When a Company Gets Acquired, What Gets Lost?
It's easy to overlook the non-financial costs of mergers and acquisitions
When companies get acquired, employee sentiments around culture and values significantly decline.
Employee reviews that mention acquisitions are overwhelmingly negative.
Employees in acquired companies worry about changes in management, changes in company culture, and decreased job security.
Navigating companies through mergers and acquisitions is a challenging task, and managing the transition process requires thorough consideration. Our previous research on mergers and acquisitions found that the geographic and role diversity of merged companies predicts future stock performance. Beyond financial metrics, it is equally important to evaluate employee sentiment and hear what they have to say about acquisitions. This week, Revelio Labs analyzes employee sentiment in acquired companies using data from over 25,000 acquisitions between 2010 and 2020.
First, let’s take a look at employee ratings of culture and values. The culture and values ratings at acquired companies increase in the lead-up to the acquisition, which is likely one of the factors that prompted the acquisition to occur. However, there is a significant shift after the acquisition, with culture and values ratings declining significantly in the following years, our data analytics tools show.
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To understand the reasons behind the decline in sentiment, we analyze employee reviews at acquired companies after the acquisition. What stands out the most is that employees who mention acquisitions overwhelmingly do so in negative reviews—a troubling sign for the acquiring company.
So, what do employees dislike about the acquisition? The distinctive words used in negative reviews provide a deeper understanding of employee dissatisfaction. The word cloud below reveals the major concerns of employees.
Revelio Labs data analytics tools show that the most salient issues mentioned by employees are changes in management and company culture, and decreased job security. These concerns highlight the need for acquiring companies to effectively communicate and manage the transition process in order to address the concerns of employees in their newly acquired companies.
