Corporate Risks - Mergers & Acquisitions

By Vivek Raghuvanshi

When a Corporate Raider attempts a hostile takeover of an organisation, we need to understand the interplay in the quicksilver environment:

The Players:

1. White Knight
2. Black Knight
3. Gray Knight
4. Yellow Knight

Further when a Corporate Raider attempts Green mailing or hostile takeover threat still persists, do we have options such as:

1. Moat
2. Golden Parachute
3. People Pill
4. Poison Pill
5. Lobster Trap
6. Killer Bees
7. Suicide Pill

Mergers & Acquisitions presents Corporate Risks which has to be mitigated.

Success of merger / acquisition depends how we have actually prepared at:

1. Merger stage
2. Post Merger stage

Merger stage:

Here compatibility issues need to be addressed under:

A. Courtship phase
B. Evaluation and Negotiation phase

While we are looking at compatibility issues at during Courtship phase, have we looked at compatibility between the vision and objectives, have we been able to build and reinforce personal and business relationships.

Once we find a common ground, we have compatibility, we share vision and objectives that we may like to proceed to Evaluation phase and Negotiation stage where we need to undertake due diligence and evaluate the cost/benefit of the merger/acquisition besides understanding the regulatory clearances required for the new project.

Once the Merger/ Acquisition has taken place, we may like to look at Issues which need to be addressed under:

A. Immediate Transition phase
B. Transition phase

Immediately after the merger / acquisition, Issues such as New appointments need to be made, list of Redundancy announcements need to be made, Restructuring of the various departments need to be done to make the organisation an agile corporation and Divestment needs to be considered.

In Transition phase, we need to Fine Tune the organisation further to enable the organisation to remain lean and agile. Further re-structuring and job transfer need to be done to get the right fit. We cannot ignore Cross-Cultural differences which are the Nemesis of many a mergers.

Why mergers actually fail is because of a clash of corporate cultures:

Have we addressed the cultural incompatibilities
Was cultural due diligence done correctly
Did we undertake cultural audit
Did we create Knowledge maps

And when we fail to predict the dissonance which will arise in Corporate Matchmaking because of the dissonance in organisation structures, problems will arise. Dissonance in Beliefs, Values, Norms and Behavior is the main reason why mergers fail.

Further, were similarities and differences assessed, do organisations have mutual respect for each other, do they acknowledge professional and individual competence, business capability etc. Is there a dissonance between hopes & expectations, vision statements, mission statements etc.,

What synergies exist

Is there trust in discussing difficult issues and handling conflict?

Is there commitment by both parties to succeed, 99% mergers fail because all you did was financial due diligence. Have you looked at the dissonance between vision and strategic objectives and goals of both companies.

Further the External environment is Quicksilver

To handle multiple quicksilver environments, is why we require Competitive Intelligence