The advantages & disadvantages of concepts of outsourcing merger acquisitions

Written by wendy smith
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The advantages & disadvantages of concepts of outsourcing merger acquisitions
Mergers and acquisitions take a lot of planning. (Jupiterimages/Brand X Pictures/Getty Images)

When a company merges with another company or acquires an existing businesses it will sometimes bring in experts to assist with the process. However, sometimes the best experts to handle the transition are current employees who already know the business and don't require a crash course in the company's business practices. Organizations should always consider the advantages and disadvantages of the outsourcing process before making a final decision.

Outsourcing HR

In a merger and acquisition an essential part of the transition are the employees. The human resource departments for each company will have different benefits and policies that need to be brought together in a way that provide the most benefit to the company and its employees. Since many business functions maybe duplicated, it is often necessary to select positions to lay off. Handling mass terminations requires understanding the labour laws that apply to all business locations.

Outsourcing human resource management organisations to make recommendations on which positions to retain and the number of staff needed for each area of the organisation can offer more objective and quicker results. This is the case because a company's pre-existing human resource staff is usually too overwhelmed with normal duties and often too personally involved to maintain an objective view of the actual needs versus wants. However, because pre-existing employees understand the culture of the business, they can often provide valuable insight in the final selection and handling of the process.

Legal Counsel

If a company does not have a mergers and acquisitions department that routinely handles the transition of business entities and its legal ramifications, management should consider outsourcing legal counsel. All legal contracts need to be drawn up with consideration given to employment, real estate and contract laws for each location effected. If not handled correctly this can wind up costing a company a fortune in legal settlements and fines for poorly contracted work. However, if your company has a legal staff that can handle most of the actual work, you can minimise the amount you outsource by hiring outside assistance for consultation purposes only.

IT Outsourcing

Large companies now outsource most of their information technology needs to minimise expenses, and many use foreign companies in countries like India and China to take advantage of cheaper labour. Transitioning your company's information technology in a merger and acquisition requires special skills to separate and/or merge existing systems. Sometimes companies decide to implement new systems rather than make adjustments and changes to existing systems. An experienced information technology staff that understands the business needs for each system is crucial to a smooth transition.

Tips for Outsourcing

If you choose to outsource, make sure to define the requirements for success, match the skills needed to the skills provided, and take your time in the decision making process. Especially for merger and acquisition projects, it is important to consider all of the advantages and disadvantages for each business need to determine if outsourcing a transition project or parts of the project is what is best for your company. Cheaper is not always better if the chosen method causes delays or does not provide the best expertise in handling important steps in the merger and acquisition process.

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