Robin Trehan, talked about Merger performance: horizontal, cross-border and cross-industry

Aug. 7, 2008 - PRLog -- Robin Trehan, talked about Merger performance: horizontal, cross-border and cross-industry

Merger performance evolved by the combining of companies’ which results in good net results. It is found that even though integration is not a new concept but still there are little mergers who have reached success and failure.  The mergers do differ from each other. Some mergers have positive initial stock market reactions and some others have negative stock market reactions.

On research it was found that the main problems faced by the mergers are they did not have the clear picture of the target company. After merging the organizational design set up was inappropriate. The management incentives used was not much effective and the employees also do not know the new structure. The example can be seen in US airline industry. In the late 1980s before merging the organizations were well developed and had got good margins. But after merging the organization had to face a huge loss and happened to be the least profitable one.

The main reason for this failure of the Merger performance: horizontal, cross-border and cross-industry is due to the difference in pay scale, work rules and cultures in the organizations that are merged. Some times the decision is made to reframe these for standardization and gaining labor peace. This ultimately results in generosity in pay scale and work rules at the same time increase in labor cost and decrease in productivity.

Another problem is the culture clash that occurs between the merged companies. The customers and employees of the acquired company may be disappointed since they have a feeling that theirs is the superior company. Again the acquired company will have a relaxed lenient approach since the acquiring company already have a well organized structure with set standards. This in turn declined the employees’ performance and also the customer satisfaction. This will affect the efficiency gains too. Communication breakdown may also take place which affects the efficiency of the merger performance.

In the professional service firms where the intellectual ability of the individual is concerned the professionals need to be considered than the products for the success of merger performance. Due to the acquiring the leading figures may abscond to the rival company. This may lead to the formation of rival organization against the merger itself. So management will have to take pains to keep in peace with them and retain them after the merger.

For a successful in Merger performance: horizontal, cross-border and cross-industry the acquirer should have an idea about the target company. The difference in the organization culture should not be prominent. The management should anticipate the co-ordination problem that may arise and act accordingly. The acquirer should not impose its rules on the target company.  Care should be taken before deciding on the standardization of pay scale, work rules, brand etc. Worker dissatisfaction should not be given way to happen. The acquirer should also keep the acquirers employees satisfied by giving proper incentives. These will in turn help to reduce the walkout of the key professionals.

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