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This article is written by Vaibhav Chauhan, pursuing a Diploma in Companies Act, Corporate Governance and SEBI Regulations from LawSikho.com.


Usually, companies/businesses opt for merger and acquisition to expand their functions and market outreach. But, companies do get into merger and acquisition to survive the market competition and generally, it is advisable for a business or the company rather shutting down their business or operations. With merger and acquisition companies do survive the competition cycle and can maintain their market standing. Also, knowing the nature and objective of the company’s business and to identify the factual requirements of the business is very imperative while entering into the merger and acquisition phase.

However, after the merger and acquisition of the business or company, leaves impacts upon the employees especially of the acquired company or business and left them with anxiousness, nervousness and affecting their emotional resilience. It is crucial to identify the possible impacts of business amalgamation that the employees might have to face.

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This article proceeds by highlighting the relation of employees who are behind the curtain with merger and acquisition and then provides the reason for the failure of mergers. At last, this article addresses the question about what are the post-merger and acquisition impacts on employees of the organisation along with recommendations to tackle the impacts are also provided by placing reliance on real-time cases. 

Mergers & acquisitions and employees

When merger and acquisition takes place employees of the company who are always behind the curtain have to go through the changing work environment with a new mind-set to work with. The employees required some time to get themselves aware that this merger and acquisition is for the betterment of the business and will show impeccable results in the near future. During the phase of merger and acquisition, there are situations related to the job portfolio of the employee which might affect the performance of the employees. Moreover, there are instances when goals and ideas of the two involved entities post-merger and acquisition might differ at some point of time and due to which one will tend to pull down others to get work done according to its way. Further, during this chaos business might lose its effectiveness and efficiency and put difficulty on the employee. Therefore, entering into merging and acquisition without analysing its impact might not fulfil the required objective of the business and will result in loss of revenue, business operations and the mainly employer-employee relationship.

It is pertinent to mention here one of the case of merger titled Shree Renuka Sugars buyout Brazilian Companies, in which merger was failed after closing of the deal:

In this case, Shree Renuka Sugars (hereinafter referred to as SRS) was started by acquiring the sick sugar mill Nizam Sugars. After that SRS acquired 2 Brazilian sugar mills named Vale Do Ivai SA Acucar e Alcool and Equipav for $332 million. Since 2014 SRS has experienced the drastic downfall and the debt increased to 4 times that of the SRS equity. Further, one of the reasons for the downfall is drought in Brazil and due to this downfall, SRS had to eliminate 900 employees working at the sugar mill. SRS also tried to sell one of its lands in the auction but was restrained from doing so because of the court’s injunction order.

In the above-mentioned case according to me, SRS didn’t analyse the uncertainties due to which it was unable to fulfil the required objective of the business and merger resulted in the loss of revenue, business operations and mainly employer-employee relationship that is the elimination of employees due to enormous losses.

Further, when mismanagement occurs in the business employees are the main victims because they have to adjust with the new changes without letting the productivity be affected because of merger and acquisition. However, these changes might affect the performance of business due to the loss of potential employees within the company or say organization and inadvertently creates pressure and stress upon leaders and executives of the business. At last, employees are the victim of failed merger and acquisition as well as of the chaos among the management.


Reason for failure of merger

Generally, there is a misconception that merger took place with the intent of greediness but in practicality, it is to eliminate the market competition and make the new business on top with combined resources and powers. Also, another factor might be of the cost-effectiveness involved in doing business. But, there are chances that merger might get failed due when parties to the merger and acquisition failed to run the business properly along with achieving the desired targets and goals. Further, due to clash in ideas of the group and management business have to deal with the chaos and due to this clash and lack of communication between the management will tend to destroy the relationship between the management.

Therefore, employees of the company play a very imperative role to execute the merger and acquisition in the desired way. Problems arise if the transferred employee or the remaining employee is making their way for integration. Moreover, merger and acquisition fail because the decision is not worthy for the business and employees are at the end of the list while making M&A. Failure also occurs when there is a lack of clarity about the strategies and plans among the employees of the company, especially in the case of the acquired firm. This rapid change in the business will show inefficiency and trouble in making certain adjustments when there is an appropriate time.

