The effects of PMI: a case where the theory is very close to reality

It is common understanding that what is learned in the business schools as "theory" represents an ideal, optimal state of affairs, compared to which the "reality check" reflects a more or less different story. In the case of Post merger integration (PMI), the reality seems to be very close to what the theory is preaching.

To review what I'm talking about, theory says that as after a merger or acquisition, both companies (the acquirer and the acquired) suffer from a discontinuous economic activity and go through a series of stages of disruptions. Some of the most commonly mentioned are:

- corporate culture clash
- psychological employee concerns about the future, which affects working productivity
- reduction in the number of redundant functions and employee release
- change in location for some employees, which also leads to them leaving the company

All of these translate into lower company results for the entire integration time. Consequently, it is highly recommended to begin with the integration even before the merger process is formally announced.

What I currently witness is a relevant example for an integration process that has started in 2001 and it is not yet ended. Naturally, I wouldn't be able to talk about it with objectivity if I were involved in it. However, as a "side watcher", I can distinguish all the issues mentioned in the theory as they happen in reality. Of all these, I will discuss about the mobility of people and change in location that a merger usually involves.













One of the merger's objectives is to achieve synergies and leverage shared knowledge between the two merged entities. That is why usually in the aftermath of a merger, employees on a mid to high management level or some company functions (e.g. R&D, marketing) usually have to relocate. This has happened in this case, as well: the commercial functions (marketing, supply, consumer research) need to relocate in another country in order to leverage knowledge and be close to the decision making place.

I won't concentrate on the upside of the story this time. My focus is on company's losses as a result of this decision. Imagine a 40 year old person in upper mid management level, who has to decide between the following:
- to move and likely progress in her/his career
- stay and move in another role, usually with a lower managerial importance, in order to maintain stability on the family and personal life side

It often happens that very valuable people who are made to make such a decision will eventually leave the company. From my current experience about 20-25% of people choose this way. Moreover, it often happens, as in the current case, that the company loses among the most valuable people. Thus, a move which is expected to bring higher economic returns by leveraging knowledge and best practices, leads at least on mid term, to negative economic returns and limited benefits.

Witnessing such a case is much more dramatic than it seems when reading about it in the case studies, as one sees: teams being left without a leader to guide them in the new environment, or being left without their informal leader, teams lose their overriding common goal and spread into adjunct, non-productive discussions.