Post Merger dumb stuff...
 

Imagine having your current work load doubled permanently!

The company I work for recently merged with another and has made a bunch of people redundant. (IT Outsourcing/support company)
We've effectively lost half of our work force nation wide but we still have the same paying clients expecting a service.
I've worked for this company for almost 20 years. There have been a lot of changes in the industry but we've always been able to get the work done & keep our clients happy.

But after these latests redundancies I really don't know how we're going to be able to meet our commitments. I've never seen anything like this before!

At this stage I plan to hang around and do the best I can but if I was made redundant I wouldn't be disappointed.

If someone told me 12 months ago the company I worked for would do something like this, I never would've believed it.
Economic reality? It's funny how things change so quickly.

Economies of scale can become diseconomies of scale post merger.

While I agree it sucks this has been the reality for a long time now.

Take solace in that it's taken this long to affect you and you've had a relatively pleasant career.

Just before I retired my employer acquired another consumer healthcare division. We were told that we would be the controlling entity. What that really meant is that we'd only go through a 40% work force reduction while the acquired entity would endure a 60% reduction. I had all of my points and pension so bid them a'dieu!

The question is whether the shape of the cost vs. size curve is an L or a U.

I believe it is a U as at the small end of the size spectrum you don't have the scale to be efficient, at the large end, the overheads and inter-communication overwhelms the benefit of larger scale.

I also do not believe the model that it is an L with a downward slope out to infinite size, because then the true cost of any activity is zero, ergo, being flat, there is no further economy of scale to be gained past a certain point.

Your experience has been borne out in my experience many times, and it is always complicated by the learning curve into the new "normal", which may include lessening service levels and increased workloads.

You have my sympathies. Been there. Done That (many times). Am the cause of it (usually).

Dennis

Stages of two companies merging:

1) Send an email to all employees of both companies that everything will be the same, and no jobs will be eliminated to quell the unrest
2) After merger, fire half the IT, Billing, and advertising people. But make it clear that this in no way will effect the front line staff or face to face client care
3) Immediately thereafter, fire half the recpetionists, and helpers. "Right Size" positions and make sure everyone is working at the top of their license
4) Make everyone reapply for their job. Fire anyone that ever showed backbone.
5) Send out memo that everything is going great, morale is wonderful. Schedule group meeting.
6) Make sure all the white collar VP and President positions stay, offer golden umbrellas
7) Fire all mid level managers, report that they voluntarily left
8) Watch upper management all leave and cash out their pensions...
9) Redistribute workload to anyone left, explaining that "everyone everywhere" is working this hard
10) Watch all your best people come to their senses and quit.
11) Panic, give raises to anyone left and immediately try to recruit
12) Watch customers leave


Those are the steps... been there, suffered that...

Skip to step 10...

I've said it before: mergers of large, national players (or large, international players) is usually a bad idea. The only people that make out in those mergers are often the executives of the buying company. Customers, employees, and shareholders all get screwed.

(The merger of regional players or small local companies can often work out okay. Of course, any size company can buy another company with problems...and thus buy their problems.)

I suspect I've experienced more buyouts, "mergers", and takeovers than most can fathom...I couldn't begin to count 'em during my corporate career :(. I was a major player in them (IT)...I have nothing to add that will cheer you up unfortunately....that's part of the corporate bs I became sick of, so I called it quits after 25 years. Never looked back....:)

Thanks... This is close to what's actually happening! :eek:

I was told my manager "resigned" but I talked to him recently and he was actually made redundant. At least he got a pay out.

This is not true. It is usually the executives of the SELLING company who are the only ones who "make out" (Cashed out equity, accelerated vesting of options and restricted shares, severance pay a.k.a. "Golden Parachutes"). Shareholders also make out. They wouldn't approve the acquisition if the price wasn't acceptable.

...Customers, employees, and vendors?...All SCREWED!

The executives of BOTH entities "make out"... like bandits :(.

The buy-side execs CAN do well after the deal matures and the money hits the bottom line. The execs of the acquiring company are either leveraging the company which hit the balance sheet, spending cash reserves, or diluting equity to raise money. All these events put the seller execs at risk. If the deal doesn't meet projections, the buy-side execs that did the deal can lose they're jobs. If the acquirer is large enough to have an M&A team in-house, then those deal guys get nice bonuses, but that's about it.

Craig, you and I were in different corporate worlds...mine was with a couple of mega-banks and later big tobacco. Made a movie about my last rodeo....Leveraged Buy Outs suck :(. There was nary an executive in any of those organizations (buyer or seller) who didn't make a fortune imo.

I started out of grad school in Business Development for a $1BB diagnostic division of SmithKline Beecham, which became Quest Diagnostics (now $11BB). Went on to head M&A for a publicly traded biotech start-up taken public by Solomon Brothers in 1996, acquired by Genzyme Genetics, and eventually LabCorp. Started my own M&A consulting firm in 2004, mostly putting deals together for LabCorp ($12BB-"LH" NASDAQ). We did some buy-side roll-up work for private equity, but wasn't my cup of tea.

