City hunter
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The employees have to adjust to the new company's culture and working style.
Also, both companies may have different client base which can cause conflict. For instance, Citibank bought Cal Fed in california few yrs ago. The buyout helped Citibank to have more appearance in california area as Cal Fed had quite some branches back then. However, on the other hand, numerous of Cal Fed old customers closed out their accounts as they complained about the fees. In obvious, Citibank aimed to high-end clients, while Cal Fed aimed at lower-income public (just like Washington mutual). The old Cal Fed clients couldn't afford to pay for higher fees.
Moreover, as other said. Some employees need to go espeically those at higher positions. It's because there will have overlap at the same job functions. This, in turn, will lead to lower moral in the company.
In additions, the benefit packages will be different. Both companies may carry different insurance or 401k plan. After they combined, both companies will need to see how to adjust this. Anyway, this is only a small issue.
Besides, weaker company may carry debts. The larger company may have to pay for its debt. In actual, most of the larger company won't mind paying the debt. It is because the main purpose of buying out is either to elimate a potential competitor or streamline production/manufacturing process ... that's why often stock market will rise becuase pubic belive the buyout will help the newly formed company to advance and grow.
-edited 12:52pm |
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