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3 merger-related challenges that should be planned for in advance

On Behalf of | Jun 17, 2024 | Business Transactions

Negotiating a business merger is a process that could take a year or longer to complete. From finding a viable candidate to setting agreeable terms, mergers can be incredibly complex transactions. There are a host of issues that can arise during and after a merger that can undermine how beneficial it is for the two organizations involved.

Some challenges that occur during mergers are unique and unusual, making them impossible to effectively predict. However, many issues during mergers are predictable because they occur in more cases than not. The following are some of the common merger issues that people may need to address to better ensure that a transaction is successful.

The inevitability of a culture clash

Even if the merged businesses operate in the exact same industry and community, the cultures within the companies can be vastly different. Particularly when workers from both companies have to do their jobs together, there can be clashes between the cultures that have developed at the organizations. People may not know what to expect from the culture at the new company. Taking steps to establish the company culture as quickly as possible can reduce the likelihood of conflicts among workers.

The likelihood of talent loss

Any significant business transaction usually comes with a degree of risk. Some employees are more risk-averse than others. They may have a family to support or might worry that if they wait until the company fails, they may face too much competition for available jobs in the industry.

Given that talent loss is all but inevitable during a merger, leadership at both organizations may need to identify the best and brightest staff members. They can then make efforts to retain key players at both companies. That process may involve sit-down meetings with human resources and possibly even contract negotiations. Workers offered incentives to stay are more likely to weather the challenging transition of a merger.

The need to liquidate redundant resources

Discussions about redundancy often focus on employees, but there are many redundant assets that may require investment to maintain. Actual business premises, machinery and other physical assets require space to store them. They may also contribute to the tax burden on the business. Therefore, companies may need to streamline their holdings after a merger by selling off certain assets. Doing so can allow the company to eliminate otherwise unused facilities that might have to serve as storage spaces and to run a more efficient operation after the merger.

Proper preparation before a complex business transaction can help leadership at companies overcome predictable challenges. Mergers can be risky, but they are less of a challenge when companies prepare for foreseeable issues before they arise.