tp of hr-r1902a17

8/9/2019 Tp of Hr-r1902a17

1/17

Page | 1

LOVELY PROFESSIONAL UNIVERSITY

TERM PAPER OF

HUMAN RESOURCE MANAGEMENT

ON

Human Side of Mergers & Acquisitions

SUBMITTED TO:- SUBMITTED BY:-

Ms. Gurneet Kaur Rajiv Kumar

A-17

Reg. No.10901437

Sec. R1902

MBA-LSB

8/9/2019 Tp of Hr-r1902a17

2/17

Page | 2



ACKNOWLEDGEMENT

I feel pleasure to give the credit of my term paper not only to one individual as this work

is integrated effort of all those who concerned with it. I want to owe my thanks to all thoseindividuals who guided me to move on the track.

This report entitled HUMAN SIDE MEGER AND AQUISITION.

I sincerely express my gratitude and lot of thanks to Ms. Gurneet Kaur (Lect. , Human

Resource Managemen) also thank to my friends for helping me in completing my Term

paper and give me better ideas to doing my job and making it a great success.

I would like to express my deep sense of gratitude to staff of LOVELY SCHOOL OF

BUSINESS who introduced me to the subject and under whose guidance I am able to

complete my project.

RAJIV KUMAR

A17RR1902

MBA 2nd sem.

8/9/2019 Tp of Hr-r1902a17

3/17

Page | 3


INDEX

1.Introductionpage no.4

2.Distinguish B/W Merger & Acquisition..page no.4

3.Types of Mergerpage no.5

4.Motive behind M&A.page no.5

5.Effec on Management page no.5

6.Reviw of Litrature 0f 10 Articles.page no.6

7.Managing all the HR issues..page no.11

8.Critical appraisel and summery of M&Apage no.15

9.Bibliography...page no.16

8/9/2019 Tp of Hr-r1902a17

4/17

Page | 4


INTRODUCTION

The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporatestrategy, corporate finance and management dealing with the buying, selling and combining ofdifferent companies that can aid, finance, or help a growing company in a given industry growrapidly without having to create another business entity.Acquisition-An acquisition, also known as a takeover or a buyout or "merger", is the buying ofone company (the target) by another. An acquisition may be friendly or hostile. In the formercase, the companies cooperate in negotiations; in the latter case, the takeover target is unwillingto be bought or the target's board has no prior knowledge of the offer. Acquisition usually refersto a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm will acquiremanagement control of a larger or longer established company and keep its name for thecombined entity. This is known as a reverse takeover. Another type of acquisition is reversemerger, a deal that enables a private company to get publicly listed in a short time period.A reverse merger occurs when a private company that has strong prospects and is eager to raisefinancing buys a publicly listed shell company, usually one with no business and limited assets.Achieving acquisition success has proven to be very difficult, while various studies have shownthat 50% of acquisitions were unsuccessful The acquisition process is very complex, with manydimensions influencing its outcome

Distinction between mergers and acquisitions Although they are often uttered in the same breath and used as though they were synonymous,the terms merger and acquisition mean slightly different things.When one company takes over another and clearly establishes itself as the new owner, the

purchase is called an acquisition. From a legal point of view, the target company ceases to exist,the buyer "swallows" the business and the buyer's stock continues to be traded.In the pure sense of the term, a merger happens when two firms agree to go forward as a singlenew company rather than remain separately owned and operated. This kind of action is moreprecisely referred to as a "merger of equals". The firms are often of about the same size. Bothcompanies' stocks are surrendered and new company stock is issued in its place. For example, inthe 1999 merger of GlaxoWellcome and SmithKline Beecham, both firms ceased to exist whenthey merged, and a new company, GlaxoSmithKline, was created.In practice, however, actual mergers of equals don't happen very often. Usually, one companywill buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim thatthe action is a merger of equals, even if it is technically an acquisition. Being bought out often

carries negative connotations, therefore, by describing the deal euphemistically as a merger, dealmakers and top managers try to make the takeover more palatable. An example of this would bethe takeover of Chrysler by Daimler-Benz in 1999 which was widely referred to in the time.A purchase deal will also be called a merger when both CEOs agree that joining together is in thebest interest of both of their companies. But when the deal is unfriendly - that is, when the targetcompany does not want to be purchased - it is always regarded as an acquisition.

8/9/2019 Tp of Hr-r1902a17

5/17

Page | 5


Types of MergerBusiness firms make use of mergers and acquisitions for consolidation of markets as well as for

gaining a competitive edge in the industry.Merger types can be broadly classified into the following five subheads as described below.

