The Coating Blew Up in the Merger

Mergers are for many reasons a complicated beast, as anyone that has gone through one or two has probably figured out the hard way. I once worked for a company that merged with another industry leader. It was hard but at the same time fascinating to experience. With any such merger there is a cohort of pitfalls to manage, from cultural clashes to financials risks, and from customer concerns to brand dilution. What puzzled me most at the time, however, were overestimated synergies and the lack of interest in listening to and hearing feedback from employees and third-party stakeholders.??

In the case of my former company, I was personally exposed to discussions on branding and product portfolio synergies, but other aspects of the merger were part of the new everyday reality. This included, for instance, the politics of it all, the transition plan, and operations.?

The companies involved at the time were in the same industry but were different when it came to sales and marketing, corporate culture, and client and product portfolios, among others. My company was the larger of the two, had a stronger brand position in the B2B market (according to brand surveys at the time), was a price leader, and had transitioned from a commodity player to a brand player long before anyone else in the sector. My companies financial backers and other forces behind the merger had different alliances and, in the end, only a small handful of people from my old company moved over to the new, merged company, and a lot was lost in the transition.?

Regarding the brand, no one remained who could speak to its authenticity going forward. The consistency of our message and communications about the product was lost, and the long-term perspective and cultural context quickly forgotten.??

I knew this because months after I left, I started getting phone calls from upset distributors and brokers. They complained that the coating on our flag ship product (12% of our sales before the mergers) was not behaving the same way as it did before, it was breaking and flaking off, and their clients were upset. Everyone was losing clients. There was not much I could do to help, but I knew immediately what the problem was: the new management had changed the raw material to lower manufacturing costs. The replacement – a cheaper material – was treated differently which changed the end results. It was the companies flag ship product; the pride of the organization, and its coating – the result of substantial internal R&D investments – was key to differentiating our product from alternatives on the market.??

The company eventually reverted to the original recipe, but the damage had been done. If the brand had still had a voice and advocates on the inside, this could have been avoided.??

Instead, while the new company had a solid management team, they were not fully in charge due to the influence of financial backers and outside stakeholders who fixated on economic returns at the cost of the brand.??

Fortunately, however, over time this team did do what was needed to get the company back on track, and it was eventually rebuilt into a financially and operationally solid, brand-driven organization.???

Looking back, it is clear that in all the mergers I have witnessed, including this one, there have been a few common pitfalls that have linked them all together:??

• ?Few people were really interested in listening and hearing feedback from employees.?
• Someone always had to be right, or the winner, in a seemingly zero-sum game where organizational cultures and management styles clashed, which inevitably had a negative impact on employee morale and undermined integration efforts.?

• Talent was lost in abundance along with brand understanding and memory, values, and cultural context.?

• Customers were lost for a variety of reasons, including culture, brand maneuvering, brand dilution, and loss of talent.?

• Expectations of cost savings and revenue synergies were in all cases overestimated during the merger planning phase.??

Many aspects of those mergers were a success but piloting these pitfalls requires thorough planning, effective communication, and inclusive leadership to ensure that the fusion of two companies would enhance value creation and minimize disruption for all stakeholders. And hopefully, key dividends included brands emerging stronger than ever.?