Human Side ofMergers & Acquisitions

-Presented By: Alisha Mahajan

Nidhi Mishra

Merger

Two Companies come together to form a new entity

A single new Company rather than being separately owned and operated.

Acquisition

• One company takes over another & cleary establishes itself as the new owner.

• Acquisition may be ‘Friendly’ or ‘Hostile’.

Reasons of M&A

• Increasing Profitability.• Gaining Market Share.• Cross-Selling.• Economies of Scale.• Acquiring new technology.• Improved Market Reach and Industry visibility.• Taxation.

Issues during M&A

• Profitability (Finance issues)• Resource Optimization (Operational Issues)• Market Study (Marketing Issues)• Technological Issues (IT Issues)

HUMAN ISSUES??????

HUMAN SIDE OF MERGER AND ACQUISITION!!!!!

Impact of M&A on Employees

Stage Characteristic Response

Denial Not Accepting that the merger will take place.

Fear Afraid with regard to future prospect.

Anger Resentment towards those considered responsible.

Sadness Mourning & grieving for what's past.

Acceptance Recognition of futility-a positive approach starts to develop.

Relief Recognition that the situation is actually better than expected.

Interest Increasing feeling of security

Liking Recognition of new opportunities.

Enjoyment Satisfaction that the merger is working out well.

Issues in Mergers and Acquisitions!!!

• 1) Retention of key talent;• (2) Communications;• (3) Retention of key managers; and• (4) Integration of corporate cultures.• 5) Creation of Manpower Plan- delineate roles & reporting relationships. • 6) HR Integration –HR Systems, Policies &Practices

HR ISSUES DURING VARIOUS STAGES OF M/A

•Stage 1: Pre-Combination•Identifying reasons for the IM & A •Forming M & A team/leader •Searching for potential partners •Selecting a partner •Planning for managing the process of the M and/or A

Stage 2: Combination and Integration•Selecting the integration manager •Designing/implementing teams •Creating the new structure/strategies/ leadership •Retaining key employees •Motivating the employees •Managing the change process •Communicating to and involving stakeholders •Deciding on the HR policies and practice

Stage 3: Post combination•Solidifying leadership and staffing •Assessing the new strategies and structures •Assessing the new culture •Assessing the new HRM policies and practices •Assessing the concerns of stakeholders •Revising as needed

Role of HR Department

• Formulation Strategy.• Creating Teams.• Creating Organization Structure.• Developing a Communication Plan.• Creating a Transition system.

Encourage open houses or forums where employees can come together and discuss the deal and allay their fears and insecurities surrounding it.

Acknowledge the problems as and when they arise

Advocate family assistance programs to make the employee that he/she is cared for

• Train managers on the nature of change• Stress reduction program• Orientation programs • Explaining new roles • Post merger team building • Keeping all employees informed (Frequent broadcasts

from CEO, HR Director) of all crucial decisions.

Few

Examples of

mergers

and

acquisitions

CISCO

• Cisco devised a three step process of acquisition. This involved, analyzing the benefits of acquiring, understanding how the two organizations will fit together – how the employees from the organization can match with Cisco culture and then the integration process.

• In the evaluation process, Cisco looked whether there is compatibility in terms of long term goals of the organization, work culture, geographical proximity etc.

• The company insists on no layoffs and job security is guaranteed to all the employees of the acquired company.

• The acquisition team of Cisco evaluates the working style of the management of the target company, the caliber of the employees, the technology systems and the relationship style with the employees.

• Once the acquisition team is convinced, an integration strategy is rolled out.

• A top level integration team visits the target company and gives clear cut information regarding Cisco and the future roles of the employees of the acquired firm.

• After the acquisition, employees of the acquired firm are given 30 days orientation training to fit into the new organizational environment.

This has resulted in high rate of success in acquisitions for Cisco.

ROVER - BMW

• The merger of BMW and Rover ‘failed’ • Because of cultural differences, poor leadership and

poor due diligence;

ARCELOR- MITTAL

MITTAL STEEL• Was one of the world's largest steel producers by volume,

and turnover. ARCELOR• Was the world's largest steel producer in terms of turnover • Second largest in terms of steel output.• Created by a merger of the former companies Aceralia

(Spain), Usinor (France) and Arbed (Luxembourg) in 2002.

RESULT

• The merger resulted in the creation of the world’s largest steel company.

• 2007 revenue - $105 billion• Steel production - 10 percent of global output • Presence in 60 countries• A global leader in all of its target markets.

TOP MANAGEMENT

Arcelor Mittal’s top management set three driving objectives before undertaking the post-merger integration effort. - Achieve rapid integration- Manage effectively daily operations- Accelerate revenue and profit growth.

STRATEGIES FOR MANAGING HUMAN RESOURCE IN M&A

• Communication• Common culture• Training and

Development• Individual counseling

Daimler-Chrysler (DCX) Merger – A Failure.

• Daimler Benz• Germany• Planned & methodical way

• Stuck to their plans & frowned on failure.

• Hierarchical ,Top-Down structure

• Bureaucratic• Spoke only German• Formal Dress Code• Lower Compensation

• Chrysler Corporation• U.S.• Carefree Attitude, individual

instincts & ideas• Experimentation ,Trial & error

Approach• Flat Structure

• Highly Decentralized• Hardly knew German• Casual Dress Code• Higher Compensation

After the Merger……• Compensation system was restructured.• Salaries were revised and made more equitable.• Chrysler employees did not like the lower salaries after

merger.• Daimler started exerting pressure on Chrysler employees to

adopt most of its policies & procedures.• Result – Chrysler CEO left the Company within 19 months -Chrysler was slowly overshadowed by Daimler in almost all

areas. -Daimler employees were in key positions & took most of the

key decisions -DCX went through major crisis.

REFERENCES

•European Management Journal Vol. 19, No. 3, pp. 239–253, 2001•Anon (2000b). Employee Communication during Mergers. The Conference Board, New York.•Excel Journal of Engineering Technology and Management Science Vol. I No.1 December-January 2012 ISSN 2249-9032•http://www.bizsum.com/summaries/human-side-mergers-and-acquisitions•http://www.questia.com/library/1G1-20872995/the-human-side-of-mergers-and-acquisitions-understanding•http://jab.sagepub.com/content/41/4/422.abstract•http://www.123eng.com/forum/f12/impact-mergers-acquisitions-human-resources-116448/•http://www.businessgyan.com/node/5787•http://www.tlnt.com/2011/07/28/hr-mistakes-in-mergers-and-acquisitions/

THANK YOU !!