Impact of Merger and Acquisition on Stakeholders

          In the earlier article we had discussed about the merger and acquisition, difference of merger and acquisition and also the reasons for merger and acquisition. Apart from all this topics another topic comes into over mind when we discuss merger and acquisition and that is Impact of merger and acquisition on stakeholders. So today in this article let us discuss the impact of merger and acquisition on stakeholders.

Impact of Merger and Acquisition on Stakeholders

          In a merger and acquisition there are few objectives due to which the merger and acquisition of two or more companies take places. But two or more entities that are operating have their own rules and regulation and work style and more are going to come together thus it is going to affect various stakeholders who share some relationship with the company such as employees, creditors, competitors and more. Stakeholders getting affected because it is difficult or a great challenge for addressing each one of the stakeholders in a merger and acquisition which itself it a too complication process.  The stakeholders that are going to be affected in a merger and acquisition are as follows,

§  Shareholders

§  Top Management

§  Government Regulators

§  Vendors

§  Lenders

§  Advisors

§  Customer

§  Competitors

§  Employees

Now let us discuss each one of the stakeholders how it is going to affect them below

§  Shareholders:

The merger and acquisition will affect the shareholders of both the companies that are going to merger. In acquisition the acquired firm shareholders will get the most benefits then the acquiring firm because usually the acquiring firm pays a little extra than it is supposes to pay. The degree to which the acquired firm shareholders gets the benefits the same degree acquiring firm shareholders get affected.

§  Top Management:

When Merger and Acquisition take place usually the top management results in clash of their egos due to the variation in cultures of the two organizations. As a result of merger and acquisition usually a new effective management comes into picture and as a result of this the managers and executives may be asked to implement and executive such policies which he may not approve as a result of this issues arises and the executives become busy in resolving the issues. But during merger issues related to top management is addressed and the top management is well qualified then this kind of issues doesn’t take place or come into existence.

§  Government Regulators:

Whenever the companies go for the merger and acquisition usually the companies file an approval to the government bodies and wait for the approval. In the period the government bodies verify and investigate the information since if the merger would result in closure of any factory then it requires notice to be given to state or federal law before closing the factory. Company’s minute information is securitized during merger and acquisition. Any mistake or any clashes with the state law or rules and regulations will result in non-approval. Thus a regulatory review is must before announcing the deal.

§  Vendors:

Vendors have a huge interest in the merger and acquisition because it would disrupt their businesses also. And also whether they are going to continue as suppliers after the merger and acquisition or discontinue after the merger who had made timely payments. Once the M&A is over it will result in updating the credit data for the merging firm but usually acquisition offers an opportunity to consolidate the vendors and increase the bargaining power thus vendors are interest to know about the continuity of the business especially the critical ones. The last and one of the important things is that post merger it may be difficult for the merged or acquired firm to maintain its normal operations.

§  Lenders:

The acquirer firm includes debt as a part of payment for acquiring or target firm thus making the lenders important advisors. Lenders will be interested in offering the collateral and the use of their funds for the M&A and also they are interested in the projections of the merged or acquired firm as they want to know when will the increased debt will be paid off. Selection of the lenders is one of the most important considerations as it results in positive outcomes of the deal.

§  Advisors:

In any M&A in a better to have advisors to integrate the external perspective for a better decisions regarding the M&A. Having prestigious advisors will result in important reputation advantage but increasing the number of the advisors will increase cost and time of the deal. The primary advantage of the advisors is that it will speed up the process and also after considerations for public firms and sellers they will ensure that manager fulfill the given trust to the shareholders.

§  Customer:

Usually the companies focus on the internal issues during the integration at the cost of the external market issues resulting in ignoring the customers of both the companies (acquiring and acquired). Since an M&A will affect the business of the customer or customer during M&A process will result in losing the market share and will give the competitor an opportunity to convince the customer and impact the customer perception on the impact of the M&A. Thus in order to avoid this problem it is required that the company maintains a strong communication with the customer during M&A process and prevent the issues from rising from the customer’s end.

§  Competitors:

It is easy to over look the competitors group who want you to fail and hurt you success and also the competitive pressure will be continue once the deal is announced publicly. It is good to have acquisition announcement publicly and clear because competitors take this as opportunity to create an inevitable distraction. The competitors will not miss a single small opportunity and will respond immediately and will plant doubt in the minds of the customer and employees. As a result of this they will try to attract customers and meanwhile employee’s commitment comes down towards the new organization and will recruit the employees of the firm. Thus my attracting the customers and employees towards his firm or organization the competitor makes the both the companies (acquiring and acquired) vulnerable.

§  Employees:

This is the most important group which is to be considered while in an M&A because even if all the other things are perfectly handled and this group is ignored or not been considered then the merger or acquisition will result in failure. Employees of both firms will be very much interested in M&A to cope up with the uncertainty that have be came into existence due to M&A and also see that the firm or organization value its human resource. Thus employees will have least tolerance for the delays in the communication during M&A. If communication is not maintained then this will result in anxiety and speculation leading to the complicated issues in integration. The other issue is that their job security and headhunting of the good employees after M&A announcement. Thus if effective communication is not maintain and good employee accepts the offers of the competitors then it acquiring firm loss good employees and will face problems post M&A. Thus in order to avoid issues arising from the employees end it is better to manage a strong and effective communication with employees of both the firms and keep them informed about the deal.