Saturday, February 2, 2008

Writer's Block: The Problem with Mergers


Corporate mergers and acquisitions are an all-time favorite in the financial market.
In a world ruled by digits and speculation, the mathematics of it all is a heaven or hell for calculator-punching investors.
It is a fascinating world where companies bleeding red can get back in the green by a mere rumor of a merger.
But between all the speculation and hyperactive stock prices, lies a human slant.
When a marriage between two companies occur, at least 10 percent of a company's workforce could be laid-off, and about a third of employees in an acquisition are at risk.
Companies normally downsize their workforce when it is combined with another, to eliminate overlapping roles and of course, to cut costs.
The sad part is, there really isn't anything ordinary employees can do to safeguard their jobs. No matter how competent an employee is, the big guns are busy building a new organization. And this is where the problem lies.
The economic and psychological impact of mergers on the common worker can be devastating, and it begins even before a merger occurs.
Mere talk of a merger can make employees nervous and lower their morale - especially when information going around is controlled, even on an internal level. Fears of losing one's job, seniority, and/or a promotion can cause anger and anxiety among workers, and this remains until after a merger has materialized.
Afterwards, laid-off employees are more likely to suffer from depression (among others), while employees who remain may end up with a sense of guilt for having "survived" the acquisition - grateful as they may be to be able to keep their jobs.
Unemployment rises, and laid-off employees who get re-employed, usually suffer a wage-cut.
The really sad part of this is that a marriage between companies does not necessarily equal success.
But when millions and billions of dollars are involved, the hard truth is - no one is indispensable. In the world of finance, he who has the gold makes the rules. -wmf