Mergers, Acquisitions and Unemployment

Mergers, Acquisitions and Unemployment
March 26, 2018 admin
In Employees
Mergers, acquisitions and unemployment

One of the easiest ways to lose your job is when your company is acquired, or is the small fish in a merger.

This ugly reality has come to the forefront again. Many industries go through radical cycles of mergers and acquisitions (M&A). The current acquisition splurge is amplified by cheap money, causing more and larger deals to be made. And as a result, layoffs are routine and even more painful.

Knowing who, how and why people lose their jobs during an M&A is helpful. So too is knowing this may be the best thing to happen to your career.

The realities of being “excessed”

The main reason people achieve unemployment during an M&A is that there are too many employees for the united companies. Executives often cite “cost efficiencies” as a justification for an M&A, with one of the costs being employee salaries and benefits. Reduce headcount and you achieve “cost efficiency,” which makes investors beam with delight.

The numbers are sadly compelling. Depending on the industry, market realities and investor profit demands, between 15 and 50% of the work force of the acquired company (this includes the smaller company in a merger) can be let go. That is a lot of people suddenly receiving unemployment checks.

The brunt of the losses comes mainly from the acquired company. In deals where the acquiring company wants key technologies and a few select people, the layoffs can be practically company-wide. But it is almost exclusively staff from the acquired firm. Some staff from the acquiring company might be seen as redundant, and often any marginal employee will be let go as part of the consolidation. But it is the people on the other end of the deal who suffer most.

This is in part practical, and in part irrational bias. Some common justifications for bloodletting within the acquired company include:

  • They must be lousy employees because they were not doing as well as we are.
  • We know more about the industry, so they would merely be a drag.
  • They won’t fit into our corporate culture.

The good news is that employees closest to making products are least likely to be let go. After all, they create what can be sold. But staff positions – management, sales, accounting, purchasing, even marketing – are the ones most likely handed a pink slip.

What to do if you are vulnerable

The good news is that you are in the driver’s seat, if you are watchful and proactive.

M&As are rarely surprises. Rumors, news reports, even direct communications from your management may detail an M&A in the works. From start to finish, an M&A takes 3–9 months when it is not opposed… longer when management, shareholders or regulators get involved. Alerted, you can make rational plans and take advantage of the situation.

First, know that during the M&A process, your company cannot afford to lose you. In order to keep valuations high, motivation up and investor/acquirer confidence positive, they need you. This is leverage. With it you can make interesting things happen for your benefit.

If you begin asking the right questions, and make it known that you are looking for a new job, you can demand many things if management starts asking you to stay. Foremost might be to lock in a retainer or exceptional severance package. Neither shows up on the books in ways that would disrupt the M&A, and both offer you ways of staying employed or being better compensated for being unemployed when the axe falls. With this tactic, you also have nothing to lose. Worst case is that they will let you go when they let everyone else leave, but you will have a head start in job hunting.

The other upside is that your job may not be all that great. The world is full of opportunities, and often we humans don’t seek them except via necessity. If you see an M&A coming, know that your company is looking to be absorbed. You will be out of a job… eventually. Might not be this M&A, but it will likely happen someday. Start thinking now about what you would like to do instead of what you are doing, and set your course accordingly.

Stay calm and move ahead

Don’t stress out. You are employed now because you are valuable. That has not changed.

And never forget that the job you have now you likely got when you started looking for work. This too is a constant.

But, layoffs are never fun. Just start networking as soon as you get any indication that your company is being acquired. If you decide to hang in there, make sure you fully understand your odds of remaining and at what position. Get an inside scoop of the likely termination package, and see if you can do better. But foremost, view this as an opportunity to beat the rush, grow your career and live life more fully.

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