A merger occurs when two companies decide to come together to form a new entity, while an acquisition happens when one company completely buys another company. Although the decision may be for the best, employees often feel anxious due to the change and uncertainty.
Mergers and acquisitions allow businesses to grow and expand beyond their current capabilities. They help gain more market share and customers, but only a few know what to expect during the process. In this article, we at DealRoom will discuss some of the fears employees have during an M&A.
Top Fears Employees Have When Their Company is Going Through M&A
Mergers and acquisitions are common and can happen in any industry. Bigger and more stable companies use them to reduce competition while struggling companies mostly change ownership to ensure the business stays afloat and the needs of customers continue to be met.
Let's explore the 5 things employees face during an M&A.
1. Fear of Losing Their Job
Mergers and acquisitions typically affect employees in various ways, including layoffs.
The company’s new leaders may view certain operations as redundant and some roles as no longer relevant. This is an inevitable circumstance that affects employees regardless of their job position or work experience.
2. Fear of New Leadership
When the company is acquired by another entity, employees become unsure about what to expect.
They assume that many operations would be shut down, and favorite projects might be scrapped. They become suspicious of the intentions of the acquiring company, feel less confident about their job security, and may begin to underperform.
3. Fear of Getting a New Boss or Being Moved to a New Team
During an M&A, employees know that changes typically result in new bosses and team members. They wonder if the new CEO and managers have their best interests at heart.
They may also hope that the new team members align with the company’s values. Employees are uncertain about whether they can trust these new individuals.
4. Apprehension About the New Company Culture
When two companies merge, combining their work cultures can be challenging.
If one company is being bought, employees might need to adapt to the acquiring company’s culture. While the transition can be difficult, it becomes easier if the new culture is favorable, inclusive, and employee-centric.
Read more: Culture Merge in M&A
5. Fear of Changes to Compensation or Benefits
Many employees dislike M&As because they threaten their livelihoods. They start to wonder if their perks, salaries, healthcare, and retirement benefits will remain unchanged.
They are unsure about the plans the new leadership has for retained employees. This uncertainty leads to fears of neglect or inadequate treatment from the new company.
How Does a Merger or Acquisition Elevate Employees’ Stress and Anxiety Levels?
A merger or acquisition can significantly increase employees' stress and anxiety in several ways. Firstly, the merger process needs approval from legal officials and regulatory bodies, which can lead to delays before the payment, paperwork, and full handover are completed.
Secondly, the change and uncertainty make everyone feel vulnerable and unsure about their standing. It's an emotional rollercoaster since they anticipate positive outcomes but are uncertain about potential negatives.
Lastly, every employee would be concerned about their future with the company. They wouldn't know what the new leadership has planned for them, whether their routines or lifestyles will change. An M&A raises numerous questions and concerns that need addressing to maintain everyone's composure.
How Can Companies Manage the Transition and Keep Employee Morale High?
We have discussed the common fears employees experience during their companies' mergers and acquisitions. We also understand that the entire process increases their stress and anxiety levels.
Now, let's explore some essential steps that companies can take to help alleviate their employees' fears during an M&A:
- Communicate clearly from the beginning to prevent the spread of rumors.
- Implement a change management process or hire a change management consultant.
- Conduct group and individual meetings with employees to address their concerns.
- Practice honesty and transparency.
What is Change Management, and How Can it Help During M&A?
Change management involves all the processes, tools, and techniques aimed at effectively managing people during significant changes. Using employee experience software, companies can make the transition during a merger and acquisition less daunting and uncertain.
This approach enables companies to provide employees with the necessary tools to adapt and transition smoothly. Guidance can be provided regarding expectations, new project plans, routines, and cultural adjustments. Additionally, offering answers to their questions helps prevent speculation and harmful rumors.
The process of completing a merger or acquisition is often lengthy, which can be daunting for employees. It's crucial to keep them well-informed and address their fears. Change management helps communicate new changes and workflows to employees while providing essential guidance and resources needed during the transition.