CFO Insight LLC
Some acquiring companies become overly zealous in their efforts to integrate target companies. They may launch into poorly planned tactics without an overall integration strategy, and give little thought about the implications on the employees of the company acquired. Have they forgotten that the acquired assets leave the building every evening?
What if on a Monday at 6 PM, you received an ‘all employees’ email from your CEO that your Company has been acquired … at 6:30, you receive a welcome note from the CEO of the acquiring company … Tuesday, 11 AM you receive an email from an unknown person at the new company stating that you will transition to the new company immediately … it is essential that you sign the attached contract by Friday at 5 PM … receive voice mails on Tuesday and Wednesday confirming that you must sign the contract by Friday at 5 PM … on Thursday at noon, a completely new and more restrictive employment contract is sent to ‘all employees’ to be signed by Friday at 5 PM… Thursday mid-day, another voice-mail requesting that the contract be signed by Friday at 5 PM … Thursday afternoon, your Company CEO schedules an all employee teleconference Friday at noon to discuss compensation…
Oh, so many unanswered questions! What happens if an employee doesn’t sign the contract by Friday at 5 PM? There are no documents (except two different employment contracts to be signed within days) that describe the transaction or integration objectives.
…Unfortunately some executives may not appreciate the M&A implications on the employees – the assets purchased. Perhaps this is an extraordinary sale under duress? Other than such a critical event, the acquirer is moving far too quickly, and may lose some of the key assets supposedly acquired. Several questions that may improve the success of the transaction:
What should be done?
Service business acquisitions are particularly difficult because the assets leave the building every evening. If you pay $100 million for a service business, which includes 1,000 service personnel, on average you paid $100,000 for each employee. If the asset leaves the employment, you lost $100,000 of your investment. Employees are more mobile than buildings, machinery and equipment, so carefully plan and execute any service business M&A activity.