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Mergers and customer dissatisfaction
In
general, customers get a raw deal when companies merge. That's the
conclusion of a Business Week article with the provocative title “Why
Customers Hate Mergers” (12/6/2004). The article is based on a
University of Michigan/Business Week study that tracked customer
satisfaction (or rather dissatisfaction) in a number of major mergers
over the past five or six years, including Bank One's purchase of First
Chicago Bank, Unilever's acquisition of BestFoods, and BP's takeover of
Amoco.. In the majority of cases surveyed, the customers were
disgruntled, even years later.
As the article puts it:
The frustration is worse with mergers in industries whose
services have the most direct influence on the quality of Americans'
daily lives. Oil companies, cable-TV outfits, and retail stores saw
their satisfaction ratings plunge between 5.3% and 7.4% on average…And
the effects can prove to be long-lasting. Five years after SBC
Communications Inc. bought Ameritech Corp. for $70 billion in 1999, its
customers still say they were less satisfied than before the merger.
The reason is simple. Mergers tend to cost a lot of new debt, and
cost-cutting measures are the order of the day. One of the first things
that go out the window is customer service, rarely perceived as
important as direct profit centers. When companies talk about reducing
wateful overhead through a merger, customer service is a major part of
that overhead.
And the confusion, complex integration of infrastructure including
computer systems, and low morale that often follows inevitable layoffs,
these make it all the harder to serve existing customers. In industries
like banking, the expectation is that over 10% of customers will leave
after a merger, based on their frustration. Even in industries like
cable TV, unhappy customers look for alternatives like satellite TV.
Victims of bad telephone service have fewer alternatives.
While
companies always claim they are making the acquisition to benefit their
clients, in most cases, the reality is quite otherwise. [Oligopoly Watch