Merging two companies is like trying to blend families in a second marriage. The decision to combine was made at the top by few, and everyone below has to deal with it.
No one knows how it will affect them, or what their place will be in the new enterprise. Like the kids involved in a blended family, employees on both sides feel threatened. While the newlyweds are celebrating, the kids are feeling abandoned, planning sabotage across blood lines, or even escape! Just as the single biggest cause of second marriages is the blending of children, the single biggest cause of failed mergers is the blending of employees.
Most mergers fail to deliver the kind of investor value they initially promise. Early examples date back to the “Guilded Age,” when railroad developers and operators used financial engineering to sell their European investors on the value of acquiring other railroads, and J. Pierpont Morgan eventually had to put them into receivership to sort out the mess. Later 20th century history showed us the high-profile failed merger between Daimler-Benz and Chrysler, a combination that promised efficiencies and synergies, but delivered nothing but two “divorced,” weaker companies.
American Airlines and US Air are still moving forward with their integration. Anyone who flies often out of DFW Airport can feel the apathy of American Airlines employees, from the people checking us in, to the flight attendants during the journey. An American Airlines manager told me, “People aren’t happy. We don’t feel listened to.” Customers become the victims here. Compared to flying on Southwest or Virgin America, it’s quite unpleasant. Sorry Mr. Parker, the new interiors don’t make up for the rest.
In all the genius that goes into a merger, with all the strategic planning done by leadership teams, and the millions of dollars of investment banking and legal fees, it’s amazing how little attention, and investment, is put into the most complicated part of the transaction: the human part. Every company, even within the same city, state, country, and industry, has a unique company culture.
If care isn’t taken in opening lines of communication, getting buy-in from departments and teams, and collaboration across the formerly independent organizations, failure is eminent.
AT&T’s Lori Lee has her work cut out for her, charged with managing the acquisition and merger with Time Warner. As an AT&T stockholder, I’m optimistic when reading about the increased market share and technological advantages that will result from this merger. I just know that if she isn’t addressing the culture clash that is about to take place, my retirement account is sure to suffer.