50 .What problems may arise after acquisition has happened? How are m&a perceived by employees, shareholders, customers and the general public?

After the acquisition has happened, success is by no means certain. The first problem is cultural - the two organizations may have a different way of doing things, and there may be personality clashes between the two groups of managers. The second is poor implementation - reorganization, new job descriptions, unfamiliarity with the customers and markets of the other company will all lead to a period of confusion, and any expected cost savings may not materialize.

1. Employees get worried about redundancies, having to move offi ce, etc. Workforces are generally resistant to change.

2. Shareholders like mergers if it means that they will profi t from M&As.

3. Customers sometimes worry about losing contact with the company as they know it, especially if they are loyal, established customers. They might worry about a change in the quality of the company’s products or services.

4. The general public can view M&As with suspicion or they may not even know that a particular company has merged with or acquired another company.

51 How is a merger like and unlike a marriage?

• Usually, both people in a marriage bring assets (car, stereo, house, an income) into the marriage so their combined wealth is greater than their individual wealth. In the same way a merged company will have more assets than the individual companies had.

• A newly-married couple have to learn to live with each other and work out the best way to do things as a couple. One person might be good at housework while the other might be better at doing the household accounts. In the same way employees in a merged company have to learn to live with each other and accept that there may be different ways of doing things in the newly-merged company.

• Married people have to pull together and work hard to make the marriage a success – the same can be said of a newly-merged company.

52 What are good and wrong reasons for m&a?

There is no doubt that M&A is a risky business. With a 70% plus failure-rate, you might think that B-school professors would do well to discourage their students from launching takeover bids. But you'd be wrong. Austin describes some of the other (good) reasons for mergers and acquisitions: 'I suppose the most popular reasons synergies and making economies of scale - these are ад sometimes conveniently long-term goals! Other objectives may be increasing market share; cross-selling, when for example a bank can sell insurance to its existing clients; diversification, if a company is perceived to be too dependent on a niche market; or quite simply taking on debt, the so-called poison pill, in order to make itself a less attractive target for would-be buyers.' The bankers, brokers and lawyers will be pleased to know there are still many good reasons to merge. But what about the wrong reasons? 'They mainly involve excessive pride or arrogance on the part of management,' says Austin. 'Wanting to build too big an empire, too quickly, and overextending the financial, commercial and human capacity of the organization. 55 These courses aim to help executives bring their CEOs back down to earth: learning to follow your head rather than your heart is the key lesson in avoiding very expensive mistakes.'