They are Horizontal Merger, Conglomeration, Vertical Merger, Product-Extension Merger andMarket-Extension Merger. 1.Horizontal Merger refers to the merger of two companies who are direct competitors ofone another.They serve the same market and sell the same product. 2.Conglomeration Merger refers to the merger of companies, which do not either sell anyrelated products or cater to any related markets. Here, the two companies entering the mergerprocess do not possess any common business ties. 3.Vertical Merger is effected either between a company and a customer or between acompany and a supplier 4.Product-Extension Merger is executed among companies, which sell different productsof a related category. They also seek to serve a common market. This type of merger enables the

new company to go in for a pooling in of their products so as to serve a common market, whichwas earlier fragmented among them. 5.Market-Extension Merger occurs between two companies that sell identical products indifferent markets. It basically expands the market base of the product.

MOTIVE BEHIND M & A

The dominant rationale used to explain M&A activity is that acquiring firms seek improvedfinancial performance. The following motives are considered to improve financial performance: Economy of scale: This refers to the fact that the combined company can often reduce its

fixed costs by removing duplicate departments or operations, lowering the costs of the

company relative to the same revenue stream, thus increasing profit margins. Economy of scope: This refers to the efficiencies primarily associated with demand-side

changes, such as increasing or decreasing the scope of marketing and distribution, ofdifferent types of products.

Increased revenue or market share: This assumes that the buyer will be absorbing a majorcompetitor and thus increase its market power (by capturing increased market share) to setprices.

Cross-selling: For example, a bank buying a stock broker could then sell its bankingproducts to the stock broker's customers, while the broker can sign up the bank's customersfor brokerage accounts. Or, a manufacturer can acquire and sell complementary products.

Synergy: For example, managerial economies such as the increased opportunity of

managerial specialization. Another example are purchasing economies due to increased ordersize and associated bulk-buying discounts. Taxation: A profitable company can buy a loss maker to use the target's loss as their

advantage by reducing their tax liability. In the United States and many other countries, rulesare in place to limit the ability of profitable companies to "shop" for loss making companies,limiting the tax motive of an acquiring company.

Geographical or other diversification: This is designed to smooth the earnings results of acompany, which over the long term smoothens the stock price of a company, giving

8/9/2019 Tp of Hr-r1902a17

6/17

Page | 6


conservative investors more confidence in investing in the company. However, this does notalways deliver value to shareholders (see below).

Resource transfer: resources are unevenly distributed across firms (Barney, 1991) and theinteraction of target and acquiring firm resources can create value through eitherovercoming information asymmetry or by combining scarce resources.

EFFECT ON MANAGEMENT

A study published in the July/August 2008 issue of the Journal of Business Strategy suggeststhat mergers and acquisitions destroy leadership continuity in target companies top managementteams for at least a decade following a deal. The study found that target companies lose 21percent of their executives each year for at least 10 years following an acquisition more thandouble the turnover experienced in non-merged firms.

Review Of LitratureArticle 1.Mergers and acquisitions as a human resource strategy: Evidence

from US banking firms

Absracts- Mergers and acquisitions (M&A) is treated as a long-term strategic orientation based onhuman resource advantage rather than a tactic to pursue short-term goals. Using a sample of 267US banking firms, the main and interaction effects of M&A intensity, HR capability, and in-statepropensity on four firm performance measures were examined. The findings confirm thatbanking M&A could be very effective when the firm had high HR capability. Evidence was alsofound that HR capability had a direct impact on firm performance. Although in-state M&Astrategy was in general superior to out-of-state M&A strategy, a firm with excellent HRcapability might narrow the performance difference between in-state and out-of-state M&A.

Article 2.HR'S Role in Mergers and Acquisitions - Human Resource

Management

AbstracsThe key HR initiatives have included:-

* Development of preliminary organizational designs and identification of the top three levels ofmanagement.

* Assessment of critical players and deployment of appropriate resources in the new company.

* Retention of key people and separation of redundant staff.

* Development of a total rewards strategy for the combined companies.

* Communications strategy development and implementation.

* Integration of payroll benefits and HR-IS.

* An ability to do all of the above with speed.

