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Why the United and Continental Merger – and Other Mergers – Are Not Going to Fly.

Merger Mania is once again in the air – literally. United Airlines and Continental Airlines announced they will merge into one company. Continental CEO Jeff Smisek and United CEO Glen Tilton claim the $3 billion deal will save at least $1 billion dollars a year through operational integration. According to business experts, this merger is only one of many large mergers to come in the next 24 months as CEOs react to an improved economy, capital to finance mergers becomes more available and large companies have an abundance of available cash to spend on acquisitions.

Merger Mania is once again in the air – literally. United Airlines and Continental Airlines announced they will merge into one company. Continental CEO Jeff Smisek and United CEO Glen Tilton claim the $3 billion deal will save at least $1 billion dollars a year through operational integration.

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According to business experts, this merger is only one of many large mergers to come in the next 24 months as CEOs react to an improved economy, capital to finance mergers becomes more available and large companies have an abundance of available cash to spend on acquisitions.

As with most mergers, the United/Continental merger looks like a winner on paper – otherwise no one would do them -, and both CEOs are promising “improved profitability and sustainable long-term value for shareholders.” However, the historical reality is 60% of all mergers fail to achieve their financial goals and 20% actually reduce the value of the merged company.

Why do 80% of all mergers fail to produce the anticipated results? Because mergers only succeed when they generate synergy and synergy is created only when the Employees of the companies are successful at working together. Most mergers don’t achieve the synergy that prompted the merger decision in the first place because managers fail to focus on the impact that two distinct and different organizational cultures are going to have on the success of the merger, even though it is the performance of the combined workforces that ultimately determines the success of any merger.

Can mergers succeed? Sure, if management implements a Post Acquisition Integration Processes that identifies and resolves the “human” dynamics issues that are more important to financial success of a merger than any other controllable factors.

Will the United/Continental merger succeed? There is every indication management is ignoring the impending impact of an organizational culture clash affecting 88,000 Employees, including 46,000 dissatisfied United Employees who want the wages taken away from them in the United bankruptcy given back and consistently give the worst customer service of any airline except one – the merged US Air and American West Airline.

My prediction: This merger ain’t going to fly!

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Contact me at paulglover@trainingeverydayleaders.com to obtain “The Art of Successful Acquisition Planning and Integration.”

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