Introduction of the Merger between Al MADA AND AL SHUROOQ Architecture Companies

A merger has been described as an agreement that unites two existing enterprises into one new enterprise. A merger is basically one of the solutions for modern enterprises to survive in the emergence of globalization along with its tough competition with a purpose to preserve their businesses and pursue the potential profit (Appelbaum, Lefrancois and Tonna). The two enterprises that make a merged agreement usually have the same business operations regarding the size of the enterprise, the customers, the scale of business operation, and other similar points. In addition to this, the merger is commonly performed with certain purposes such as to get the market share, decrease the costs of business operations, build up and increase the profits for both enterprises. Besides those purposes, the two enterprises that decided to merge typically will combine their alike products or services produced by both of enterprises, especially the ones that expected to deliver benefits for the shareholders of both enterprises (Bergamin and Braun).  

            Regarding the merger performed by Al Mada Architecture Company and Al Shurooq, despite the fact that both of enterprises have been working in the exact same industry which is architecture, but it appears a big gap in the terms of how each company has been doing the business. The difference occurs in which Al Mada is an architecture company which established in 1970 has been doing a traditional business operation whereas the company utilizes only a few software application to support its business. Meanwhile, as an architecture company that constructed in 2000, Al Shurooq has always applied the latest software to support in running their business activities. This issue has turned out to become quite a challenging one and needed to be addressed along with their merger processes.

This report discusses the possible impacts of the change on all stakeholders, a suggestion of who should lead the change along with a leadership style required, prepare the new organizational culture for the change, propose a change model to be followed by the two companies, and some recommendations to maintain the changes that derived from the merger process.

The Possible Impacts of the Change of the Merger between Al MADA AND AL SHUROOQ Architecture Companies

            The big-scale organizational changes derived from the mergers have been approved to cause severe impacts on the employees and also the two companies that merged. In the context of employees, a merger has the capability to trigger the anxiety and stress related to the change in the management. Many studies have also suggested that anxiety and stress are frequently strengthened by the intuition of losing their job in accordance with the changes in organizational members which is one of the results of mergers. In fact, those studies have clearly stated that the mixture of uncertainty along with the change possibility, both are considered to be both favourable and also unfavorable, generates the stress on the employees, and finally, impacts the opinions and judgments, social interactions, as well as the dynamics of the new company made from this merger itself. From a stress point of view, there is a big possibility that a merger would be compared to the life occasions such as the loss and bankruptcy (Appelbaum, Lefrancois and Tonna).

            Another potential impact of this merger is mentioned as the employee’s turnover. The organizational changes have been studied and the result is that these organizational changes might deliver the outcomes in both avoidable and unavoidable employee turnover. During the organizational changes, one or both companies that merge might well decide to act tactically besides than restrict its negative impacts, or else, they would simply react to the impact of employee turnover. Three different schemes along with the best method to manage the impact in the context of employee’s turnover are such as mentioned below:

·         In case if most of the employee’s turnover is avoidable, then it would signify an unnecessary loss of employees. Both companies could take some defensive steps and compensate for the change impacts.

·         In case if most of the employee’s turnover is unavoidable, then the employees who are leaving can be considered as fundamental losses. The costs derived from this loss could be determined in contradiction to the benefits that the company will get from implementing the changes.

·         In case there is a mix of both avoidable and unavoidable employee’s turnover, then it would be more complicated to be evaluated. For this reason, there would only be inappropriate prevention or pure control.

In addition to this, a study conducted by Irene Maria Schönreiter (2018) has stated that in the post-merger circumstance, both of the companies that merged are exposed to a number of impacts that obstruct the positive and effective harmonization process. There would be some challenges in the contexts of integrating the views of the entire personnel from both companies, there would appear some differences regarding the culture, arrangements, as well as the strategies of businesses. For this reason, the companies that merged need to integrate their business activities, streamlining the business processes, merging the systems, changing the management, while still have to maintain the motivation of the employees and the satisfaction of customers within a socio-cultural differences setting and several changes in the management (Schönreiter).

In accordance with this, there is a big possibility of stress and anxiety to have appeared in the new company which resulted from the merger of Al Mada and Al Shurooq. In fact, the employees might unable to adjust themselves with the differences in management and also business operations that they would have to through. The employees who belong to Al Mada Company, they have been used to with the traditional business operations conducted by the company. Thus, they might be getting difficult to follow the modern business operation conducted by Al Shurooq. On the other side, the employees who belong to Al Shurooq who have been used to with the modern business operations which utilize the latest technology in the software will also find it difficult to adjust if the management will decide to utilize the traditional business operations performed by Al Mada. This might lead to employees' turnover which definitely will impact the productivity of the new company derived from this merger.

Another potential impact of this merger is regarding the voting power and weakening of the shareholders. The entire shareholders of both Al Mada and also Al Shurooq Architecture companies might have to experience a weakening of voting power. The reason behind this is due to the increased share amounts appearance which is unconfined over the merger processes. This phenomenon has been considered to be a noticeable appearance in the stock-for-stock mergers, in which the new company will offer a part of its shares in exchange with the share targeted by the company nonetheless at an indicated conversion rate (Gaughan).

References of Merger between Al MADA AND AL SHUROOQ Architecture Companies

Appelbaum, Steven H., et al. "Mergers 101 (part two): training managers for culture, stress, and change challenges." Industrial and Commercial Training (2007): 191-200.

Bergamin, Stephan and Markus Braun. Mergers and Acquisitions: Integration and Transformation Management as the Gateway to Success. Springer, 2017.

Gaughan, Patrick A. Mergers, Acquisitions, and Corporate Restructurings. John Wiley & Sons, 2015.

Schönreiter, Irene Maria. "Methodologies for process harmonization in the post-merger integration phase: A literature review." Business Process Management Journal (2018): 330-356.