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What are some significant potential risks and advantages of mergers and acquisitions? As a participant in this kind of event, what are some specific things you would do (e.g., communications, processes, etc.) t to help ensure an ease of transition.
Mergers and acquisitions are generally large endeavours that take substantial amounts of internal resources to make happen (McKinney, 2022). While these can be very beneficial to the growth and development of an organization, there are several risks to be aware of. One such risk is the potential loss of clients and investors as outlined by McKinney (2022). Depending on the business and the involvement of the owner, sometimes mergers and acquisitions can send up red flags if the original owner decides to leave the new organization altogether. One of the main disadvantages of a merger is job loses (SAC Attorneys LLP, 2022). When two organizations merge into one or when one is acquired by another, there generally are multiple job synergies that need to be addressed. Another risk outlined is the potential increase in consumer prices
(SAC Attorneys LLP, 2022). This happens when one entity gains significant market share from buying or merging with a competitor. This increased market share from reduced competition typically raises prices on the market which is unfavorable for consumers.
Some notable advantages of mergers and acquisitions are an increase in financial resources and
improved economies of scale. Larger organizations can benefit from the greater combined resource pool and use their increased purchasing power to drive economies of scale and negotiate more attractive deals with their suppliers (SAC Attorneys LLP, 2022).
As an individual who experienced a merger a couple of years ago, by far the most important and helpful thing leadership can do is timely and honest communication. When communication is lacking during a time of change it leaves everyone confused not knowing what to expect. In addition to this, proactively training individuals from the two legacy organizations on the chosen systems and processes moving forward.
References
McKinney, J. (2022). Considerations when acquirers come courting. Journal of Pension Benefits,
29
(4), 5-7.
SAC Attorneys LLP. (2022, May 6). Advantages and Disadvantages of Mergers and Acquisitions
. Retrieved November 7, 2022, from SAC Attorneys LLP: https://www.sacattorneys.com/advantages-and-disadvantages-of-mergers-and-
acquisitions.html
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