Mergers and acquisitions of transport and infrastructure businesses are nothing new. Over the last decade, we have seen many companies combining to strengthen their strategic offerings in the UK and further afield.
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 SNC-Lavalin is to buy Atkins for £2.1bn, creating a 53,000-strong global business. Joining the likes of Halcrow, Scott Wilson, Hyder, Davis Langdon, EC Harris and Sweett Group on the ever growing list of independent UK consultants to shift to international ownership.
Consultants aren’t the only targets. Buying UK owned contractors is a sure-fire way for foreign companies to gain access to the UK’s proposed pipeline of infrastructure activity. Although rumours that Chinese building giants are set to swoop in and buy up major UK contractors has yet to happen, is it just a matter of time?
A major consideration that could put the brakes on M&A activity in contractors at present, is the huge uncertainty around labour supply after Brexit. Until this is clarified, it is unlikely that any deals will be made unless the target company has a direct labour model.
Whilst mergers and acquisitions are most prevalent in consultancy, transport operators and manufacturers are not immune from buy-outs. Deutsche Bahn bought the quintessentially British Arriva back in 2010 and in February TrenItalia acquired National Express subsidiary, c2c. And if the rumours are to be believed then Bombardier and Siemens could well be joining forces soon. Most of UK utilities have been in foreign ownership for some time.
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.
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. Atkins for instance is a highly regarded name in the UK engineering market and SNC may well wish to retain the name which staff and clients strongly associate with.
On the other hand, rebranding to form one united company – as seen recently 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.