Why are emotions important during M&As?

Emotions are transient feelings everyone experiences, with an identified trigger or target shaped by sensemaking practices, resulting in emotional experiences and responses. During a sensemaking process, an individual cognitively appraises emotional triggers based on positive or negative effects on their well-being. This emotional process is especially triggered by disrupting events. Therefore, particularly relevant in times of change, such as M&As.   

Emotional experiences can be broadly categorized into two groups, negative emotions and positive emotions. Research shows that negative emotional experiences are associated with negative attitudes and behaviors, such as indifference and sabotage. In contrast, positive emotions are associated with positive attitudes and behaviors, such as openness and cooperation. Thus, making emotional dynamics during M&As important factors concerning alignment or resistance towards organizational set M&A goals and initiatives, thereby impacting M&A success or failure.

Different kinds of emotions during M&As

Not much is known concerning emotional dynamics during M&A times and their effects, and what is known is mostly fragmented and incohesive. To resolve this problem, we made a review of the existing literature. First, we divided the M&A process into three phases, the pre-M&A, during-M&A and post-M&A. Secondly, we examined per phase what emotional triggers were salient, which emotions were experienced, what the emotional outcomes and attitudes were, and how these emotional dynamics were managed. Finally, we summarized the literature in a process framework.

What came to light after the review was that emotional experiences are extremely diverse and range from positive to negative and everything in between. Employees can also experience multiple (conflicting) emotions at the same time. Examples of observed emotions are happiness, excitement, frustration, indifference, anger, hostility, jealousy, fear, anxiety, stress and many more.

Interestingly, employees do not respond to emotional triggers in the same way. What is good for one might be bad for someone else. This is due to individual differences concerning emotional sensemaking. Moreover, we observed that negative and positive emotional experiences do not always have similar outcomes. For example, negative emotions are sometimes used as correcting mechanisms, whereas positive emotions sometimes result in overconfident- self-serving behaviors. Employees further exhibit huge differences in emotional resilience, coping, intelligence, labour and psychological capital, making emotions and outcomes challenging to manage and predict.

Finally, we observed that during the pre-M&A and during-M&A phases, emotions are contained within the upper echelons of an organization and are mostly positive. However, as soon as the rumour mill starts running and the M&A is announced in the post-M&A integration phase, emotions spread rapidly throughout the organization and shift from positive to negative.

A bright M&A future might lie around the corner

With our article, we offer valuable insights for managers and other practitioners. Firstly, by championing the importance of emotional dynamics within an organization and the trajectory of an emotional trigger, registration, experience and response. Understanding these mechanisms makes adjusting corporate strategy towards emotional value creation easier. Focusing on the organization’s human capital reduces stress and anxiety and, ultimately, the high (human) costs associated with turnover and burnout.

Secondly, there are huge opportunities to prevent negative emotions by correctly managing emotions during the post-M&A integration phase, as emotions become endemic. Negative emotions need to be felt, heard and acknowledged. Moreover, negative emotions can act as correction mechanisms for faulty strategies. It is vital for employees to feel responsible, fairly treated, certain and in control. These states can be achieved if managers offer their employees respect, motivation, inspiration, empowerment, communication, reward, recognition, and accountability. During M&A times, it is vital to offer a clear plan in which these dimensions are touched upon, combined with describing what will happen for the foreseeable future, e.g., three years. In doing so, one of the most harmful emotions, uncertainty, will be mitigated. A valuable lesson is that negative emotions must be felt and closed off instead of lingering like the sword of Damocles.

Finally, there is much-untapped potential concerning positive emotions. The main focus of organizations and societies is oriented towards negative emotions. Our article shows positive emotions’ positive effects on M&As and employees. Positive emotions prevent and can counter negative emotions; positive emotions broaden the mind making employees open to change, and positive emotions, such as enthusiasm, make employees actively cooperate with M&A initiatives. Leaders should therefore focus on preventing negative emotions by actively fostering and cultivating positive ones. This can be done by creating a safe environment in which dialogues between employees and management result in a continuous feedback loop. Why cure a sick patient if the patient does not need to be sick in the first place?