Two prosperous New York companies are merging, and everything is going well. The deal has been signed, they’re making a lot of space for the new company in the building, and the only missing piece of the puzzle is to combine their two companies. The problem is that this merger or acquisition may still fail due to one or more reasons.
All that space and money that was supposed to be spent on the new company should have been spent on developing or acquiring new talent, but they didn’t have time to do it because they were too busy shoving people around and making them change their careers.
Lack of leadership
A merger almost always requires more “hats” to be worn, and many of them are usually filled by someone who never intended to wear that hat in the first place. There was never a plan for all the new positions created by this merger; there was no transition plan. This means that no one is managing anything, and all sorts of problems start to arise.
Hidden debt and financial stresses
Hidden debt can take several shapes, including unfulfilled promises to shareholders. The two companies may have debts that were never shared between them, and if one company has a lot of debt, the other company might be unable to handle it. If one company is struggling financially, it will be up to its new “partners” to help compensate for these financial losses.
Too many people on the payroll
It may be easy to take on many new people initially, but a merger can take time and money to implement. This is fine at first, but as the merger trudges on and more problems emerge, more people may be hired to make up for any losses that were incurred by the merger. These new hires cost extra money and resources.
A merger or acquisition is supposed to increase the company’s profitability. It should, in theory, expand the company’s client base and increase its overall profit margins. The problem is that the two companies involved may have different ideas of what they need to do to achieve this financial success. To successfully complete a merger, expectations must be in line with reality before implementation. Otherwise, the two companies will “grow apart” before they even have a chance to gain traction and make any profits at all.
Keep in mind
If expectations aren’t realistic, then there won’t be much success coming from the merger. On the other hand, mergers can be good if they’re well-planned and properly managed, and everyone gets on board with the same goal in mind.