Three key challenges of a merger or acquisition
In recent years, a number of mergers and acquisitions (M&A) have hit the headlines.
Key points:
- High-profile M&As have highlighted some of the challenges facing businesses in a transitional process.
- Important issues include retaining talent, preparing for new customer bases and overcoming regulatory barriers.
Should your organisation be considering a similar move in the future, these are a few of the key challenges you may face.
1. Fair competition
Mergers tend to have a significant impact on the sectors in which the businesses in question operate. In some cases, large-scale mergers or those in small markets can destroy fair competition by giving the post-deal businesses too much power.
The Competition and Markets Authority (CMA) is responsible for reviewing the potential impact of these deals in the UK and has the right to prevent a merger or acquisition from taking place if it will negatively affect consumers, markets or the wider economy. Organisations wishing to merge must prove that the benefits of the deal outweigh the risks.
In some cases, if the market in question is small enough, competition concerns may not be an issue. The CMA will not pursue a detailed review of M&A deals where “the markets concerned are not of sufficient importance.
2. Staff retention
The restructuring aspects of M&A inevitably can lead to the downsizing or reassignment of certain areas within the business. The challenge lies in optimising the new organisational structure to ensure key players stay with the organisation and the best talent remains confident in their job security.
Employees can often have a negative reaction to M&As, feeling threatened by the changes to leadership, strategy and their own roles. It is important to maintain trust and engagement with staff during a transitional process in order to avoid high levels of turnover. A significant loss of workers can mean a sizable drain on knowledge and internal morale.
At the higher levels of an organisation, losing influential executives and board members can severely damage the success of a deal as company culture and perception suffers.
3. International relations
Due to the widespread growth of business globalisation, many M&A deals now involve companies based in more than one country. This can mean organisations are exposed to foreign markets that they have little experience in.
Cultural differences and language barriers can have a profound effect on a company's ability to work across borders. A recently merged or acquired business can particularly suffer if the previous key players in those relationships have been lost in transition.
Our two-day Mergers and Acquistions Course from our training partner BPP, examines the main processes and issues involved in acquisitions and disposals of UK companies.
We also offer a shorter on-demand online course Introduction to Investment Banking – mergers and acquisitions.
Categories:
- CPD
