Making Business Happen

3 things to know about mergers and acquisitions

On Behalf of | Dec 12, 2023 | Business Law

Mergers and acquisitions are significant business strategies used by companies for various reasons, including growth, diversification and/or gaining competitive advantage. A merger involves two companies combining to form a new entity. By contrast, an acquisition is the purchase of one company by another, where the acquiring company typically assumes control.

These processes are complex and involve various considerations, three of which are particularly critical.

Leadership changes will occur

In mergers and acquisitions, changes in leadership are almost always inevitable. These changes can range from the top executive levels to middle management. In a merger, leaders from both original companies may take on new roles, or new leadership may be appointed to guide the merged entity. In an acquisition, the acquiring company often installs its own leaders to oversee the integration and future direction of the acquired company. These leadership changes can affect the new company’s strategic direction, operational workflow and overall employee morale. Clear communication about these changes and their implications is vital to maintaining stability during the transition.

Company culture must be re-defined

Company culture refers to the shared values, beliefs and practices within an organization. During a merger or acquisition, differing cultures may clash, potentially leading to conflicts and decreased productivity. It’s important to define and, if necessary, reform the company culture early in the process. This may involve integrating the best elements from each company’s culture or creating a completely new culture that aligns with the merged entity’s goals and values. Successfully blending cultures requires careful planning, open communication and often the help of human resources or organizational development professionals.

Employee policies must be clear

The harmonization of employee policies is another crucial concern. Differences in policies such as benefits, compensation, leave and performance evaluation can create confusion and resentment among employees. It’s essential to establish a unified set of policies that apply to all employees. This process should be approached with fairness and transparency to ensure that employees feel valued and secure. Additionally, keeping employees informed about how and when these new policies will take effect is important for a smooth transition.

Creating new company documents and policies after a merger or acquisition generally requires the legal assistance of an experienced professional knowledgeable in Texas law. Law firms that practice mergers and acquisitions law tend to have substantial knowledge about all aspects of these processes.