On Friday October 28, Elon Musk, the richest man in the world, formalized the news: he took the reins of the social network Twitter, bought for 44 billion US dollars.
The operation is part of what is commonly called “mergers and acquisitions.” The idea is to join forces with another company or take control of the target company for often large sums. They are presented by business strategy specialists, comparing them with a number of customers to be won or acquired in terms of synergy. The media often show the social consequences of the process.
In the case of Twitter, half of the employees were fired in just one week.
The fate of clients is rarely mentioned, including in the scientific literature. However, at the end of April, when the founder of Tesla announced his intentions to get his hands on the platform and when his board of directors accepted an initial offer, the tracking tool on the web page VisualPing saw an 82% increase in US searches for how to delete your Twitter account. Tens of thousands of users, 41,287 for one day on April 26, then switched to rival network Mastodon.
As we have shown more generally in recent research, the reaction of customers, users and other users to the announcement of a takeover operation is often tinged with pessimism and negativity.
An American customer satisfaction indicator shows that, on average, consumers are less satisfied, even two years after an operation of this type. In 2010, Continental Airlines lost 10% of its satisfaction rating after its merger with United Airlines. In 2008, following the merger of two airlines, Delta and Northwest, Delta’s customer satisfaction index dropped by the same order of magnitude. When Compaq and HP merged in 2002, a survey showed that customers expected to reduce their purchases of the Compaq brand by 10% and the HP brand by 4%.
On paper, however, much can be expected from acquisitions. When it comes to Twitter, we can assume that Elon Musk’s finances or the reputation of his companies like Tesla and SpaceX can be useful for the users of the tool. And this, even as his intentions behind the maneuver remain somewhat vague.
A company after a merger is larger, has more market power and can therefore negotiate from a position of strength with its suppliers. All this has a positive effect for the customer in terms of costs. The operation also facilitates the pooling of resources and skills. This can result in an increase in the level of investment in research and development and consequently facilitate the creation of new products or services, which better suit expectations.
However, nuances appear quickly. Our results show that satisfaction varies according to the types of operations, sectors of activity, as well as the specifics of the countries of origin of the companies involved.
The simultaneous improvement of productivity and customer satisfaction is, for example, not easy to reconcile in the service sector where customers are sensitive to the personalization of the offer (it is difficult to satisfy by standardizing or proposing the same everything) compared to manufacturing sectors. Satisfaction levels are also lower when it comes to horizontal acquisitions (when a company acquires a company in the sector in which it operates).
The reaction of Twitter users may depend on whether they are located in a democratic country (freedom of expression) or not, or on their perception of paid/free services.
Check your strategies
Following a merger or acquisition, many actually fear that the new entity will prove unable to provide an offering that meets their expectations. The long and complex period of negotiations and transitions can be worrisome, when for example uncertainties arise from legal proceedings, as happened with Twitter. Perhaps this is more directly relevant to employees whose positions may be questioned, unlike users.
For the latter, however, it is possible to imagine that administrative, technological and operational dysfunctions are inevitable. Moreover, they are not only satisfied with their consumption experiences but see themselves as active players, in the same way as other stakeholders that the company must consider.
A relationship between a customer and a business is often tied to other relationships. Consequently, any change affecting the latter may also have consequences for other stakeholders. A merger that results in layoffs may, in the eyes of the user, be synonymous with a loss of expertise and quality for the company. A study shows that replacing executives of the acquired company can negatively affect performance.
The customer/user was not integrated when Elon Musk announced new strategies for transforming Twitter from top to bottom and remains considered a mere spectator. Among these measures, we can mention the revival of paid subscriptions, the monetization of the distribution of very popular tweets or even the payment of content creators, which directly concerns him.
Managers involved in mergers and acquisitions must, in our view, understand that the customer is an important element that deserves its place among key strategic concerns. Our results are also an invitation, during negotiations, for clear strategies to be taken to inform clients of the future benefits they will derive from the maneuver. It is a question of thinking about investments aimed at improving customer satisfaction in the short term to prevent some of them from rejecting the operation where they do not see themselves, at the risk of moving towards competitors. .
ThroughTeacher-Researcher in Marketing and Data Analysis (AI), ICD Business School.
The original version of this article was published on The Conversation.