Planning and Implementing a Merger

Forming a board of directors

First of all, the place and task of the top management must be clearly defined in a merger. This gives rise to a number of practical difficulties. Taken together, the merging enterprises have too many directors. Also, particularly in the early years, the new top management must be able to make quick decisions and carry out policies without disagreement. A board of three directors working as colleagues, as described below, or a chairman and three directors, is appropriate for the task.

Experience shows that it is not effective to leave the boards of the partners as they are, simply letting them meet from time to time as the new joint board. The clash of roles is so great that conflicts cannot be avoided. Important decisions, which could “hurt” one or other of the partners, are often not made. Whether it is necessary to engage anyone from outside at director level depends on the talents of the two former boards. But it is no use appointing a chairman from outside if the existing directors are split because:

  • within the new combination the partners adhere to their former policies
  • there is a power struggle between persons or groups or
  • one of the partners feels superior to the other

This is why it is so important that the partners should establish more precisely than usual, before the merger, who will be the new directors, how the tasks will be divided, and what policy will be introduced. If agreement is not reached about ...

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