Rashmi Dubé: Why merger and acquisitions can be an emotional roller coaster

Rashmi Dube, is the founding partner of Legatus Law.

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The UK still seems a hotspot for M&A deals while the number of M&As have decreased in most parts of the world. “The record of number of deals took place in 2000 where more than 5,100 transactions had been announced.”

There are of course a variety of reasons for following this path. I could talk about the reasons why a company would consider an acquisition or merger but I am sure you can find a variety of articles or books on this subject. Inevitably, the reason is often to increase the company’s market size and their economies of scale.

Yet I believe there is no magic formula; each situation has to be considered on its own merits. However, what I find interesting in this process is the impact of people. You would be right to assume I am talking about the employees, but I am also considering the executive directors – the board’s emotional journey through the process to finally signing on the dotted line and post completion. For simplicity let us consider a merger.

If we take the latter group (the executive), they will experience a range of emotions. At the start, there may be the energy and excitement of establishing the business and getting it into a position where they can consider a merger, but then going to market can be time consuming and involve a number of conversations with a variety of businesses. Each time, this can slowly erode your enthusiasm and eats at valuable time.

Once you have earmarked a business, you have to understand the business and, more importantly, understand the mindset of the owners with high levels of stress from both sides and inevitable deal fatigue will set in. Usually external advisers often need act as “counsellors” to help the business owners/directors through the process, particularly if it is their first experience as the business owner is navigating in new unchartered territory. Inevitably, there is a marriage of the two executives and by the time the deal is done, stress levels are high.

What I would always suggest before you hit the ground running is take a moment to decompress and after the first week, take a few days off, ideally a week. This will help you in that crucial first 100 days – time for yourself should not be forgotten given that you as a director/business owner will be a driving force for the success of any merger.

There is also performance anxiety to consider post completion. Was it all hot air even with the figures that were presented? According to the article, Judgment Call: Leading through transparency, by David Hanfland, Rodrigo Slelatt and Michael Phillips (2013) their study showed “that increased transparency in strategic acquisitions, combined with execution focus, enhances market performance.” That is to say the … “companies that report on progress toward goals have greater success, and those that provide frequent progress updates garner the highest rewards”. “Therefore, companies need to ensure that they are operationally prepared for transparency to gain the benefits associated with regular reporting of outcomes.”

Logical of course but requires the executives/ business owner to have a new mindset and behaviour from day one which cannot be easy.

The impact of the merger does not just effect the executive – employee impact can also have a lasting effect on things.

Kris de Jong, a physiologist, suggests that during the initial transition there often is development of negativity based upon perceived status, or lack of, coupled with new management structure and an “unfamiliar environment, bringing feelings of shock, loss and even ‘survivor’s guilt’.

The reality that should be presented is that of opportunity.

They are being introduced to a new network of people and connections and this will inevitably help with their growth.

M&A is a very complex transaction – not just in terms of the practical aspects such as due diligence, negotiations and funding but also the emotional side, and the stress and fatigue that sets in. Also, no one ever really plans for post completion which requires just as much time and energy.