The new M&A’s season and Impact on Employees

M&A’s of 90’s were propelled by the concept of core competency. Lot of consolidations across the sectors happened during the nineties.

It is time for once again another stage of consolidation. This time it is propelled by the disruptive technologies.

Mr. Anand Mahindra of India’s leading automotive business famously mentioned, he is no more competing with the likes of Ford and Toyota’s. But with the Uber and Ola’s.

At the top of businesses, there is huge restlessness now. It is now technology competing with business and no more business competing with the business. All on a sudden strategic management, Six Sigma –Lean, like efficiency tools became outdated. They have become old school. All these, practiced, proven business tools are best effective in somewhat predictive business environment. Even MBA is dead, long live MBA’s. Big businesses are like a blind folded Ninja warrior. No one can predict who and where from is the next competition going to come. With no history, pedigree or experience, it is today possible to put together business from the scratch. Tesla is an example.

Only someone needs an idea and the moment an idea is born the end is near to some business somewhere.

Sometimes the ideas are wonderful, brings a huge value addition to the ecosystem. But also sometimes the startups are like Kamikaze’s killing them and taking down a lot of things along with it. There are businesses models propelled by reckless investors, not generating profits, but strategize for valuations at the expense of profitability. They bleed every day and also cut the veins of some good business too.

Lifecycles are no more about products but about organizations as such itself!!

An old business is no more a good thing to hear. Old is good where experience matters and experience is good when we are talking about known stuff. The problem is, competition is no longer known and need an entirely new set of skills to fight off.

While the above summarizes reasons behind todays M&A’s and why it is going to be only the beginning of a new season of M&A’s. Predatory bloodthirsty agents and investment bankers know about this restlessness at the top. They are waiting to tear apart businesses.

What are signs the employees can watch out for?

Like a father preparing a young girl for marriage, look out for the signs the management is decking up the business for attractive valuations. All on a sudden there can be mushrooming of new projects increasing values of future delivery lines. There can be unexplained slackening of the processes to increase the market share. No more there is a delayed release of products and technology to market and no more talks of cannibalism from own range of products. All talks are about market share and sales.

Knowing early help employee to be prepared for the troubled times ahead. Because once M&A is announced, task of both the board and the CEO’s is to make sure how it works better. In other way it is all about cost cutting. Only one business delivery and support systems needed, obviously someone loses out in the musical chair that follows. There won’t be any more special programs to retain the promising employees, no more expensive expat programs and in fact no more succession planning needed. Very soon the C.V’s will lose its lustre because there will be a lot of them floating in market.

Jumping the ship may not be the answer always since outside world is nothing better for sometimes to come. Best thing is to start looking out for job and keep options ready, in case you don’t have a chair when the bell stops ringing.

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Is your provident fund part of an economy stimulus program?

Governments across the world want citizens to put their money to work. Money lying idle and earning interest is not desirable for a growth less economy. Bank of Japan introduced the negative interest rate also some European banks. Governments want their citizen to sweat their money out. It was surprising a stable and strong government in India dilly dallied on its provident fund policy recently.

Almost four months before there was a statement saying government intends to hold back 25% of the amount till the contributor attains retirement age. Then government went a step ahead, without even giving a waiting period, they declared 50% of the amount cannot be withdrawn till the retirement age. A budgetary announcement followed that 60% of the employee contribution will be taxed at the time of withdrawal. Later this was rolled back. Latest news is withholding of the amount is put off till April end and will be effective from May.

In this era of data analytics and scenario building tools tough to believe all these are disconnected events. Especially when the top minds in the world are advising this government.

A bit of calculation on back of hand told the real story.

The total size of the money with the PF is 128 Billion as on 2016 March. Assuming the 80:20 rule, 80% of this amount should be from 20% of the high income contributors. And if I am one in this group, I will certainly a bit restless once I see all these dillydallying. And if given a window, first thing in my priority list will be to take this amount out.

And what will I do after taking the amount out. It doesn’t make sense to invest in fixed deposit due to the tax outflow. The best choice for me is to pay back the home loan and reduce the size of the EMI. Suddenly I have free credit limit with bank and more risk taking ability since the outstanding liability is small. Now I think about investing in a second property!

Gotchaa!!...even a 20% contributing population withdrawing money is close to 20 billion USD. Come good times for the home loan segment and the reality, which will have a cascading impact on many other sectors.

What you see is not what you see and what you hear is not what you hear; when coming to smart and intelligent governments. 

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