The Dark Side of Mergers & Acquisitions


The Dark Side of Mergers & Acquisitions

When companies get acquired, founders and early employees make money. At least that’s how it is made out to be. There are many happy outcomes to an acquisition.Angels-and-Demons-Tax-on-Angel-Investment-Budget-2012.jpg

Some instability and chaos is part of almost every merger & acquisition. As the ecommerce industry consolidates & smaller deals pick up, if you are a startup employee, it won’t be a bad idea to be ready for it.

In large firms, HR readiness for M&A is taken quite seriously they tell me. Pre & post acquisition surveys, communication processes and months of planning & integration makes it smoother, although there is always some attrition.

But for startups, none of this exists. At an organisational level, there is very little readiness. Of course, in many cases, the founders are considerate enough but many mergers these days are shotgun weddings. Time is often a luxury no one can afford. Founders themselves are helpless in many cases.

Like I’d written before, startup employees are made of a different fabric (it is one hell of a ride!) and you will live to tell the tale.

Take some recent examples.

BabyOye & Hoopos

In 2013, BabyOye and Hoopos merged. The two companies, both retailing in baby products, had common investors. A year later, when push came to shove, and BabyOye had to “rightsize” many from the Hoopos team had to leave the company.

Often, the merged entity ends up with two of each roles and sooner or later someone has to go. A company can’t have two chief financial officers or even two visions of how things should be done. Also, when companies have to downsize, they tend to fire people they haven’t hired in the first place.

What can you do about it? Be indispensable by being on top of your game. Companies in firefighting mode can’t really afford to lose their best talent.

Fashionandyou & Urbantouch

This one was very messy. After the acquisition, much laundry was washed in public. Finally, when the dust settled, many heads had rolled. There is enough evidence pointing to a bad cultural fit & big egos at work.

One can’t predict how things turn out but it’s always a good idea to be upfront with your employer. Once you take the guesswork out of who’s camping with who, you’d probably have a fair idea of how to negotiate tricky situations.

Naspers Acquisition of redBus

This acquisition was one of the best things that happened last year. However, after redBus was acquired for Rs 800 cr by South African media conglomerate Naspers some senior employees quit because their shares hadn’t vested and there wasn’t an accelerated vesting option.

In many cases, the effect of an M&A on employees depends on the way a deal is structured. Sometimes, the deal specifies that the employees stay back for a period or forgo their earnings from the deal. For lower level employees, this hardly matters.

Sometimes, there isn’t much you can do. You could try and negotiate better terms with the management. Or your founder.

To be fair, the positive outcome of the acquisition for employees is that all redBus employees got a higher salary as Naspers levelled their pay with company standards.

At the end of the day, your experience at the startup counts.

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