Mergers will cause problems and also to the employees and investors, these problems include loss of jobs, demoralization of employees, loss of investor confidence and a decline in the market area and other problems which are discussed below, from various scholars it is evident that mergers often will cause more problems than advantages gained. Planned mergers adversely affect employees of the merging companies, the merge process is a slow process and affects the employees of both firms, when announcements are made about the merge of companies the working climate in those companies change, workers are confused and anxious about what will happen when the merge takes place and this reduces productivity of these workers, employees also feel betrayed and therefore mergers will result in reduced employee loyalty.
Both companies will, therefore, report poor performance due to reduced productivity and efficiency during the merger negotiation process. This is evident from a report by Totenbaum (1999) who reported that the productivity of firms after a merge dropped 25% to 50%; this is a significantly large drop in productivity which will adversely affect the performance of the company in the market.
Mergers involve major restructuring of the firms structure of the new company to be formed, this is due to the fact that merging firms will eliminate duplicate processes as a way of cutting down on production costs, as a result of this employees will lose their jobs because of this restructuring, according to Appelbaum (2000) the merge process leads to uncertainty among employees regarding the impact of merger on their career and job, for this reason, therefore, employees spend more time thinking about their career and job rather than their jobs and this will reduce the productivity of the employees in both companies.
Managers and other top-ranked employees in both companies may be deprived of their authority after the merger.
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