Situation: A company is considering a merger. The other firm competes with customers who account for 25% of the company’s current revenue. How do you maximize the value of this merger to the company while mitigating the negative impact on current business?
Advice from the CEOs:
- The maximum risk from the combination is loss of 25% of current revenue. The merger makes sense if you believe you will gain upside which more than counters this risk.
- Both companies have brand equity. Maintain both brands and to continue to promote them. Maintaining both brands will buy you time to replace business which is potentially at risk.
- Talk to customers and get their perceptions of the pros and cons of the potential combination. Ask about any concerns that they may have. Understanding the pros, cons and concerns will help you to mitigate negative fall-out.
- Legally, in a 50/50 split, the Chairman will call the shots. You will have little recourse to counter the Chairman if he decides to fire you. This individual has built his company through previous mergers. Visit and break bread with those who were principals of these companies at the time they were merged or acquired. This will tell you a great deal about the individual with whom you entrusting your future. You will also learn what the others did during their mergers to help plan your own moves.
- Give yourself a back door or Golden Parachute after six months if the merger does not go as you anticipate.
Key Words: Merger, Competition, Value, Mitigate, Upside, Risk, Market, Access, Brand, Equity, Customers, Pros, Cons, Concerns, Control, History, Golden Parachute