Many companies report that their mergers are successful but admit the end results aren't assuccessful as they could have been. Recent studies place the success rate of merged companies at

8/9/2019 Tp of Hr-r1902a17

7/17

Page | 7


30 to 60 percent, depending on what criteria you measure. No matter how flawless a deal seemson paper, the results are often disappointing. Most merged organizations lose 1 to 10 percent oftheir market value in the first year after the merger. Only 28 percent of companies said they did agood job of assessing the culture of their merging organizations before the deal, only 26 percentsaid they had put the right people in the right roles during the merger, and a scant 15 percent said

they had successfully communicated the vision and goals after the union.Some guiding principles:* Take definitive action and make decisions quickly--the secret for holding onto good people.* Be candid with employees, and treat them with respect. Let them know that the combinedentity will be a more valuable organization.* Whenever possible, use ownership of the company as represented by stock options and stockgrants to get everyone pulling in the same direction.* Be honest about the people decisions that must be made.* Treat those leaving with the same respect and attention as those staying.

Article 3. The Impact of Culture on Mergers & Acquisitions

Abstracts-There are following impact:-

1: Preoccupation- In countries where people identify largely with groups, people tend to lookfor support within their group. In France and Italy, people caught in the midst of a merger oracquisition often turn to unions. If unions cannot provide answers because they have beenexcluded from the negotiation process, they are likely to go on strike. These strikes may do muchmore damage to the organization than comparable Canadian strikes; for example, the strike byFrench railroad and subway workers in December 1995 resulted in the demise of the Juppgovernment. Multiply this by 65 (there are 65 working days per quarter) and compare thisnumber with the amount in gross sales revenue that the firm will have to generate to the bottom

line to offset this loss in productivity.2: List-making- As soon as the merger is announced and the first calls to action proclaimed, thereality sinks in. The "list" is overwhelming. Personal and departmental needs drive the allocationof resources. Quickly, as the days build, there is a widening disconnect between the financial andmarket-based goals of the merger and real-time allocation of effort. During the first 90 days,focus and get everyone to focus on the 20% of the goals that yield 80% of the economic value.Dealing with uncertainty explicitly is critical to the success of M&As.3: Organizational Proliferation-In Canadian organizations, many task forces, committees andintegration teams are created to handle all the lists and to plan new lists. Integration structuresand transition teams designed to be all-inclusive and to represent a sign of "new partnership" willweigh heavily on an organization seeking to keep its eye on its customers and the market. Moreeffort will be placed on temporary rules and reporting relationships than the work itself. . Formsmall, agile, quick-acting teams, including people from both sides of the M&A, with a clearmission and empowered integration team managers with direct access to senior management andto their support. Transitions do not need to be demonstrations of democracy in action.4: Infrequent and irrelevant communication-Fear and a lack of all the answers deters topmanagement from providing the information that customers, shareholders and employees need toredirect their action to the value-added of the deal. Rumor fills mystery and vacuums. Whenthere is communication, it often lacks information and substance that explains and supports

8/9/2019 Tp of Hr-r1902a17

8/17

Page | 8


stakeholders' interests. . Frequent communication, repeated at least 7 times through multipleavenues - print, voice mail, e-mail, meetings, and video. In times of stress, the "noise" of survivaland uncertainty drowns out the message. The communication strategy needs to takecommunication style preferences into account, as in the Norwegian - American examplementioned above

5: Triangulation-Without clear lines of authority and clear understanding of where they fit in,employees and managers are caught in a web of conflicting objectives and old loyalties. Thistype of organizational and personal strangulation robs the new entity of the very energy it needsto overcome the losses in productivity6: The relatives- Time in a merger is accelerated, compressed and merciless. In Canada, publiclyheld companies need to show clear results at the end of the first quarter after the announcement.Individuals going through a merger have to work at an accelerated pace at the very same timethat the inner adaptation of change - personal and psychological transition - weighs them downand operates on personal, rather than linear time. Adapt to the realities of change and transition -they are different experiences and each individual will have their own way of going throughthem.

7: The guiding light- At a time when leadership and active management is most called for, thestress and uncertainties associated with the merger causes an inward focus and a retreat to safeand high ground. More leadership is needed, at this time, than less. One of the primary roles of aleader is to articulate a vision and inspire others to join in that vision. Proclaiming a new visionand handing out laminated cards, however, does not create a new vision for the new entity.

