Monday, 17 February 2014

The Biggest Financial Disasters in Corporate Mergers & Acquisitions


Change management abilities are an important part of HR competences. If an organization wants to be successful in major change initiatives (Mergers & Acquisitions), it is important that HR is part of the strategy team so that all possible personnel related issues are addressed. There have been many successful corporate M&As in history; however, many have been huge financial disasters. 

What are the main reasons for failures in M&As, and which M&As have caused the biggest losses to the merging or acquiring companies?


So what are the most common HR-related problems during M&As?

  • Failure to merge or blend the two existing corporate cultures.
  • Ignoring the importance of combining infrastructures and resources and integrating both systems and human resources.
  • Forgetting to inform all personnel as to why the business transaction took place and what improvements are planned.
  • Not communicating how the new business structure will feel and how the new situation will effect the work environment.

Overall, the main HR reasons are usually major differences in company culture and not managing the merging of these two cultures. So what are the most serious examples of such failed merging of culture?
  1. Daimler Benz and Chrysler: value at merger - $37 billion; Chrysler's value at selling - $7 billion.
  2. AOL and Time Warner: value at merger - $111 billion. Since then the value of Time Warner stock's has dropped 80 percent.
  3. Quaker and Snapple: Quaker purchased Snapple for $1.7 billion, later selling it for $300 million.
  4. HP and Compaq: approximate losses to date - $13 billion.
  5. Ebay and Skype: Ebay paid $2.6 billion for Skype and sold it four years later for $1.9 billion.

These five mergers combined caused a loss of approximately $120 billion to their respective owners. Just to illustrate what this number means, the annual expenses of the Slovak Republic based on the 2014 budget amount to approximately 18 billion Euros.

So failed mergers and acquisitions can cause a company to lose a lot of money. Even if your company is not Chrysler or Ebay, there is a major risk associated with acquiring a company or merging with one. One of the factors that should be taken into account are the various HR processes that are influenced by M&As. If you would like to learn about dealing with HR change or culture change, please take a look at our upcomingwebinar about the essentials of change management for HRprofessionals.

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