Mergers and Acquisitions (Part 2)


This is the second and final part of this Mergers and Acquisitions series. I hope you found the first part and this part enjoyable.

The Compaq and Tandem cultures seemed to gel ok, but the combined Compaq and Hewlett Packard cultures were much different. Of course, who couldn’t have seen that when Tandem was started by a disgruntled Hewlett Packard employee. Compaq was generally considered the young, scrappy, Texas computer company that shot from the hip. However, Hewlett Packard was generally considered a bunch of old engineers who couldn’t move fast enough for the new IT industry. From the very beginning culture was an issue. It was discussed in the white room but the power people in the merger were not going to give up this merger.

Ultimately, the old and new cultures even within Hewlett Packard clashed before the merger was complete and a proxy battle ensued. The proxy battle finally came to an end and the merger was officially completed in 2001. However, in late 2005, the competitive effectiveness of Hewlett-Packard's merger with Compaq was still a subject of debate among analysts and outside observers, and it may take many more years before it will be unequivocally clear whether the HP-Compaq merger turns out to be a success or failure. The post merger cultural impacts at Hewlett Packard were extensive enough to lead to alcoholism, stroke, and suicide. More than one family filed suit against the company claiming that it was corporate pressure that caused the loss of their loved ones and an Army of counselors were hired to complete office to office counseling of the remaining personnel for such mental disorders as survivor syndrome.

This could very well be one of the most extreme examples of cultural trauma from a merger or acquisition, but there are successful mergers and acquisitions also. While the Compaq and Hewlett Packard merger is not the only merger to have such incredible effects on employees, it is certainly one of the most public of recent years. The question is what are the effects that mergers and acquisitions have on employees and why can they cause serious stress on employees that could potentially put the success of a merger at risk. That question has led to many companies paying to research mergers and acquisitions such as this and the answer may never be fully understood.

As mentioned above, there are a number of goals that drive a merger or acquisition. A merger or acquisition is about synergies and teamwork. It is about building a company that is greater than the parts. As such, typical goals include the competitive position of the new company, which includes the potential cost savings of the combined company. Since that competitive advantage usually comes in the form of economies of scale like consolidation of facilities and reduction of workforces as well as also acquiring something of value like intellectual property, most of the advantages require the redistribution of human resources that possibly leads to layoffs. This is a major generator of stress because most people are change adverse by nature.

It is this fear of the unknown and the change itself that really is a driving factor in the stress of employees during a merger or acquisition. This change process has been studied for years and has identifiable steps that include routine, change event, decline, letting go, confusion / creativity, insight / vision, renewal, and then the new routine. Every single employee of the new company has to go through this process because change happens at a personal level and at the end of the day corporations are all socio-economic systems. It is during this change process where the new company can either become hopelessly divided or come together as a new team. The later is the preferred situation and the best way to achieve that situation is through clear and regular communication coupled with efficient and professional execution of any and all organizational changes.

It is at this time when team culture becomes the most fragile because the team planning the merger usually only thinks through so much and then they hope to see self organization and emergence. Generally speaking, the people who go through the change process quicker should be teamed with those that don’t so that maybe those change veterans can help lead the path to normalcy and alignment with the new corporate paradigm. Hopefully this series will aid you in the future if you find yourself in this environment.

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