Article 4. Mergers and Acquisitions in India

Abstracts-The merger and acquisition business deals in India amounted to $40 billion during the initial 2

months in the year 2007. The total estimated value of mergers and acquisitions in India for 2007was greater than $100 billion. It is twice the amount of mergers and acquisitions in 2006. Till

recent past, the incidence of Indian entrepreneurs acquiring foreign enterprises was not socommon. The situation has undergone a sea change in the last couple of years. Acquisition offoreign companies by the Indian businesses has been the latest trend in the Indian corporatesector. The Indian IT and ITES sectors have already proved their potential in the global market.The other Indian sectors are also following the same trend. The increased participation of theIndian companies in the global corporate sector has further facilitated the merger and acquisitionactivities in India.Recently the Indian companies have undertaken some important acquisitions. Some of those arefollows: Hindalco acquired Canada based Novelis. The deal involved transaction of $5,982 million. TataSteel acquired Corus Group plc. The acquisition deal amounted to $12,000 million. Dr. Reddy's

Labs acquired Betapharm through a deal worth of $597 million. Ranbaxy Labs acquired TerapiaSA. The deal amounted to $324 million. Suzlon Energy acquired Hansen Group through a dealof $565 million. The acquisition of Daewoo Electronics Corp. by Videocon involved transactionof $729 million. HPCL acquired Kenya Petroleum Refinery Ltd.. The deal amounted to $500million. VSNL acquired Teleglobe through a deal of $239 million.

Article 5.International Mergers and Acquisitions-

Abstracts-

8/9/2019 Tp of Hr-r1902a17

9/17

Page | 9


International mergers and acquisitions are performed for the purpose of obtaining somestrategic benefits in the markets of a particular country. With the help of international mergersand acquisitions, multinational corporations can enjoy a number of advantages, which includeeconomies of scale and market dominance. International mergers and acquisitions play animportant role behind the growth of a company. These deals or transactions help a large number

of companies penetrate into new markets fast and attain economies of scale. They also stimulateforeign direct investment or FDI.

Methods of Financing International Mergers and Acquisitions

Financing (or taking loans) Cash Factoring Hybrid Financing

Instances of the major international mergers and acquisitions: The merger of British Petroleum (BP) with Amoco (erstwhile Standard Oil of Indiana) The acquisition of Mannesmann AG by Vodafone Airtouch PLC The merger of Exxon with Mobil (The name of the company formed as a result of the

merger is ExxonMobil) The acquisition of AirTouch Communications by the Vodafone Group The acquisition of Compaq by Hewlett-Packard The acquisition of Shell Transport & Trading Company by Royal Dutch Petroleum

Company The merger of Bank One Corporation with JPMorgan Chase & Company

Factors Affecting International Mergers and Acquisitions

Corporate governance Company acts The capacity of average workers

Expectation of the consumers Political features of a country Tradition and culture of a country

Article 6.Mergers and Acquisitions in Banking SectorAbstracts-

Mergers and acquisitions in banking sector are forms of horizontal merger because themerging entities are involved in the same kind of business or commercial activities. Sometimes,non-banking financialinstitutions are also merged with other banks if they provide similar type ofservices. Through mergers and acquisitions in the banking sector, the banks look for strategicbenefits in the banking sector. They also try to enhance their customer base. Mergers andacquisitions in the banking sector have the capacity to ensure efficiency, profitability andsynergy. They also help to form and grow shareholder value.Major Mergers and Acquisitions in the Banking Sector of the United States-

The merger of Chase Manhattan Corporation with J.P. Morgan & Company. The nameof the new company formed as a result of the merger is J.P. Morgan Chase & Company.

The merger of Firstar Corporation with U.S. Bancorp. The name of the resultant entity isU.S. Bancorp.

8/9/2019 Tp of Hr-r1902a17

10/17

Page | 10


The merger of First Union Corporation with Wachovia Corporation. The name of thenewly formed company is Wachovia Corporation.

Article 7. 450 jobs go as Vodafone, Hutch merge Down Under-

Abstracts-

The fresh merger between Vodafone Australia and Hutchison Australias 3 has revealed itsfirst round of casualties with the announcement that it is off-shoring its call center operations toIndia. Up to 450 jobs have been made redundant as a result of the decision. Vodafone Hutchisonannounced that it will relocate the bulk of those 450 call center jobs to India. Around 100 jobswill stay in Australia but will be moved to another company in Tasmania.The joint venture has a call center located at Malad in Mumbai jointly run by 3UK and 3Australia. The Mumbai operation employs 1800 people, Vodafone Hutchison Australia (VHA)said.Lawyers have warned that it may result in reduced competition.

