Consumers hate mergers
“Why Consumers Hate Mergers” is the title of a recent Business Week
article (12/8/2004). Based on a five-year study commissioned by the
magazine, the article concludes that dissatisfaction after mergers is
widespread, and it can take many years to regain lost good will.
According to the article:
The frustration was greatest with mergers in industries whose
mergers have the most direct influence on the quality of Americans’
daily lives. Oil companies, cable-TV outlets, and retail store ssaw
their satisfaction rating plunge…
The effects can last for along time. Theartcile gives an example
phone company SBC’s takeover of Ameritech, which still caused consumer
anger five years later. Furthermore, the article notes, “If
consumers don’t like a merger, they vote with their feet — laying
extra costs on companies and potential losses on their investors.” That’s especially true in banks, which often experience a big pullout of costomers from the acquired bank.
Dissatisfaction comes from several reasons:
- The extreme costs cutting which is used to justify the cost savings (“synergy”) that justify the deal results in poor service.
- Screw-ups in the transition, as records from one company’s computer systems are brought over to another.
- For retailers, less money to spend on upgrading units, as all
that money is poured into “re-logoing” and re-standardizing the look of
- The elimination of familiar and factored products and services.
- Poorer service from anxious employees more concerned about keeping their jobs and learning a new set of rules and practcies.
Some companies are at least going into acquisitions aware of the
problems and trying to put customer satisfaction as a priority during
the transition period. But the fact is that mergers and acquisition
process make companies intensely inwardly focused, generally to the
detriment of the customer. [Oligopoly Watch]