Merger Meltdown – Who’s running The Business?
Everyone has their own views on what makes for a successful merger. My own opinion is that it starts with good quality due diligence – checking out the potential partner. Eric Daniels (Chief Executive of Lloyds TSB) is quoted as saying that they carried out 3-5 times less due diligence than they would normally have done on HBOS. This resulted in Lloyds being forced to take GBP17billion of government capital, announcing write-downs of GBP11billion as a result of their takeover of HBOS, and prompting a drastic fall in their share price. There is speculation that Lloyds were asked to step up to the plate – but at what cost to the
Assuming that due diligence is positive, the next step is
persuading stakeholders of the wisdom of the move. Shareholders, staff, customers, unions, regulators,
governments, competition authorities amongst others all have to be convinced
that this will be a good thing. Will it
result in added value all round? The
added value may be a stronger business (or a rescued one). Expect staff and customer losses – there will
be those who cannot work with the new regime.
Assuming that the above works, management need to set priorities
(most of these will, hopefully, have surfaced with the due diligence). They need to think of, amongst others, the
strategy for the new organisation, systems, people, products/business lines,
customers, fixed assets, corporate identity, financial reporting, regulatory
and legal filings.
Ideally, there will be a separate merger team reporting to the
new Board of Directors. Team members should
be drawn from both sides and should have intimate knowledge of their own
organisation. It is best if they are
completely removed from their “day jobs” to avoid distraction. This will not always be possible, but it will
at least mean that senior management at the higher levels are not distracted by
having to continue running their own business as well. Yes, it will cost more, but the longer-term
benefits may outweigh this, and remember, you have more staff available. The merger team should also have the ability
to co-opt members as needed for varying periods of time if this can be done. Don’t forget your legal advisers and audit
firm – they can help.
You need to work out how much it’s going to cost to set
things up for the newly-merged business (again, this should have surfaced with
the due diligence). What legal,
regulatory, financial costs will there be? Will there be redundancy costs once the
businesses are merged? How will all of
this be financed?
In the meantime, “business as usual” must continue. There will still be customers to serve. Staff
morale will be critical at this time.
The best way to keep customers, staff and other stakeholders (e.g.
shareholders, unions, banks, regulators) on side is to issue regular updates on
progress – so gear up your Communications Department (or put someone in charge
of this).
Staff will be particularly concerned over job security and
some unpleasant decisions will have to be made.
Make it clear what will happen and when, and be sensitive. Staff will have knowledge of systems, customers,
processes and networks of others who help them deliver the customer experience. Manage this badly, and you destroy
value. There may also be trade unions to
work with. Remember, uncertainty breeds
fear.
Any merger means change and uncertainty, but good management
minimises potential damage and maintains stakeholder loyalty. The critical steps are: good due diligence at
the outset, a separate merger team reporting directly to the Board of
Directors, regular communication to all stakeholders and involvement of the line
when needed. The merger process needs to
happen alongside “business as usual” even if this implies additional costs at
the outset.
I have spent more than half my life working in different world markets from the most developed to “emerging” economies. With more than 20 years in the world financial services industry running different service, operations and lending businesses, I started my own Performance Management Consultancy and work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of services.
I have spent more than half my life working in different world markets from the most developed to “emerging” economies. With more than 20 years in the world financial services industry running different service, operations and lending businesses, I started my own Performance Management Consultancy and work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of services.
posted by William Martin @ 16:13
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home