In the past three years there have been many instances of mergers between vendors. This trend has also filtered to the channel community as well, with varying degrees of success.

At a session on 'Managing Mergers' during the SP Summit held at Andaman, RK Malhotra, MD, Velocis Systems spoke at length about the merger exercise that his organization had under­taken. Elaborating on the challenges of undertaking a merger Malhotra said, “When considering a merger, it is important that the two com­panies look at compli­mentary solutions sets to cater to the combined customer base.”

Managing people post merger
People retention is a key challenge when one becomes part of a merger. This is because people's expectations post-merger increases. Also there is every chance that post merger, the level of commitment and involvement of employees would tend to decrease. This means that while loyalty tends to dip, expectations would continue to rise.

So it is very important that an HR process be put in place to cater to the new challenges that can arise post-merger. Citing an example from his own merged company, Malhotra said, “After the merger, we too had to suffer from attrition. This is because suddenly people were unsure how their prospects would be affected, though we had provisions for all our staff.”

Malhotra shared that the biggest challenge in making any merger successful is establishing a common culture that would bind the various entities together

The biggest challenge in making any merger successful is establishing a common culture that would bind the various entities together. This is because the merging companies would have very different cultures-be it work culture, dress code, etc. “In fact one year after our own merger, we still are facing the challenge,” Malhotra revealed.

Putting systems in place
Another important part of a merger, according to Malhotra, is putting in place the required systems and processes that would help build the combined entity. Communicating to the people, stakeholders and customers all the required information about a merger is also very crucial because conflict are likely to arise at various levels.

“Also one must remember that stabilization would take a while, and one needs to understand and work along those lines,” he further added. It is ideal to take everyone related to the companies along so that they know what is expected from them, as well as the common goal that has to be achieved.

Indicating that financial strength and clarity on leadership of the combined entity was the biggest advantage that Malhotra had, he said that the objectives of the merger have to be made clear on the first day itself because the success of any merger lies with the people and all else comes later. “People first, strategy next should be the mantra of a merger,” he added.

“After the merger, we too had to suffer from attrition. This is because suddenly people were unsure how their prospects would be affected, though we had made provisions for all the staff that we had” RK Malhotra, MD, Velocis Systems

Often one of the merging companies, usually the dominant one, decides the culture that is to be followed by the rest of the partner organizations. “This culture could decide whether the combined unit will be marketing focused, technology focused or focused on services,” advised Malhotra.

Once that decision has been made, success of a merger depends so much on people, one must ensure that policies for people retention are in place. Bridges must be built between various employees to ensure smooth functioning of the combined unit.

Challenges in merging
While explaining the challenges of a merger, Malhotra warned that employees would be skeptical and resist change. So it is up to the promoters of the various organizations that these apprehensions are cleared. It helps having several sessions of open discourses with the employees to allay any fears they would have.

“Earlier I would be involved with most of the employees directly. But as I merged my companies and they became bigger, I could not do so. This started alienating people and they quit the company for better prospects,” rued Malhotra.

While Malhotra has been successful in his mergers, not everyone else in the audience was as lucky. Hyderbad-based Choice Solutions and Locuz Enterprise Solutions too had announced their plans to merger. But recently the two decided to call it off.

Speaking about his own experience in this incident, K Jagannath of Choice Solutions said that although their proposed merger with Locuz Enterprise Solutions was called off, the experience had taught them about the need to employ a professional consultant and take up the merger option after due professional consultation.

Sharing his thoughts, Nityanand Shetty of Essen Vision Software felt that an effort must be made to retain key people post the merger and also ensure that there are enough people to cater to various market segments once the exercise is complete. In short, partners believe that while mergers are a good way to go forward, being prepared for the challenges of the exercise would go a long way in ensuring its successful completion.

DQC News Bureau

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