Employment Act 2007 provides the procedure to be followed when laying off employees through redundancy. Not following the set procedure would expose the company to an action for unfair termination.
2. Change in Organisational Culture
Since every organisation has a distinct culture, it is important to help employees during the transitional to embrace the changes. Just like in induction for new employees, employees caught up in Me & A process are faced with the challenge of adopting new cultures. A culture change in an organisation can be a blessing or a curse depending on how it is managed. Due to the uncertainty involved, the risk of losing good employees to competitors or ending up with unmotivated workforce is real. The management can mitigate this sort of disruption by providing the affected employees with the vision and mission of the organisation. In addition, the company should endeavour to explain in clear terms the direction the organisation is taking in order to realise targets.
3. Training Employees
It is important to train employees on new processes, policies and procedures that result from the new arrangement. The management should come up with a training plan which includes time lines for the new employees to familiarise themselves with new technologies, systems, reporting procedures.
4. Make employees feel valued
In an acquisition process for instance, the employee of the acquired company may have difficulty settling in their new roles that may sometimes appear as a demotion. It is important for the management to acknowledge and find a solution to this problem. Making employees feel that they are actively participating in the transaction between the two companies as opposed being viewed as one of the assets to be transacted.
The writer is associate, Simiyu and Wekesa Advocates.