At the outset of the failed merger, Snapdeal and Flipkart merger is appropriate to understand the reason for failure. This merger between the 2 e-commerce players failed because there was no meeting of minds among the founders of Snapdeal and other minority shareholders because of differential pay-out to the investors. Also, employees are also disappointed by this merger and enormous tax liability was thereupon investors of Snapdeal. Finally, Snapdeal stepped back and cancelled the deal with Flipkart and went for independent Snapdeal 2.0.

What are the post mergers and acquisitions impact on employees?

Post Mergers and Acquisition impact can be assessed how well the employees adopt the new changes and what strategies at the time of decision making are taken into consideration by the organisation pursuant to employees. After M&A, a business can perform well only when employees do have a clear vision about performing their duty, but when the combination is unsuccessful and employees are not given deliberation from beginning it impacts the employees in following ways:

  • Stress

M&A took place with the motive of achieving targets and goals projected by the company or say by the organisation which brings favourable changes in the organisation. But changes which M&A brings creates difficulty for the employees, mainly when the decision was made without considering them or when they are not involved in such decision making of merging and acquisition. These changes might stress the employee due to changed working conditions, job portfolio and if this stress is not taken care of at the right time it will have a negative impact on effectiveness and efficiency of the employees.

  • Fear of job loss and cultural shock

One of the main fears of M&A is job loss amongst the employees of the organisation. Further, the work environment or say the culture of two organisations usually differs and it’s rare that two organisations do have the same culture or working environment. So, post-M&A due to different work environments there would be conflict of interest and employees of the company have to adjust according to the same culture and in practical sense, there are job losses due to this change of culture. Thus, this fear of job loss can impact productivity and will lead to high employee turnover ratio. Apart from the fear of job due to change in culture there are other reasons leading to job loss are provided below:

  1. The organization is willing to save the funds by terminating the employees.
  2. The parent company is already having sufficient employees to work efficiently and effectively for business operations.
  3. The organisation might not be performing well due to surplus employees which leads to job loss.

In the USA 12,000 employees lost theirs due to the merger between Chemical Bank and Chase Manhattan in 1995. Moreover, 18,000 employees were laid off when Nation Bank acquired Bank of America in 1998.  

Moreover, changed work environment creates cultural shock among the employees because other organisation or company might be having a different way of working, handling the customer and clients due to which employee’s post-M&A have to get inherited with these changes and also have to spend some extra time to adapt, understand the changes in consonance with the business objective. There are situations when employees are unable to adapt the changes which clearly increases the tension and stress upon the employees. However, when an organisation is lacking in the strategic planning related to training of employees to get themselves well versed with the new cultural shock the decision of getting into M&A might be the wrong business decision with unclear business goals.

It is pertinent to mention here the merger of Daimler Benz with US Chrysler Group in 1988 is one of the failed mergers because after two years of the merger the company stated enormous loss in consequence of which 21,000 employees lost their job. But, the main reason for the failure of this merger was the different culture of both the organisations as Damlier always worked on centralized decision making with proper organisational working and on the other hand, Chrysler used to work on creativity and on the risk of reputation. Therefore, due to different cultures and lack of active strategy to operate the business operation this merger is a complete failure. 

  • Fear of lay- off

M&A results in laying off the employees because the organization is trying to reduce its cost by eliminating the employees and when merger and acquisition took place there are two sets of every department available with the organization. Further, from the available set of departments organization might choose the best and terminate the rest of the employees.

Now, when employees get laid off Industrial Dispute Act, 1957 comes into play and provides Section 25FF which deals with compensation for the present case scenario. Further, this provision is of no help when an employee is not willing to work in the new changed culture or stay with the new organization, but now after the one of the pertinent judgement of apex court titled Sunil Kr. Ghosh vs. K. Ram Chandran, 2011) 14 SCC 320, this provision provides for compensation when the employee is not willing to work in the new organisation. In this case, the apex court has rightly taken the decision which was against the law but in favour of the employees.

In this case, Philip India Limited decided to merge with kitchen Appliance India Limited. But, the employees felt dissatisfied and filed a petition before the court and prayed for retrenchment benefits in the light of Section 25 FF of Industrial Disputes Act, 1947. The Hon’ble Supreme Court held that employees are free to decide whether they want to work under different management or not and if they don’t give their consent to do so then the employer must provide them compensation for retrenchment and retirement in accordance with the Industrial Disputes Act.

