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What is it like to Work for a Company that is Acquired?

Over the last 15 years of my career I have personally been involved in about 10 Mergers and Acquisitions (M&A) projects.  Today I lead the systems and process integration side for the supply chain of a large corporation.  As such I know a thing or two about what happens during M&A. The most common question people ask is, what happens to my job when my company is acquired?

Give my experience on these projects, as well as my experience seeing such activities across 2 separate large corporations, I figured I might have some wisdom to impart.  After all part of my responsibilities today include trying to put others at ease given this type of anxiety.

The Type of Deal in an Acquisition is Important

So the first thing to understand is, what really happens when a company is acquired depends on the type of deal.    In an asset deal a company is just acquiring the assets of another company.  In this case the purchase is done on an individual asset and liability basis.  If it’s not called out, it’s not transferred.

Conversely a stock deal is the transfer of wholesale ownership of a company.    In this case the ownership of the company lock stock and barrel transfers to the acquiring company.  

In the former asset deal your position as an employee depends on if you are transferred with the assets.  In the stock deal you automatically have a new employer.    So where you end up depends initially on the type of deal.

Offered a Job in the Combined Company, What Does that Mean

Say you are transferred to the acquired company.  What happens to you also depends on the size of the acquired and acquiring company combined with your position in it.  Let’s look at each combination in term.

Executives at an Acquired Company

Let’s start with being an executive at a smaller acquired company.   Depending on whether you as an executive were considered an integral leader you will probably have a retainer for the first year to 3 of the acquisition.  During this time you are expected to stick around while the acquired company is acclimated.    For those at the utmost pinnacle this is often even tied to the payout of the acquisition as a sort of performance bonus.    

Executives at a larger acquired company sometimes have a possibility of moving laterally into the acquired company’s management.  But if you are a smaller company executive the likelihood is high you will be shown the door after the acclamation period.  Still that severance or bonus you receive probably makes it worth sticking around.

What Happens To The Rest of Us When Our Company is Acquired

Executives out of the way, what about the rest of us poor acquired schmucks.  Well that depends.  Key acquired company employees will likely get a retention bonus.    In some cases those who are underpaid compared to the acquiring company’s pay scale might even receive a pay increase.    So it’s not all bad for the rest of us…

Downsides in a Acquisition

But there is one key downside to being acquired as a regular employee.  There are probably less opportunities for promotion in your near term.  Let’s be honest, the acquiring company keeps employees on to help keep things stable or because the acquired company employees have unique knowledge.  It does not keep the acquired talent on to replace their own managers which they will obviously favor when it comes time for promotion.  So honestly, if you are looking for a move up being acquired is probably a sign to move out.  If you enjoy your job, it might be advantageous to stick around and see what happens.

Losing Your Job from an M&A Event

But what about the possibility as a regular employee of losing your job?  Well honestly people do usually lose their jobs in an acquisition.  But it usually happens after integration completes to maintain stability through the process.   Also these employees often get generous packages to stick around until the right time.   Being acquired can be good for your wallet in the right situation.

Signs Your Job May Not Continue When You Are Acquired

On a smaller scale those that lose their jobs tend to be in roles that the acquired company centralizes.  So when you are acquired pay attention to those you work with in your function.  If all of them are centralized off shore or at one site, that might be a sign that your job is in danger.

However sometimes company’s do larger layoffs when acquiring a company.  This usually happens when the larger company plans to shut down the acquired company’s operations or move them offshore entirely.    Say closing a manufacturing plant or even just utilizing the patents.  In these cases the best sign to your long term site chances are whether the acquirer is investing in your site.  If they sign a new lease or buy the building in an asset deal you probably have a low likelihood that the site will be closed.  If they do the bare minimum to integrate you, it’s probably a sign to get out of dodge.

The final recommendation on the job and pay front I’d have for any acquired employee is to talk to other acquired employees.  Most large corporations have done multiple acquisitions over the last few years.  So what happened to the last set of employees the company acquired?  Companies that acquire often typically have playbooks for these type of things.  So you can tell a lot by finding out how it went for those who went before you.

Be Prepared to Adjust to Change

The thing is, the amount of change for the acquired company doesn’t end with keeping your job.    The larger company will change your policies and even your culture.  Do some research and see how well you fit with those policies and culture.  If it’s not a good fit, it might be a time to look.  Conversely if they match you, then take advantage of your new benefits and culture.

How Systems and Process Change during a Merger

Now we come to systems and process integration.  This one is a per company situation.  Some companies buy others and then essentially leave them to run on their own systems and processes.  Simply replace management (or in some rare cases not) and let them continue to operate.  Some push any acquired company over to their systems as quickly as possible.  Finally others do something in the middle.  Again finding out about what others have experienced before is critical.  But regardless of which route your acquirer tends to take, prepare for significant change.  Change is a constant in the corporate world,, but in an M&A environment it is on steroids.

