The Seven Risk Factors In Successful Mergers
William Case is the founder of Integrated ChangeWare Systems, a company that specializes in merger integration, multiple organization roll-ups, and strategic change.
In a workshop presented for AccountingWEB, Mr. Case outlined the seven risk areas that need to be addressed to protect the value of a merger.
These seven areas include:
- Risk 1 - What will happen to your customer base while you wait to combine your companies? If a sales rep is unsure about the future of the company, the rep will not have the confidence to sell the product. Most companies budget for a decrease in sales when they could achieve a significant increase.
- Risk #2 - Which of your acquisition costs will occur once and which will recur? It is crucial to identify which assets must be sold and then sell them quickly. Companies that wait too long risk letting them fall into disrepair and having to take a much lower price than they expected.
- Risk #3 - How quickly will your company be able to make important decisions? Before the merger the two companies made decision just fine, but afterwards either no one is in charge or everyone tries to be in charge and the decision making process comes to a halt.
- Risk #4 - What will happen to the major projects you have going or you have planned? There is a natural inclination to abandon major projects, such as installing new computer systems, during a merger when it is actually the best possible time.
- Risk #5 - How many good employees will you lose during the transition? Proper use of the acquired and existing talent is key to the success of the ongoing company. Identifying and deploying those individuals so you keep the ones you want and lose the ones you don't during the merger process can save a lot on the backend.
- Risk #6 - How will changes in organization affect the company as a whole? Every organization can be divided into three groups, 20% are leaders, 50% are on the fence and 30% are resistant to the change. Most companies spend too much time trying to make the 30% happy, by focusing on the top two categories you will have 70% of the organization on your side . However, do not ignore the resisters, some of the best talent may be in that group and they can become leaders if they are engaged in the process.
- Finally, Risk #7 - Do you have the management team in place to get the results you need?
Following the description of the risk factors, Mr. Case entertained a lively discussion among the participants regarding what works and what doesn't in integrating a merger.