From this judgement of the apex court, it made crystal clear that workers cannot be forced to work as an employee of the merged team if they don’t want to be part of the same. This judgement made the employer reconsider its decision regarding the merger of a company. So, in the spirit of this judgement workers should be paid compensation for retrenchment under the Sec 25 FF of the Industrial Disputes Act, 1947.

  • Technological changes

Organisations which do have good market standing, performing impeccably well and going for M&A to cover greater market parameters usually take up the technologies to increase effectiveness and efficiency in job. The organisation might replace the people/employees with the technology because now the organisation relies more on technology. Moreover, acquiring technology for the organisation is not bad but avoiding the employees might result in a loss for the company and less investment in hiring the human resource. However, acquiring the needed technology by the organisation impacts the employees in a positive way because it will increase the efficiency and productivity of the company when a human resource that is employees and technology work together.


Company A Ltd. acquired technology from Company B for the production of auto parts of the cars. Now, the dependence on technology will increase and the need for employees for work will decrease. Further, if A Ltd. eliminates its employees because of the adoption of new technology, its business operations might get hampered because correct data might not be uploaded correctly solely relying upon the technology. So, the beneficial situation would be to retain the employees, provide the appropriate training and make technology and employees work together in order to increase the efficiency and productivity of the business operations.

  • Recommendations

Post-M&A do impact employees in a negative sense and to avoid these impacts an organisation should take careful steps towards the employees. The decision at the time of M&A should be taken by keeping in mind that employees of the company feel secure about their job and the working environment so that there would be no stress and cultural shock. Moreover, as mentioned above, M & M&A leads to cultural shock due to changes in the culture of the organisation and due to which there are different reactions like curiosity, anxiety, uncertainties in the new work duties, and even being intimidated with their colleagues and sudden changes. Uncertainty in new work culture is the form of negativity which employees of the organisation need to understand and to deal with this negativity they should and move into different activities which would help them to secure their job and make their career path clearer.

M&A affects the employees gradually with the time and the need for stabilising the business operations are must post-merger and acquisition. So, the company has identified the workforce required for the development and strategies so that they can contribute enormously well towards stabilizing the successful business operations. Furthermore, organisations have to prepare strategies during the phases of M&A, so that important elements of organization i.e. employees/people should not be left unattended and proper attention can be given.

One of the latest cases Snapdeal and Flipkart merger provides the steps to take after the failed merger between the two. After the failed merger of Snapdeal, the management took one on one sessions with their employees for the first three months because employees were confused and feared about their job post-merger between the 2 companies. Kunal Bahl co-founder of Snapdeal realised the importance of employees and also provided the employees with copies of motivational books. Therefore, this step taken by Snapdeal helped them to survive the failed merger and go for independent Snapdeal 2.0.

As time dictates in the effectiveness of the merger and acquisition, it gradually affects the employees toward the business combination. It is hard to prepare the employees when the business activity already started, and the people expect a solid ground for communication. The true potential of the business can only be seen in the interaction of the people within the organization. The influence of the post-merger stage of a company can help the people navigate in different issues. People can identify the changes and contribute their skills and knowledge in stabilizing the successful business. Moreover, the organisation should plan M&A by putting human resources as one of the priorities in their list, so that low morale within the working culture should not arise and impact the employee’s commitment toward the work. Therefore, any successful business is made out of their efficient employees, so the organization should make strategies in such a way that the impact of post-M&A can be controlled.


Merger and Acquisition are suitable for organizations who are having equivalent market shareholding and in the same line of business. The much-needed factor to save the M&A from failing is effective communication because due to this organizations can identify the worst-case scenario and can save the organization from massive loss. Further, M&A might result in favour of the organisations and bring good results but it also impacts the employees of the organization when the M&A happens so fast that it leaves the employees with confusion about their role in the organisation and from this point, chaos starts in the management of the organization. This confusion among employees becomes stronger when the decision taken by the leaders of the organisation is incompatible and not suitable for the organisation. 

So, post-M&A will lead to stress and pressure in the environment when ideas are not combined as projected or expected, therefore this will impact the employee’s effectiveness by creating fear of job, uncertainty, negativity, lay-offs, loss of talent which affects the business operations in entirety. Thus, to avoid these consequences there is a need for strategic planning and considering the employees as an important part of the decision making while going for M&A and employees who dare to face these impacts are termed to be valuable and deserving.  

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