Post Merger dumb stuff...

[sc_rufctr]

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.

[legion]

Economies of scale can become diseconomies of scale post merger.

[stomachmonkey]

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.

[flatbutt]

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!

[Iciclehead]

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

[Deschodt]

[bpu699]

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...

[legion]

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.)

[KFC911]

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....

[sc_rufctr]

Originally Posted by bpu699

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...

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

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.

[legion]

[Craig T]

Originally Posted by legion

The only people that make out in those mergers are often the executives of the buying company. Customers, employees, and shareholders all get screwed.

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!

[KFC911]

Originally Posted by Craig T

This is not true. It is usually the executives of the SELLING company who are the only ones who "make out" ....

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

[Craig T]

Originally Posted by KC911

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.

[KFC911]

Originally Posted by Craig T

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.

[Craig T]

Originally Posted by KC911

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.

[Bill Douglas]

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.

[KFC911]

Originally Posted by Craig T

...

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.....

. A few years ago I lost the stomach for it. I retired last January.

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....

[flatbutt]

Originally Posted by Craig T

I started out of grad school in Business Development for a $1BB diagnostic division of SmithKline Beecham, which became Quest Diagnostics (now $11BB). .

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.

[Shaun @ Tru6]

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?