Business integration

Dealing with the post-closing business slowdown

The same way storms are always followed by quiet weather (and vice versa), pre-deal M&A processes usually defocus business leaders from their key priorities. 

Busy in diligences discussion, they must manage the changing emotional state of their teams, whilst being involved in the PMI process. It’s exhausting and overwhelming. 

Shortly after closing, they usually experience "decompensation". A typical  aftermath is a temporary business slowdown. 

A few insights about decompensation :

In the context of M&A integration, decompensation refers to a phase in the change management process that employees may experience during the transition of merging or acquiring companies. 

This phase is described in the 5-phase model by Autissier and Moutot (2016) and is characterized by the following:

1. Refusal to understand (or denial): Employees may initially resist the change and refuse to acknowledge the reasons behind the merger or acquisition.

2. Resistance: Employees may actively resist the change, expressing concerns about job security, cultural differences, or the impact on their roles and responsibilities.

3. Decompensation: This phase occurs when employees feel defeated or overwhelmed by the changes. They may experience a sense of loss, anxiety, or frustration, which can lead to decreased productivity and motivation.

4. Resignation: Employees eventually accept the change, but they may still feel nostalgic for the old reality. They may be going through the motions but not fully engaged in the new organization.

5. Integration: In this final phase, employees have fully embraced the change and are actively contributing to the success of the newly merged or acquired organization.

How does it affect business results ? 

Decompensation, as a phase in the change management process during M&A integration, can have several effects on business results. These effects can be both direct and indirect, and they can impact various aspects of the organization. 

Some of the key effects of decompensation on business results include:

1. Decreased productivity: During the decompensation phase, employees may feel overwhelmed, frustrated, or defeated, which can lead to a decrease in productivity. This can result in missed deadlines, lower quality work, and reduced output.

2. Increased employee turnover: Employees who are struggling to cope with the changes brought about by the merger or acquisition may choose to leave the organization. This can lead to a loss of institutional knowledge, increased recruitment and training costs, and a potential negative impact on morale.

3. Reduced customer satisfaction: If employees are not fully engaged in the integration process, it can lead to a decline in customer service and satisfaction. This can result in lost business, negative reviews, and a damaged reputation.

4. Delayed synergy capture: Decompensation can slow down the integration process, which can delay the realization of synergies and other benefits of the merger or acquisition. This can impact financial performance and shareholder value.

5. Reduced innovation: Employees who are struggling to cope with the changes brought about by the merger or acquisition may be less likely to engage in innovative thinking and problem-solving. This can result in a decline in new product development, process improvements, and other forms of innovation.

How to cope with the business slowdown ?

As part of the PMI process, to mitigate the effects of decompensation on business results, organizations should focus on effective change management, clear communication, employee involvement, and support. 

By addressing the decompensation phase and other phases of the change management process, organizations can better cope with the traditional business slowdown after M&A closing and maximize the value of the merger or acquisition.

Here how to specifically cope with the usual “post-closing business slowdown” :