Can you trust an acquiring company’s promises?

Posted on 10 February 2010. Filed under: Tips & Suggestions |

Would anyone answer the above question ‘yes’ after yesterday’s news?  Kraft, less than three weeks after agreeing to the purchase of British chocolate company Cadbury, reversed it’s promise to keep Cadbury’s Bristol plant (with over 400 employees) open. You can see the news story here on Sky News.

As the Cadbury union leaders said, this appeared to have been a deliberate attempt by Kraft to mislead the employees of that plant (and indeed the whole company) in order to gain further support for it’s hostile bid.  It also sends, in the words of the union, ‘the worst possible message’ to the other Cadbury employees in the UK and Ireland.  Even the British Business Secretary, Lord Mandelson, had to say “This will confirm the fears of those who felt the takeover would result in job losses.”  He went on to say that “It is for the company [Kraft] now to prove the worth of their other statements about investing in the UK.”

There’s a clear message here for Cadbury employees and certainly for the employees of any  company acquired by Kraft in the future.  But how about employees of other companies that are acquired?

I do think that it is very likely in any M&A deal that there will be changes to the post-acquisition plans once the deal is signed and even moreso after the deal is closed.  This is more likely when the deal has been hostile (as was the case in with Kraft and Cadbury), as the acquirer will not have been able to spend time with the target’s current management discussing the company and it’s existing plans.  Much will remain unknown until after the deal actually closes and the two companies try to start operating as one.

It is therefore why I have noted in my book Surviving M&A that any employee should question any statement made by management during this period.  This is not to say that management will be trying to deliberately mislead employees;  more likely is that management JUST DIDN’T KNOW.  But all the more reason to be prepared fully for the possibility of redundancy and to do whatever you can to better your chances of being retained if your entire division isn’t axed after the deal.

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