Article 8. HR Issues in Mergers & Acquisitions The ability to succeed in a merger depends entirely on the people who are driving the business- whether they have creativity, capacity to innovate and ability to execute, and more importantly,

whether they can do these things collaboratively.Stage 1: Pre Combination - The HR issues in the pre merger phase are: -Identifying reasons for the M&A

Forming M&A team leader Searching for potential partners Selecting a partner Planning for managing the process of M&A Planning to learn from the processThe HR implications in this phase are: - Knowledge and understanding need to be disseminated Leadership needs to be in place

Composition of team's impact success Systematic and extensive pre-selection and selection Conducting thorough due diligence of all areas Cultural assessment Planning for combination which minimizes problems at a later stage Creating practices for learning and knowledge transferStage 2: Combination - The HR issues in this phase are: - Selecting the integration manager Designing / implementing teams Creating the new structure strategies and leadership Retaining key employees

Managing the change process involving the stake-holders Deciding on HR policies and practicesThe HR implications in this phase are: - Selecting the appropriate candidate Creating team design and selection which are critical for transition and combination

success Communicating the benefits of merger

8/9/2019 Tp of Hr-r1902a17

11/17

Page | 11


Deciding on who stays and who goes Establishing a new culture, structure, and HR policies & practicesStage 3: Solidification & Assessment - The HR issues in the integration phase are: - Solidifying the leadership and staffing Assessing the new strategies and structure

Assessing the new culture Assessing the new HR policies & practices Assessing the concerns of stakeholders Revising as needed Learning from the processThe HR implications in the integration phase are: - Elective leadership and staffing of the new entity Creating and evaluating a new structure Assessment revision required for melding two cultures The concerns of all stakeholders need to be addressed and satisfied The new entity must learn

Article 9. Mergers and Acquisitions in Vodafone and Hutch When a company decides to take over the other, several factors need to be kept in mind.Considering that such actions are taken to increase the popularity, growth and market reach of abrand, one has to be aware of the consequences of the deal. How much technological know-how and expertise exists with the company to actually go ahead and ensure such a process.Mergers and acquisitions are an important part of brand building. It could also show howpowerful you are as compared to your rival.Hutch and Vodafone,in process Vodafoneacquired Hutch for a whopping 10 billion USD!

Article 10. M&A: The Bridge Over Troubled WatersIt is given by Mr. Dirk Van Dyke,President of valuation services.He believes that in many

areas of technology that there will eventually be a few really big winners and that midsize

companies will have a difficult time competing. That is, there will be either more monopolieslike Microsoft or oligopolies with a few big players with 70-80% market share of an industry.The desire for companies to become one of the big players will drive a lot of M&A activity, inhis view.

This is another reason that much fewer M&A deals are taking place, because owners ofprivately held companies don't want to do deals at lower values than their most recent financing.He gave an example of a company that had what he thought was a good offer on the table andwalked away because it was less than what it got at its last round of financing. Consequently, thecompany recently had to close its door because it ran out of cash.

Managing All The HR IssuesMany M&As fail to achieve the desired synergies because the HR issues are not given the

importance they deserve. This article explains the importance of HR issues for successful M&Asand suggests a few points for companies to ponder on. In 2003 the value of M&A business in the US was worth $510,866.4. This is much less whencompared to the value of merged and acquired businesses in 1998, amounting to $1.2 trillion.Though there are still a large number of companies worldwide that believe in the philosophy of"growing through acquiring", the percentage of failures in M&As has been pulling back quite a

8/9/2019 Tp of Hr-r1902a17

12/17

Page | 12


few. The decade of 1990s saw a spate of mergers and acquisitions in all the important sectors ofbusiness. However, the success rate of these M&As is estimated to be a mere 30 - 40%.Companies do announce that their mergers have been successful, but they also accept that

they have not been able to derive the kind of benefits that they expected to, from a mergeror an acquisition.

1.View the merger from the HRM Angle People issue is one of the most sensitive but often ignored issue in a mergers &acquisitions scenario. When a decision is taken to merge or acquire, a company analyses

the feasibility on the business, financial and legal fronts, but fails to recognize theimportance attached to the human resources of the firms involved.

Organizations fail to realize that people have the capability to make or break the

alliance. Therefore, it is important for organizations on the verge of integration to analyzethe feasibility of the integration on the human resources front.

Organizational culture and the national culture become two important factors in

determining the feasibility of integration. For example, the organizational culture of

company A might be very open and transparent with free flow of communication in alldirections. People enjoy their freedom of working in an informal and friendly atmosphere.

