History is filled with examples of corporate mergers gone wrong. There’s AOL – Time Warner in 2000 and HP – Compaq in 2001, and who can forget when Microsoft didn’t know what to do with all their extra cash and decided to buy Nokia, hoping it would help everyone forget about Windows Phone?
As someone involved in more than a few acquisitions, I’ve learned how to tell if a merger will be successful. Every merger boils down to the essential fundamentals for both companies: people, processes, and technology. Add in one or more CEOs with big egos and a healthy dose of hubris, and you all but guarantee the merger will be a disaster for everyone involved.
Every merger starts with a plan. And some plans—and their execution—are better than others. But almost nothing about a merger goes according to plan. Successful mergers are the ones where (1) the CEO gets out of the way and (2) the merger plans zero in on the end goal and work backward, focusing on the people, processes, and technology needed to reach the end goal. The most recent (and best) example here is Microsoft purchasing LinkedIn.
Let’s consider the recent agreement between Micro Focus and OpenText. I’m not here to say “everything will be terrible” with this merger, but there’s no reason to think Micro Focus and OpenText will somehow avoid the same issues other company mergers have faced. I believe Micro Focus and OpenText can make their merger a success, but it will take some work. Let’s break down three areas crucial to making this merger successful.
The people
There's always some turnover and attrition during (and after) any merger. Employees leave companies for a variety of reasons. Perhaps they don’t like where they landed after the merger, or maybe they don’t feel the new company offers job security. And some mergers clearly outline whether jobs will be eliminated, which is the case with Micro Focus closing terms detailing
roughly 8% of employees will be eliminated. Between elimination and natural attrition, about 10% of their current employees likely won’t be there a year after the merger is completed.
Chances are there will be some talented folks in this 10%, and when you lose valuable talent, you lose the very people who produce and support the products and services customers know and love. Micro Focus needs to communicate clearly to their existing customers how this 10% reduction in their workforce will affect support for existing products and future product development. With over 380 products, many current customers are bound to feel this workforce reduction.
In other words, changes are coming. And this isn’t necessarily a bad thing—but the longer it takes Micro Focus to communicate its plans regarding the loss of personnel, the more nervous existing customers may become.
The processes
The term “processes” doesn’t refer to the process of the merger itself but to the internal processes for employees in the newly merged corporation. I also think of this as “culture,” but I see culture and process as intertwined. For the 90% of Micro Focus employees who remain a year or more after the merger is complete, the next hurdle is how they cope with the new processes they face. For example, something as simple as booking travel or requesting time off could become so onerous for new employees they’re slowly disengaged to the point they leave.
Most people are willing to try new work styles, adhere to new corporate values, and shift priorities. But this can wear down even the best employees over time, especially if their styles don’t fit what the company wants. Over time—maybe another eighteen months—you’ll see a new wave of departures.
The 90% of people who remain a year after the acquisition are the exact people Micro Focus will want to retain. Micro Focus and OpenText must have a plan for how they intend to keep them, which should be clearly communicated. Otherwise, they’ll face the same issues mentioned before.
The technology
On the surface, the merging of two companies is straightforward. Employment at the old company ends, and you start at the new company the next day. Everyone signs new benefits packages and gets new email addresses. But mergers aren’t as simple as they sound. The reality of having people adapt to new tools (giving up Slack for Microsoft Teams, for example) is challenging enough. Still, certain teams (like developers) must integrate with how software builds and deployments will go forward.
Differences in programming languages, source control, and other technical constructs can create significant challenges for any corporate merger, which are reflected later in the products. Sometimes, decisions are made, and your favorite product may be put into “maintenance mode” (shorthand for a product likely near the end of its life). Just ask former Nokia employees.
Micro Focus must communicate its roadmap for product integrations, feature enhancements, and possible sunsetting. Existing customers should have the necessary details to make an informed decision regarding their needs as soon as possible. Any delay in communication regarding the products can erode customer trust, something tough to earn back once it’s gone.
Summary
Mergers are complex, and they don’t always turn out perfectly. But every company wants the same thing: happy customers. With the sale of Micro Focus, I hope they prioritize their existing employees and customers. If they do, the merger is likely to have less friction overall.
But as the months progress, if there’s a lack of information coming forward, current Micro Focus customers need only examine the actions taken by OpenText concerning people, processes, and technology. Those actions will tell them everything they need to know about the chances of a successful merger.
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