Mergers and acquisitions often drastically alter the companies involved. In a merger, two companies combine their operations into one larger business. In an acquisition scenario, one company purchases another along with all of its resources, such as intellectual property.
In both mergers and acquisitions, redundancy can be a serious concern. The combined final business or acquiring company may have to address duplicate equipment, an excess of facilities or redundant employee positions. How can organizations address redundancy to minimize the financial challenges of a merger or acquisition?
By prioritizing efficiency
The cost of operating two previously separate but now combined businesses can be higher than operating either business on its own. Organizations often need to do a comprehensive analysis of each facility, production line and department to determine how to address redundancies.
Often, the focus is on establishing the most efficient and streamlined final organization. It may be necessary to close certain facilities. The business may be able to terminate commercial leases or sell excess real property.
It may also be necessary to liquidate machinery and equipment. Idling and reselling older production lines and aged equipment can help allow a business completing a merger or acquisition to retain the best equipment and optimize organizational efficiency.
By downsizing staff
Mergers or acquisitions almost invariably result in some terminations or layoffs. Businesses don’t need two separate payroll departments after they acquire another business or merge with another company.
The organization may identify certain employees who are more productive than others. They may also base decisions on seniority. Typically, downsizing during a merger or acquisition requires great care to limit accusations of discrimination or retaliation.
The overall process of addressing redundancy often begins during merger or acquisition negotiations and carries on for months after the completion of the transaction in many cases. Companies need to have a plan for how they evaluate workers and assets to determine what they keep and what they need to eliminate.
Understanding the challenges that arise after a merger or acquisition can help organizational leadership prepare for difficult transitions and decisions. Redundancy can affect company solvency if leaders aren’t proactive about addressing it as quickly as possible. Those who approach the process carefully can help limit the likelihood of a lawsuit or future operational challenges for their business.