Employees can prepare for the consequences of a company takeover, says Scott Moeller
Can you trust an acquiring company’s promises? Would anyone answer the above question ‘yes’ after the well-publicised news in early 2010 that Kraft, less than three weeks after agreeing to the purchase of British chocolate company Cadbury, reversed its promise to keep Cadbury’s Bristol plant, with over 400 employees, open?
As the Cadbury union leaders said after Kraft’s announcement, this appeared to have been a deliberate attempt by Kraft to mislead the employees of that plant, and indeed the whole company, in order to gain further support for its hostile bid. Its action also sent, in the words of the union, “the worst possible message” to other Cadbury employees in the UK and Ireland.
Even the UK government’s business secretary at the time, Lord Mandelson, said: “This will confirm the fears of those who felt the takeover would result in job losses.” He went on to say: “It is for the company [Kraft] now to prove the worth of its other statements about investing in the UK.”
There is a clear message here for Cadbury employees and certainly for the employees of any company acquired by Kraft in the future. But how about the employees of other companies that are acquired?
It is very likely in any merger and acquisition (M&A) deal that there will be changes to the post-acquisition plans once the deal is signed and even more so after the deal is closed. This is more probable when the deal has been hostile, as was the case with Kraft and Cadbury, because the acquirer will not have been able to spend time with the target’s current management discussing the company and its existing plans.
Much will remain unknown until after the deal actually closes and the two companies try to start operating as one. It is at that time that the acquiring company will really find out what it has purchased, despite all its best attempts at due diligence before closing the deal.
This is why I advise in my book, Surviving M&A: make the most of your company being acquired, that employees should question any statement made by management during the lead-up to the deal closing. This is not to say that management will deliberately mislead employees; it is more likely that management just did not know. But this is all the more reason to be prepared fully for the possibility of redundancy and to do whatever you can to improve your chances of being retained if your entire division is not axed after the deal.
In the book, I note that there are a number of factors that contribute to the likelihood of being made redundant. An extensive survey conducted for it found that you are more likely to be fired if you are a senior executive, especially at the target company, in a back-office job, have had a recent poor performance review, have never been at a company that has been acquired, have worked for the company for more than 10 years, or have a personal situation that makes it difficult to move to a new location. Many of these factors are, of course, obvious, but put together they can reveal whether you need to be better prepared for the worst.
The survey also identified a number of people who do better, both in terms of job position and compensation. We found some employees were ‘deal junkies’ who even sought out situations where they thought the company would be acquired, or make an acquisition, because they felt they had the skills to leverage the change in their favour.
In fact, in a smaller survey, we found that about a quarter of the people who remained in the newly merged company actually did consider that their situation had improved compared with before the deal.
So it is possible to be truly ‘rewarded’ from a takeover, even if some companies break their promises.
Professor Scott Moeller is director of the M&A Research Centre and professor in the practice of finance at the M&A Research Centre, Cass Business School, London
Surviving M&A: Make the most of your company being acquired, Moeller S, John Wiley, (2009)
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