On the other hand, company B might be known for its stringent privacy system and strictrules and regulations with marked hierarchical roles. People in this company are used towork in a bound and regulated environment. A blind eye to these differences would render amerger between these two companies, disastrous.

Similarly, when it comes to cross-border mergers and acquisitions, care should be taken

to see that the national cultures of the two companies are not drastically different. Hofstedeidentified a set of cultural attributes that define and differentiate cultures. They can bestudied under Uncertainty Avoidance, Power Distance, Individualism Vs Collectivism, Future

Orientation and Gender Differentiation. For example, a country like Sweden, which is rankedhigh on uncertainty avoidance, would prefer a structured and orderly work environment.

On the other hand, a country like Russia, which is ranked low on the same attribute would

thrive under uncertainty. If a company from Sweden, characterized by orderliness mergeswith a company from Russia characterized by uncertainty, it can lead to chaos andconfusion. Therefore, a complete feasibility study on the human resources front is important

while going for a merger or acquisition.

2. Develop the 'HR' Project PlanA project plan is a critical document that directs and supports the whole process of

integration and should be continuously updated to include the latest developments. The projectplan should define the tasks to be performed in order of their priority. The owner for each taskhas to be identified and the responsibilities assigned. It is also important to note that the ownerenjoys the authority to carry out the task successfully. Each task has to be given a due date ofcompletion and the owner should keep track of the developments and record them. There shouldbe common forum for exchange of information among the different task owners. In all

probability, these tasks would be interrelated and the success of the project depends on effectivecoordination among all the task owners. Project plan is designed for any merger or acquisition.But, how many HR departments take the pains of designing a project plan exclusively for the HRactivities planning.The project plan should also take into consideration some unavoidable hurdlesthat may arise and provide for contingencies. It is also important to note that the support of other departments like the Finance and the Legaldepartments is essential for the successful implementation of the integration plan. Therefore, theinputs from these departments should be taken into consideration while working on the plan.

8/9/2019 Tp of Hr-r1902a17

13/17

Page | 13


Organizational culture and structure Employee compensation & benefits Industrial relations Pending employee litigations HR policies and procedures

Key talent analysisConduct the 'HR' Due Diligence Review Contd...In June 1999, Shaw's Supermarkets acquired Star Markets for roughly $500 million. Shaw's atthat time had 126 stores and about $3 billion in volume; Star had 54 stores and $1 billion insales. That acquisition was Shaw's largest to date, growing revenue by roughly 50 percent andincreasing its workforce from 20,000 to 32,000. It took eight months from signing the agreementto Federal Trade Commission approval. Completion of the acquisition and integration--operationally and culturally--of the two companies required human resources to play a majorrole.The key HR initiatives included:

Development of preliminary organizational designs and identification of the top three levels of

management Assessment of critical players and deployment of appropriate resources in the new company

Retention of key people and separation of redundant staff

Development of a total rewards strategy for the combined companies

Communications strategy development and implementation

3. Compare and develop the strategy to integrateThe next step is of course to compare the structures and systems, and polices and procedures of

the two merging organizations. Standardized systems and structures and policies and procedureshave to be developed to suit the changed needs of a merged organization. The management hasto take an unbiased view while choosing the best suitable systems and procedures. The interest ofthe organization, which would presumably be bigger in size, with an expanded business, has tobe the main consideration for any decision. No ego hassles should prevent the management fromtaking the most desirable decision for the organization.

The most common issues for comparison and integration would be employee compensation,administration, benefits and incentives, employee performance management and rewards system,training and development policy, career advancement prospects, organizational reportingchannels and decision-making levels. The acquiring company might feel that its policies andsystems should be continued with.

4.On The Employee FrontOrganizations need to employ a little tact when it comes to handling human resources. There

are two important steps to be taken by the management of both the companies. Identifying thekey resources in both the organizations is the first step. Key resources does not necessarily meanthe top people in the management cadres, but those, who have a following in the company asknowledgeable and trustworthy colleagues. They can manage a hold on at least some groups ofemployees in the organization. It is important to recognize them, take them into confidence andgroom them as the change leaders. They should be given the responsibility of informallypreparing the employees for the merger.

