One of the issues resulting from mergers and acquisitions is integrating the different cultures of different companies merging. The merger can be catastrophic when implemented without considering the cultures of the different people in the organizations. There maybe strong differences between the values and attitudes of the two companies especially in multinational mergers. Imposition of new cultures can create uncertainty to employees, which may affect their performance.
The other issue is the increased costs of altering the working processes, structures, procedures, and policies. In addition, mergers results to deployment of people and employment of others. This results in need for further training, which means more investments. In addition, there are other indirect costs of dealing with demoralized and overworked and demoralized employees.
The other issue is decreased productivity resulting from the changes in the work force. One of the reasons why companies merge is they want to reduce costs on staff expenses. The reduced number of workforce may be result to overworking to demoralization. This results in reduced productivity. Research has shown that mergers and acquisitions results in 20-30% of reduced productivity due to the above reasons.
However, the benefits of the mergers are enormous and outweigh the above problems. One of the reasons is the growth potential resulting from mergers. Small companies require capital to grow, which can be achieved through mergers. Mergers also benefit the organization in that they acquire qualified management and staff who ensure effective management of the organizations. There is also another reason for increased productivity. When companies merger, they maybe to increase their productivity, form monopolies and dominate the market. This will result to increased growth of the company. Companies are also able to obtain economies of scale from mergers. This is because they will be able to purchase and produce in bulk. Lastly, the companies enjoy synergetic benefits, where the total value of the new firm is greater than the value of the two firms added together separately.