Merger activity is rife at present. One cannot pick up a Financial Times without reading speculation about who is the next possible target. The effects are being felt far and wide, with sectors as diverse as technology, pharmaceuticals and telecommunications all experiencing an upturn in M&A activity. The trend looks set to continue, with the value of global M&A reaching $912bn in the first quarter of 2006, up by 35% on the same period last year¹. This activity may be providing a "shot in the arm" to the world’s stock markets, and making shareholders richer but there are other considerations too. Commercially focused occupational psychologists would ask what effects the ensuing uncertainty has on the people caught up in it, and moreover how can the negative effects in business be minimised.

What about the people?

There can be periods of mass uncertainty, where the acquirer is appraising their purchase, resulting in a state of limbo for job incumbents. Organisational causes of stress for the individual include overwork, feeling of being undervalued, poor communications, job ambiguity and conflict with colleagues2. All of these factors may be present in a Merger or Acquisition as workflows vary, job roles are reappraised and strain placed on once harmonious working relationships by ongoing uncertainty. Companies and HR departments should try and understand what people are feeling and thus try to avoid the pitfalls, preferably learning from others’ mistakes before they are repeated.

There exists little research on how the people involved are affected by the uncertainty of a merger or acquisition brings. This may result in the same mistakes being repeated if useful reference material is hard to find.

One can look to group and social psychology literature to try and understand what those people affected may be feeling and suggest what the best way forward might be to bring about the desired collaborative relationship. Ideas generated from this research include the following three:

1. Try to identify what can bring the two groups together?

It has been found that even when two quite different groups are brought together, they assimilate much better when they share a common goal. Identifying this as early as possible and communicating this shared goal effectively is key.

2. Create clear boundaries and decision making structures

Is this a merger or an acquisition? Is my boss still going to be my boss? It is important to provide structure to decision making processes and interfaces between the two entities. Firstly knowing how the two entities are expected to interact, and then communicating this to staff will help to alleviate any ambiguity and its associated anxiety.

3. Establish forums for reviewing the new relationship

The quality of the relationship between the two entities must be assessed via an agreed forum. Are strategic plans working effectively, do they need adjusting or are they working as planned. The measurable outcome will be the bottom line of the new entity, but problems in profitability are likely to have reared their head much earlier in the quality of the business relationship. Only by reviewing this partnership can the early warning signals be detected and used to the company’s benefit. Once issues are brought to the surface then it is important that the structure is in place to decide what the next step should be.

Lawrence Francis
Consultant Psychologist- Thompson Dunn Ltd

REFERENCES:

¹Financial Times article, 31 March 2006, Lina Saigol and James Politi

²University College London human Resources Managing Stress at Work http://www.ucl.ac.uk/hr/docs/stress.php

³Day, A (2006), Organisational collaboration: what goes on beneath the surface? The Ashridge Journal