It struck recently me that press releases on proposed mergers usually slip in the phrase ‘a merger of equals’. It seems to me that the use of that phrase is perhaps intended to avoid any negative associations with regard to the proposed merger or to avoid the impression that one of the parties is a victim of a takeover or that one of them is the more dominant one. But I wonder whether a mindset of perceived equality is helpful to foster the cultural integration which is necessary to make a merger a success.

In principle, a merger of equals is likely to be friendly and require both parties to be open and willing to seek agreement on key arrangements for control of the new/combined entity. However, the associated complexity of such an approach is likely to prolong the realisation of the benefits of the merger due to the likely reluctance to take tough decisions in order to avoid the disproportionate impact of change on any of the parties.

I often wonder whether there can truly be a merger of equals if one of the parties needs the other organisation much more than the other way round.

The effort to avoid the appearance of dominance by one of the parties could prove counterproductive. It could be argued that the pretence that neither party is dominant could cause more damage to the development of the proposed culture particularly if integrity, honesty and transparency are some of the desired values of the new entity.

It is not clear that adopting a mindset of ‘merger of equals’ is always helpful to resolve the power sharing responsibilities in the proposed new entity. It is questionable whether the customary 50:50 split of the new board and senior executive posts is the best way to leverage the best talents in the new organisation. In some respects, such mergers are doomed to fail if a suboptimal board and top leadership team is created just to foster an appearance of balance.

A key proposed benefit of mergers is to achieve significant synergies which would normally require rationalisation of processes and systems of both organisations. The nagging question is whether a mindset of ‘merger of equals’ is likely to compromise the decision making process arising from turf ways on a number of key decisions. Rather than focusing on making the right decisions for the new entity post the merger, the leaders may become distracted by seeking to achieve an equal split on major issues.

Another question is whether a mindset of ‘merger of equals’ reinforces existing arrangements along the lines of pre-merger organisational boundaries if it is expected that all key aspects of the new organisation would be handled on the basis of equality. There is a risk that the focus of leadership may be distracted as there may be ongoing jockeying for influence to maintain equality on all strategic aspects of the combined organisation.

It seems to me that if a new organisation wishes to enhance their chances of long lasting success following a merger, it should be accepted that it is likely and probably necessary that one of the parties may be more dominant in the new entity.

A key conundrum facing firms contemplating a merger is to determine whether a mindset of ‘merger of equals’ is a stumbling block or stepping stone to achieving effective post-merger integration.