Last month, we rounded up just some of the most prolific mergers and acquisitions in transport and infrastructure from 2018 in our movers and shakers companies’ edition. Mergers and acquisitions of transport and infrastructure businesses are nothing new. Over the last decade, the industry has been flooded with buyouts and unions, with new company ownerships and structures seemingly being announced weekly.
Size is a key asset when tackling the international market. While organic growth may work for some, mergers and acquisitions are often seen as the best means of increasing business growth quickly. Since the Brexit vote, and the subsequent drop in exchange rate, buying up UK companies has never looked more attractive.
Last month it was announced that Global Infrastructure Partners (GIP) would sell its 50.01% stake of Gatwick’s shares to the French firm VINCI Airports for around £2.9billion. Gatwick will become the largest airport in the VINCI group’s portfolio.
Gatwick Chief Executive Stewart Wingate has stressed that there will be no changes to the senior management team at Gatwick as a result of the deal, and adds that the deal “is good news for the airport as it will mean both continuity but also further investment for passengers over the coming years to improve our services further.”
Mergers and acquisitions may make good business sense, for the shareholders concerned. But it is crucial to remember the significant impact they have on staff. Major changes will follow and not everyone will be overjoyed at the shift.
For competitors this is a prime opportunity to prey on disgruntled employees, particularly if the recruiting company’s culture is in line with the original culture of the company being acquired.
Your intellectual capital is what has made the company such an attractive purchase, so what can you do to minimise disruption?
1. Retaining key members of the team
As soon as the first whispers of a buy-out start making the rounds, some staff are going to be considering their options. You need to decide straight off the bat who is critical to the business and lock them in with a reason to stay and invest in the new company.
Most M&A models include a retention incentive plan, which is usually in the form of a two or three year bonus scheme to encourage senior team members to remain the organisation through the transition.
This should be communicated and agreed with employees immediately, before any announcements are made to the wider company. You must take action before they do.
2. Structural and Leadership changes
“Merger Syndrome” is the presence of uncertainty and anxiety-raising speculation around change, causing stress.
Changes need to happen quickly. If you are going to make changes to the leadership and organisational structure, do so as soon as possible. It’s no good to have a vague plan for the next three years.
When WSP merged with Parsons Brinckerhoff in 2015, the company underwent a significant overhaul. In total, of nine senior Directors, six roles went to former WSP bosses, and three to Parsons Brinckerhoff managers. The companies were operating as one from March, and by April, the restructure had been announced.
Similarly, after the Jacobs CH2M buy out was approved in December 2017, several high profile CH2M directors parted ways with the company almost immediately, including their European Managing Director.
Staff need clear and consistent communication to minimise uncertainty. If your employees know what is going on, they are far less likely to consider their plan B’s. It is important to communicate as often as possible to keep everyone in the loop. Even if there is nothing new to report – let them know!
3. Culture and Brand
Likewise, the brand and culture of the new company should be established quickly. To some, the brand and reputation of a company are of significant value. For instance, when Atkins was bought by SNC in 2017, it was a highly regarded name in the UK engineering market. SNC have chosen to blend the two brand names to be known as SNC-Lavalin Atkins as staff and clients strongly associate with.
On the other hand, rebranding to form one united company – as seen with the WSP Global campaign – can reduce the impact of a “them and us” culture developing between the two merging businesses.
Whichever direction the organisation moves in, transparency and open communication is once again key. Discuss options with staff, hold forums and allow them to present ideas and suggestions. Once decisions have been made, management should explain why the changes are advantageous and what it means on an operational level.
Unfortunately, redundancies are an inevitable outcome of mergers and acquisitions, particularly at senior levels or in support functions. You can’t keep two sets of group management.
As with all changes communication and speed are important, but aside from the obvious, it is imperative that redundancies are treated fairly and with respect.
At the end of the day, you are essentially building a new business with a new reputation. If you leave a bad taste with employees you have to let go, they won’t keep their opinions to themselves. Not only will they bad mouth the company to the wider market, but also to ex- colleagues, who you want to remain invested in the new organisation.
Effectively managing disruption during mergers and acquisitions isn’t easy. If you would like any advice on handling changes to your senior leadership teams please do get in touch HERE.