By Braun Jones, Partner, WWC Capital Group, LLC
Lately, the market has been buzzing due to an increased number of mergers and acquisitions being announced. A few weeks ago, we were asking whether or not “merger Mondays” would continue. And, well, as we suggested, they have!
During the past two months, companies across the country have been spending the cash reserves they have been accumulating since the beginning of the recession. According to data from Thomson Reuters, August 2010 had the most M&A activity in more than a decade. Why? One reason is sellers are entering the market at a record pace trying to beat a potential increase in tax rates as George Bush’s tax cuts expire at the end of 2010. Secondly, with organic growth slowing and excess cash on corporate balance sheets generating low interest returns, executives are acquiring to increase their returns on invested capital and enhance growth.
There’s been a plethora of articles written about this sudden surge in M&A, discussing everything from valuations to strategy to directional market trends. Recently, I came across an article in the Gallup Management Journal regarding the benefits of engaging employees in the M&A process. Sometimes in froth deal environment, due diligence and integration take a back seat which can hurt deal success rates.
Many deals ultimately fail because integrating two companies is a complex process. The better the two companies can keep their employees engaged in the process, the greater the chance for deal success. There’s no question that with M&A comes change. However, according to the article and we know from experience, there are methods for enhancing employee engagement throughout an M&A process mostly centered around solid internal corporate communications plan that is well-executed.
When change is inevitable, keep in mind that an informed and motivated staff will help keep them dedicated to the growth and prosperity of a company and the long-term success of a successful M&A deal. Uncertainly is a killer. If you’ve recently completed a transaction, drop us a comment and let us know how you kept your employees engaged and managed internal communications.