8/9/2019 Tp of Hr-r1902a17

14/17

Page | 14


Employees should be informed of the decision and the reason behind taking the decisionthrough a proper channel. The implications of the decision for the employees and the companyshould also be conveyed to them. Any queries or apprehensions of the employees should betaken seriously and properly responded to. Retaining and motivating employees is another majorchallenge for the HR department of the organization. One important point to note here is that it is

the most talented resources of the organization that leave it first. Therefore, prompt and timelyaction (and not reaction) is essential on part of the HR department. A wait and watch attitude canonly spell doom as the employees wouldn't think on similar lines. They have their career at stakeand they wouldn't want to take any risks on that front. The minute they get the information oftheir company going in for a merger or an acquisition, they start looking out for opportunities.Speed, alacrity and discretion on part of the HR department therefore become very critical.

5.From the horse's mouthThis is what an employee of an acquired IT company had to say:Treat even the 'acquired employees' with dignity and respect. Give them a reason to believe that

they are valued in the company. Keep your communication channels open in all directions. Let the employees know what's in

store for them. Clear all employee apprehensions. If downsizing is part of the integration plan, convey the same to the employees, well inadvance. Show your concern for the laid-off employees by providing employmentassistance.believe that they are valued in the company. Keep your communication channels open in all directions. Let the employees know what's instore for them. Clear all employee apprehensions. If downsizing is part of the integration plan, convey the same to the employees,well In advance.Show your concern for the laid-off employees by providing employment assistance. Concentrate on retaining and motivating the key talent. Key resources would be the first peopleto leave organizations as they have the best opportunities outside. Respect the allegiance of the employees to their former employer. In this case, the acquiring

company, which failed to follow these basics, lost nearly 70% of the workforce and struggled towin the confidence and trust of the rest.All these initiatives should ensure a company involved in a merger or an acquisition, a successfulintegration, from the HR angle.

6.Size matters

Inorganic growth is the fastest way to scale up. Aasif. A. Khan, Director, FabtechTechnologies International Pvt Ltd shares his views, Inorganic growth is necessary for thosewho believe that a lifetime is too short to realise their ambitions. It is a great strategy for thosewho believe that big is beautiful as in some industries small is easy to emulate. Such growth isalso a sure shot formula to get out of the crab and herd mentality which eventually kills!

However, one must never acquire a company with a view to create economies by cutting jobs.Instead, an acquisition should facilitate the use of skill sets in expanding the existing markets andcreating new markets.

Apart from the benefits of size and scale, mergers and acquisitions also lead to infusion newtalent into the organisation and add new perspectives and growth possibilities. However, oneneeds to have honest intention to avail these benefits. Khan elaborates, An acquisition is notmerely an acquisition. It is a declaration of your intentions, announcing that you mean seriousbusiness and you are hungry for growth. This itself is enough to inspire talent. Success is the

8/9/2019 Tp of Hr-r1902a17

15/17

Page | 15


byproduct of your intentions and passions. Identifying a particular target establishes your likingfor that company and also for its people, who are an inherent part of it and who have made thetarget worthy of your attention. With genuine intention, you can meet any challenge andsucceed.

7.Coping with challenges

For companies, inorganic growth comes with significant costs. Human resources constitute animportant cost in the process of growth because ignoring the human factor can cause greatdamage. While it is the people that drive growth, they can also affect the deal adversely, if notproperly cared for. Before and during the acquisition process, there is constant fear amongemployees regarding changes in job, including new roles and assignments as well as possibleloss of job. There is a natural resistant to change, be it the change in corporate culture leading toa loss of identity within the company, a change in the compensation and benefits or a change incareer path.

How best can HR managers tackle these issues? Rahul Kulkarni, Head, HR at Kale

Consultants advises, Every merger and acquisition deal boils down to the people. The greatestchallenge on the people front is to integrate two different cultures. In cross border mergers, thischallenge is much more pronounced. Typically, integration should involve a close scrutiny of theorganizational design, the processes, policies, systems and practices. Due diligence should beapplied at the pre-assessment stage with the HR playing a key role in identifying organisationaldesign, retaining key people, managing their expectations and appropriately utilising resources.Reward and benefits should also be worked out by the HR in an objective manner. Lastly,integration cannot be a long drawn process. It should be done with speed, precision and clearcommunication. Since HR is at the frontline of organisational change, it is important to behonest, to hear people out and respond to their anxieties appropriately.

Critical Appraisal and Summery After several years of declining activity, mergers and acquisitions (M&As) are making acomeback in the United States. Yet recent research suggests that many firms are not as preparedas they should be to manage HR issues related to mergers or to involve HR early in the duediligence process.