Speak Up About Key Processes and Requirements For Your Business

That change is probably going to require input from you.  Don’t hesitate to respectfully speak up about what is required to do right by your organization.  While some organizations do prefer yes men, most prefer getting the right answer instead.  If the organization that acquired you prefers yes men your days are probably numbered anyway since they won’t be able to adapt your business.  So speak up.  Typically in a company the best and sometimes last time to get system improvements is during the actual integration.  So get it right the first time.

Acquisition Sources of Value Are Rarely Achieved

Acquisitions typically come with targets that the acquiring company hopes to get out of the acquisition.    Don’t sweat these if you see them published.    I will tell you, without qualification, that rarely are those targets met.  Thats not speaking just for my company, that is for every company.  A good consultant we once hired for a larger acquisition who had done hundreds of them once quoted me as 99% failing to meet those targets across corporations.  I have no doubt this is true.  Focus on what is best for the business and not disrupting your organization.  Let those above you worry about whether the justifications for buying your company were met.

Network, Network, Network…

A final note, throughout the whole process take the time to get to know your new coworkers.   While it is likely as noted earlier you won’t be getting a promotion any time soon, still somewhere down the line the contacts could be advantageous.

Any questions about acquisitions and how it impacts people?  Realize I can’t talk about specifics or inform you of the company for which I work due to numerous confidentiality agreements.  But all of what I have written here applies in pretty much any acquisition by a corporation.

12 Comments

  1. Sport of Money
    Sport of Money June 22, 2020

    It sounds bad for the employees of the acquired smaller firm.

    Do you have any advice for those employees who want to thrive in the new firm? Is there anything an employee of an acquired firm can do early on to stack the deck in favor of that employee?

    • FullTimeFinance
      FullTimeFinance June 22, 2020

      It can be. But then again I’ve seen employees at smaller firms get significant pay raises to align with corporate pay.

      The number one thing you can do is study the acquisition companies culture and do your best to fit it. Otherwise get your work done, highlight your accomplishments come raise time, and be helpful above and beyond. So not really much different then getting a raise.

  2. Steveark
    Steveark June 22, 2020

    I was employed at a company which was acquired twice in my career. Both times it was an immediate promotion and large raise. The second time they made me a corporate officer in the acquiring Fortune 200 company. It was hard to find anything to complain about either time!

    • FullTimeFinance
      FullTimeFinance June 22, 2020

      Man sounds like you lucked out.

  3. Possibly a very relevant post as there’s going to be a lot of change in the next few years as old companies get bought over.

    My experience is that company culture is very site specific and when M&A happens, things never settle down.
    Also, when they decide who stays and who goes, it’s who is liked that stays and the ones that don’t fit in are given the heave-ho.
    I have seen it a few times and it’s funny how it’s obvious in retrospect when people’s job titles suddenly change and next thing they are “in scope” for redundancy.

    • FullTimeFinance
      FullTimeFinance June 22, 2020

      There are definitely obvious signs to who stays and who goes. I suspect you are right about an increase in M and A over the next few years.

  4. Navras
    Navras June 23, 2020

    FTF,

    You’re absolutely hit the nail on the head. Our company did a similar acquisition a couple of years ago and did all of the things you mentioned.

    One thing you didn’t talk is the relationship between employees and senior management in the acquired company before acquisition. It helps to be in good standing with management as they can sometimes provide inputs to the company on whom to keep and not.

    Our company did one with a mid-sized company a few years ago and we had a checklist of boxes to tick between integration teams from both sides with a temporary CEO in-charge of the whole transition, which lasted a few years.

    Also, as you work in supply chain (just like I do), another activity involves reviewing each and every contract, termination dates and potential early termination payouts so the integration happens 1-2 years post-acquisition (esp. for larger firms)

    • FullTimeFinance
      FullTimeFinance June 27, 2020

      Great point with the contracts and contacts.

      Unions also make integration especially tricky. Depending on site contracts or union contracts you might be able to glean something about the transition timeline.

  5. Susie Q
    Susie Q June 24, 2020

    Another risk of working for a company that gets acquired is a change in job responsibilities. In my case, the acquiring company had people that did my job but wanted to keep me for my “expertise.” My new responsibilities were nothing like what I had done previously. Fortunately, I was able to retire just a little earlier than planned.

    • FullTimeFinance
      FullTimeFinance June 27, 2020

      Very true. Especially private company to corporation. A private company doesn’t have to follow Sarbanes Oxley rules for separation of duty. A large company does. So often a change of job responsibilities is a requirement.

  6. Q-FI
    Q-FI June 28, 2020

    These are all good points to think about if your company is acquired. I’m on the front-end acquisition side of M&A and mostly bow out once we have acquired the company so I don’t deal with integration too much first hand. But from everything I’ve seen on both sides of it, your summary is spot on. I think this topic is something a lot of people don’t think about, but if they work in the corporate world, they should. Especially after all the change COVID is going to cause, I see M&A activity going through the roof during the next few years.

    • FullTimeFinance
      FullTimeFinance June 29, 2020

      I’m not too involved in the front end. I get asked my opinion during due diligence but not sure how much it matters. I find that side is fascinating as well. Are you on the finance side of the house?

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