Of course the execs of the buying companies make big money already, but rarely was there any kind of immediate windfall from the closing of a deal for them. I made a LOT of the selling business's shareholders and execs rich beyond imagine. I once wired a guy $37MM out the escrow account for a business he started just 5 years earlier after selling it for $45MM. Within two years 80% of the business was lost by the buyer and several top buy-side execs lost their jobs.

I was like a bounty hunter. I dropped the body off at the jail, dead or alive. I got my money and rode of....never to look back. I didn't do integration. A few years ago I lost the stomach for it. I retired last January.

What we do in this country is merge the two companies. Fire half the staff. Then hire the fired people back as consultants at $100 to $200 an hour because the company can't work without them. Then Mr. Big who had the bright idea of firing half the staff pats himself on the back for reducing wages by 50% (because the consultants come out of a different budget) and promotes himself to director of something different so he doesn't need to face the fallout of his actions.

I knew you were a heavyweight in this arena from prior posts over the years....azzhole :).
I keed, I keed...

As for the first aspect...in the banking arena, I rode two broncos that are now wearing the BoA and Wells Fargo (Wachovia) brands....during the post banking deregulation daze that began in the mid 80s. The Pacman model....gobble, gobble, grow, grow, gobble, grow....

Bigger is better, economies of scale, synergies, blah, blah, blah....

The exec payoffs were due to sheer size after post acquisition imo. The execs at a 100B bank make coin....a 200B bank....bigger coin...almost immediate.

I was a burned out, rode hard, put away wet young bronco when I got sick of all that crap too....but I didn't get rich....oh well....:)

Life is/was good though....I was a young super techie (systems/network integration) doing what I loved on the tech side, but loathing the corporate cultures and mentality. To be clear, I never lost MY job...no resentment...just bad memories :(.

Another example....outsourcing (at a much smaller outfit though). CEO at my last rodeo made 7 million back in '08 as she began to dismantle a VERY profitable co. Outsource an IT dept (total fustercluck)...get an 8 million dollar raise in '09...then immediately retire...
At least she drove a Porsche :)

GREED is good....remember that line?

I saw it happen first hand....over, and over, and over again....

My advice to anyone in that type of environment as a peon (like I was)....get the hell out of Dodge...asap, it will never get better, only grows like a cancer that will hurt you....

Soooo that was you ;) ...I retired from what became Glaxo-SmithKline. SKB was a great place to work, innovative and open, then it became GSK.

Peter, why are you being so selfish? You should be thinking how great shareholder value and C suite compensation will be. And the consultants managing the whole process. Please think of them. It all trickles down, right?

Back when I was in r&d at the Research Triangle (IBM) fresh out of college, GSK had a huge presence at RTP....either of you ever involved with that? Just about every single employer at RTP was a dream gig....back then.

My how times change :(

Greed is fine, it just has to be motivated with the right incentives.

For example, most publicly traded companies focus obsessively on next quarter's numbers. Their current actions are looking ahead a full year at most, and "strategic plans" rarely go past a couple of years. The culture in publicly traded companies is one of short-term results at all costs and the fallout in a couple of years is the next CEO's problem. The sad thing is it didn't used to be this way, but the rise of hedge funds and mutual funds (with their large ownership stakes) and LBO's created such a culture. Once upon a time, a publicly traded company could have a bad year or two and actually spend the time to enact a sustainable, long-term turnaround. The CEO's head also wasn't on the chopping block when a quarter didn't meet "expectations".

I lived it Chris...you are not wrong :)

BS it only gushes up seldom trickles or even drips down

I agree. I lived it too. It was a three month panic cycle of trying to make earnings so the stock didn't tank. Most our income was from shares vesting ratably. :confused:

Related story...The company we took public specialized in the prognosis of many types of cancer, as well as a tumor registry and cryo-banking. We were super top heavy in institutional investors (hedge funds, pension funds, mutual funds). One morning a University released a paper on a successful therapy targeting angiogenesis in tumors, possible a future cure for cancer. The institutional investors DEMANDED we hold an investor relations meeting. All these arrogant rich Fu@Ks sat around a conference table demanding a strategy for handling this crisis. I stood up and said..."I can think of a lot worse things than your investment crashing because they found a cure for cancer!", and I walked out. I was never allowed to speak to investors after that.

Flatbutt, SKB was an awesome company. My favorite job of all. During the change, the diagnostic division was spun off. All downhill from there.

This^^^^ "Trickle down economics", a Ronald Reagan mind trick.

Only for meetings and conferences. After leaving the bench I did a lot of consulting at our global sites. First for lab robotics, then lab control systems. After that I got into Regulatory Affairs and Compliance. So a lot of travel.

SKB/GSK must have had 6 buildings full of people. When I retired we were down to 3 (IIRC).

