Measuring the Impact of Mergers and Acquisitions

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Measuring the Impact Of Mergers and Acquisitions

"Mergers and acquisitions impose a new reality upon organizations. Often they enable companies to streamline business activities, but frequently they create many problems that result in lesser productivity, market share, and proffits." So began a four-page American Management Association (AMA) questionnaire mailed in the spring of 1988 to selected companies recently engaged in mergers and acquisitions. Its emphasis: the impact of mergers or acquisitions on the newly formed organization's human resources and information systems functions.

The questionnaire, designed with the help of Control Data Corporation's Business Centers and the accounting firm KPMG Peat Marwick, drew 109 responses (see Table I, this page). The data showed the degree to which problems were anticipated and the measures the responding firms took to deal with such problems.

We do not intend to develop benchmark statistics for all mergers and acquisitions that have taken place in recent years--sources estimate that number to be anywhere from 3,500 to 7,500 annually. Also, AMA was aware that the majority of companies acquired in the 1980s were small ones that had ill-defined or nonexistent human resources or information systems departments. The researchers instead sought in-depth information about the specific functional areas of human resources and information management.

There were no inquiries in this survey about how target companies were identified, about any of the purely financial or market data that acquiring companies seek, or about whether takeovers were friendly or hostile. The focus, as always in AMA research, was on the management side of these issues: how companies deal with the new realisties in human resources and in information systems in the aftermath of a merger or acquisition.

WHAT WE ASKED

The AMA questionnaire featured four fields of inquiry, which covered the following:

* What information was available to the acquiring or parent company prior to the acquisition or merger?

* What impact did the acquisition or merger have on the human resources function in the newly formed organization?

* What impact did the acquisition or merger have on the management information system in the newly formed organization?

* What were the tangible results of the acquisition or merger in the 12 months following the event? How is success best measured?

In each field, respondents were asked to make qualitative judgments, even though such judgments are inherently subjective. But where appropriate, we also asked for quantitative data--hard numbers on workforce reductions where they occurred, or on the costs of merging information systems. And while we did not ask for specific figures in the final section of the questionnaire, we listed four problem areas that are quantifiable: loss in worker productivity, loss of market share, reduced profitability, and high employee turnover. …