More deals are occurring, and the value of those transactions is also on the rise. Year-endtotals for 2003 marked the first upswing in U.S.-based merger and acquisition activity since theturn of the century, according to Mergerstat. Nearly 8,000 deals were reported, compared with7,874 the previous year. What's more, aggregate deal value is on the rise, jumping to $528 billionfrom $461.3 billion in 2002.

Mega-deals (those valued at over $1 billion) have had significant impact, but some analysts

have noted that their popularity may be short-lived. In 2003, U.S.-based mega-market dealsjumped to 87 transactions totaling $286.7 billion, up from 68 deals valued at $218.3 billion in theprevious year. Such transactions also boomed in the first quarter of 2004. As many as 30 suchdeals were reported, with a total value of more than $214 billion, Mergerstat notes. However,firms are beginning to question the profitability of such transactions, and deal sizes havediminished for now.

Regardless of size, many firms are not prepared to meet the people management challengesthat M&As often introduce. A study conducted by Accenture, a global management consulting,

8/9/2019 Tp of Hr-r1902a17

16/17

Page | 16


technology services and outsourcing company, found that only 48% of surveyed firms believetheir post-merger integration practices are sound. The same study suggests that performancemanagement systems are not adequately tied to merger successes; just 37% of respondentsreported that executives are evaluated according to ongoing integration metrics.

Pre-planning can help firms avoid pitfalls that would otherwise doom a deal, whether a

merger is cross-border or domestic. Mergers fail for three primary reasons, according to a poll byThomson Financial and the Association for Corporate Growth: inadequate post-mergerintegration, too high a price paid for the acquired business and insufficient communications.

Due diligence is key in pre-planning, but some firms are not doing all they should. Slightlyless than two-thirds of companies surveyed conducted due diligence in the M&A process,according to a 2004 survey by Corporate Finance magazine. What's more, Bain & Companyreports that half of the 250 senior managers polled noted that their due diligence efforts missedmajor M&A problems.

One solution may be to involve HR early in the process. For example, Schneider Electric is"committed to making the HR function a fully fledged partner at the M&A table" and assuresparticipation in the M&A operations and processes, notes Jean-Luc Santerre, vice president of

corporate social development for the French firm, which operates in 130 nations. "To achievethis we have a defined HR process for due diligence and are building one for integration," heexplains. Three areas must be evaluated early in the M&A process - cultural fit, organizationaldesign and change management.

It's never too early for an organization's HR function to develop some expertise in M&As.After all, based on current trends, the likelihood of a company's becoming involved in a mergeris increasing. By making basic preparations, HR can help firms update their processes andprocedures and decide if a future M&A would be in their best interest.

Bibliographyhttp://timesascent.in/article/8/2010022120100221184931510eb4d9bea/Managing-MA-All-about-

people-.html

http://www.valuenomics.com/About_ValueNomics/News/M_A_Summary/m_a_summary.html

http://www.hr.com/SITEFORUM?&t=/Default/gateway&i=1116423256281&application=story&active=n

o&ParentID=1119278002800&StoryID=1166454619984&xref=http://www.google.co.in/search%3Fhl%3

Den%26q%3Dsummery+of+M%2526A%26meta%3D%26aq%3Df%26aqi%3D%26aql%3D%26oq%3D%26g

s_rfai%3D

http://theviewspaper.net/mergers_and_acquisitions/

http://www.telecomseurope.net/content/450-jobs-go-vodafone-hutch-merge-down-

under?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+terss+(Telecoms+Europe+R

SS)

http://findarticles.com/p/articles/mi_m4467/is_10_54/ai_66499153/

8/9/2019 Tp of Hr-r1902a17

17/17

Page | 17


http://www.icmrindia.org/free%20resources/Articles/mergerissues1.htm

http://www.coolavenues.com/know/hr/mercy_1.php

http://www.itapintl.com/facultyandresources/articlelibrarymain/the-impact-of-culture-on-mergers-a-

acquisitions.html

http://www.economywatch.com/mergers-acquisitions/india.html

http://www.economywatch.com/mergers-acquisitions/international/

http://www.economywatch.com/mergers-acquisitions/international/banking-sector.html

http://www.economywatch.com/mergers-acquisitions/type/

http://en.wikipedia.org/wiki/Mergers_and_acquisitions

http://www.emeraldinsight.com/Insight/viewContentItem.do;jsessionid=AB16EAF83EB028D205C43A2D008426E2?contentType=Article&hdAction=lnkhtml&contentId=1558135

tp of hr-r1902a17

Documents