Our company got bought a couple of times and is now in the hands of a private equity firm. Five years ago we had a lavish Christmas party, people enjoyed working there, and now we are left with Luby's style cafeteria holiday lunch buffet that we should be thankful for. Attrition has been high, new hires lacking, and raises or bonuses hard to come by even though the company is growing.

So thoughts of an early retirement have been swirling about my mind but I don't want to leave my friends and co-workers in a bind if I were to give two weeks notice. I need to come up with a plan that makes the company realize what I should be worth to them and if they don't care, negotiate a way out that doesn't put clients and co-workers in a bad place. This probably be a separate post.

A golden shower! Wheeeee!

and it continues... Things are just barely humming along but a whole bunch of good people have now moved on. I'm one of the last "originals" left nationally.

There seem to be more sycophants around trying to gain brownie points from the few mid level mangers that are left.
Announcing their successes via an email? I've never been able to respect people like that.

My plan is to stick around and do the best I can. I still have what I would call a good job & there's a part of me that's curious as to how bad things can get. It has certainly been interesting so far.

So here's a question. What can you do if you think the company you work for is making unethical decisions?
As far as I can tell they haven't broken any laws but they've certainly done some awful things to people that worked for them for a long time.

Our Outsourcing company has been inplace for a year now, and they have $%$%$ up so much it's not funny... They've genuinely cost us more $ fixing their mistakes than they have saved, by a a wide margin... management is still standing behind their decision ( and bonus) but it's out in the open now, and sooner or later we'll walk it back, it almost always happens....

... and that's it. I was made redundant today. SmileWavy

A nice payout after nearly 19 years of service $$$... So the plan is to take some time off and maybe travel to Denver to catch up with my BIL and sister.

Onwards and upwards!

The megacorp I work with has lost one of it's main clients, and due to production issues, may lose another 25% client. We have enough to keep us all working for a few years, but unless a rabbit can be pulled out of the hat, so to speak, they may start the downsizing process....just uin time for a nice early retirement with a 25 year pension (6 years until I can pull from 401K which is fully funded by it's top 50, fortune 500 parent company.)

It's been over ten years now for me....no regrets whatsoever. Enjoy the rest of the journey Peter!

If you have a decent 401k/IRA....make sure you are aware of 72(t) distribution rules...to avoid IRS penalties. Been a lot of bad info from corporate/financial types forever regarding these....don't know if it's changed.

Congrats and my condolences?!?

Glad you got a good payout and you don't seem too upset. At least you seemed to have seen it coming. Good luck with whatever you decide to do next.

All too common these days and I suspect that it will continue, especially with family owned businesses with no succession plans as the kids have no interest in the business.
Went through this as well. Transdigm Group bought us. "No immediate or big changes", blah, blah.... Staff reductions almost immediately, over 50 offered buyouts, more staff reductions and drastically increased work loads. I was designated as a "franchise player" and kept because of 25 years of experience with the company. I endured 4 years of greatly increased hours, incredible stress and constant concern about what I could not get done. Came back from a ski trip and pulled the plug 3 days later. I remember, with glee, the long faces on the mahogany row players that day:)
Been retired almost 7 years and am loving every minute of it. My division has struggled with high turnover, hires from outside the aero industry who come cheap and a serious decline in quality and delivery.
BTW, the CEO of Transdigm was paid $61 mil last year and over $250 mil over the last 5 years.

Peter, enjoy the break and make it permanent if you can. You will not regret it.

Threads like this make me glad I never got on the large corporate hamster wheel. From the outside looking in I have seen several large companies get larger through mergers. And often the few contacts we had at the company get replaced, and we lose a client because the new person has no idea how to contact us for that service. And on many occasions, the few really smart guys that were doing the work get replaced by the bosses favorite ass kisser. One one occasion, the three guys that knew the job the best at one company all were fired. They formed their own company and went on to find new clients, and often the old clients went with them, because they knew the three guys were the brains of the former company. One of our good customers is a company that formed from the smart ones fired at a mega company.

Just remember guys, you work to live, not live to work. Those corps seem to really like to push people .
You only get one life, make sure to live it a little bit, and not sell your soul for a $. ( as I embark on my 3rd 12 hour day in a row ) .
Wifey just went through this. Big corp purchased her little company . Worked her like a dog throughout the merger. It took a little over a year . 2 days after she got them through the last hurdle, she got her walking papers.
They paid her well, but really used her up .
Im glad to be in my dirty cold garage today, totally in control of my own destiny.

I've been through several mergers and buy-outs in my career, all of them went fine with no real drama or negative consequences. In the end I would say they were mostly positive.

But obviously I am the exception to that rule.

Or maybe everyone else is just following the GENERAL ELECTRIC business model. That never ever ends well.
Did you know that GE was the very first corporation to screw up a wet dream?

First, Congrats Peter. From your tone, it sounds like you got a decent severance package. Take a deep breath now and take that trip to Denver...take the long way. SmileWavy

Fastfred, you got it right. The corporate hamster wheel is pure hell.