Research Report about the Merger Syndrome

Scientific Essay 2010 9 Pages

Leadership and Human Resource Management - Miscellaneous



1 Introduction

2 Problem Identification

3 Merger syndrome
3.1 Definition
3.2 Negative consequences of the merger syndrome

4 Recommendations: How to deal with the merger syndrome?

5 Conclusion

6 References

1 Introduction

Although mergers have become a popular strategy to reach organisational growth, diversify products, or obtain competitive advantage, the amalgamations do not always lead to improvement and success and often fail, as mergers are accompanied with several severe potential problems (Pikula, 1999). For this research report, the case Grape Expectations: A Case Study of the Southcorp-Rosemount merger, written by John Rice and Peter Galvin and published in 2005, serves as basis for the identification of a problem related to mergers. The study deals with the acquisition of Rosemount Estates by Southcorp Wines in 2001. In this context, it analyses the strategic drivers of the merger, and the tensions and benefits resulting from the acquisition. This research report will examine the merger syndrome in detail, which is one major problem out of many issues related to mergers. The paper will identify the major negative consequences of the merger syndrome and analyse how to deal with it. It will argue that, for managers, the best way to deal with the merger syndrome is to provide good communication to calm and motivate employees and also a retention programme in order to assure employees’ loyalty to the company during the merger.

2 Problem Identification

As mentioned in the case study Grape Expectations: A Case Study of the Southcorp-Rosemount merger, two months after the merger, the merged group dismissed more than 100 senior employees (Rice & Galvin, 2005). According to Pikula (1999), dismissals and changes in jobs are common consequences of mergers, as the corporate structure will change, jobs will overlap and the merged company has to reduce costs to operate successfully in the future. For example, Stoneman (1999) states that job cuts related to mergers accounted for almost 74.000 in the USA in 1998. Therefore, in the course of a merger, employees fear significant changes and that they might even lose their jobs as the structure of their company will be transformed. This fear, the general uncertainty about the future of the company, and the likelihood of change are the main reasons for the so-called merger syndrome (Marks & Mirvis, 1997).

3 Merger syndrome

The merger syndrome will be analysed in detail in the following. After a definition, the negative consequences of the syndrome will be identified.

3.1 Definition

In 1988, Hunsaker and Coombs (as cited in Pikula, 1999) defined the negative emotional consequences that employees experience during mergers, as merger syndrome. According to the authors, the merger syndrome consists of nine stages. Figure 3.1 illustrates the different emotional stages from the news of the merger to the commitment to the situation.

illustration not visible in this excerpt

Figure 3.1 Stages in the Merger-Emotions Syndrome:

(Source: Pikula, 1999, p. 7)

First, employees deny that the company they are working for will change. Secondly, when the merger is conducted, employees fear the changes and the unknown results for their future. In the next stage, employees get angry because they cannot prevent the change. Next, they are sad because they realize that things will definitely change and that they will have to accept the merger and its consequences. In the next stage, employees finally accept the situation and try to find something positive about it. The sixth stage is called relief. Now, employees may notice “that the situation is not as inauspicious as they had envisioned” (Pikula, 1999, p. 7). Then, employees become interested in new possibilities and opportunities. In the eighth step, called linking, they discover these new opportunities and start to feel good about the change. According to Pikula (1999, p. 7), the last stage is when employees “discover that the new situation is working out well and feel more secure and comfortable”.



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Griffith University
Merger Syndrome merger layoffs

Title: Research Report about the Merger Syndrome