Managing Human Side of

Mergers & Acquisitions

-SavitaSawant
Roll No: 8249
Contents
 Definition (M & A)
 Types of Mergers & Acquisitions
 Reasons for M&A.
 Issues During M&A.
 Stages in M&A.
 Issues to be handled by HRM
 Re-inforcement of culture
 Communication
 A Few Cases.
Acquisition

 One company takes over another & cleary

establishes itself as the new owner.
 Acquisition may be ‘Friendly’ or ‘Hostile’.
Merger

 Two Companies come together to form a new

entity
 A single new Company rather than being
separately owned and operated.
 Both companies stocks are surrendered and
new company stock is issued in its place.
Types of Mergers

 Horizontal Merger
 Vertical Merger
 Market-extension Merger
 Product-extension Merger
 Conglomeration
Reasons of M&A
 Increasing Profitability.
 Gaining Market Share.
 Cross-Selling.
 Developing Synergies.
 Economies of Scale.
 Acquiring new technology.
 Improved Market Reach and Industry
visibility.
 Taxation.
 Merger Waves
Period Name Facet

1889-1904 First Wave Horizontal Mergers

1916-1929 Second Vertical Mergers

Wave
1965-1989 Third Wave Diversified Conglomerate
Mergers
1992-1998 Forth Wave Hostile takeovers

2000- Fifth Wave Cross-border Mergers

 Sample Tools
Defining the End State

high Absorption Transformation

Acquired company Both companies find new
conforms to acquirer ways to operate
Degree of Change in
Acquired Company
Best of Both
Additive from both sides

Preservation Reverse Merger

Acquired company Unusual case of
remains independent acquired firm leadership
low

low high
Degree of Change in Acquiring Company

*Mitchell Marks, Joining Forces

Issues during M&A

 Profitability (Finance issues)

 Resource Optimization (Operational Issues)
 Market Study (Marketing Issues)
 Technological Issues (IT Issues)

Human Related Issues ???

Issues That can be handled by HR-Managers
 Underestimation of the difficulties of merging two
cultures.
 Underestimation of the problems of skill transfer.
 De-motivation of employees of acquired company.
 Departure of key people in acquired company.
 Too much energy devoted to ‘doing the deal’, not
enough to post-acquisition planning and integration.
 Decision-making delayed by unclear responsibilities
and post-acquisition conflicts.
 Neglecting employee welfares of existing business
due to the amount of attention going into the
acquired company.
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.
 Actions from HR
Actions from HR Psychological & Cultural Impact on Employees
Communication Raises questions among employees
What is Happening?
Business Strategy Employees Question the rational
Why is it Happening?
Organization Structure Employees Question their Short –term Future
Where will I be in 6 months?
Appointments & Exits Employees Question their Long term prospects
Will I have a job?
Terms and Conditions Doubts raised about financial benefits
Will I loose out?
Managing performance Questions about management expectations from
personnel
What is expected of me?
Training & Development Further questioning the future
Do I have a future?
if people issues are so critical, why are
they neglected? Possible reasons
include:
• Executives believe that they are too “soft” and, therefore, too hard
to manage.
• Social costs and benefits are regarded as secondary.
• There is a lack of awareness or consensus that people issues are
critical.
• There is no spokesperson to articulate these issues.
• There is no model or framework that can serve as a tool for us
systematically to understand and manage the people issues.
• Therefore, the focus of attention in M&A activity is on other
business aspects such as finance, accounting, strategy, and
manufacturing.
M&A Phases
Pre-combination
Step 1: Step 2: Step 3: Step 4: Step 5:
Pre-Deal Due Integration Implementation Post-Deal
Diligence Planning

• HR is on the M/A Deal Team

• Each step is a new level of commitment towards the deal and requires more
information and analysis
Pre-Deal: Identify the strategy driving the M/A, locate and select targets, determine potential business
opportunity, define critical success factors, and notify target of intent
HR’s role: educate team on HR implications, conduct high-level analysis of people, org, & culture fit
based on available information, identify people-related issues, plan for due diligence

Due Diligence: collect and analyze information from the target, assess leadership team, summarize
findings, issues, and risks, and make go/no go decision
HR’s role: collect and analyze HR related information, identify issues, risks, costs, savings
Integration Planning: set deal terms, use information previously collected to create plans to combine
companies with minimal business interruptions, close the deal
HR’s role: secure key talent from target, collect more information where necessary, create integration
team for HR, create HR integration plans (e.g., culture, organization, people, HR processes, HR
systems and policies)
M&A Phases
Combination
Step 1: Step 2: Step 3: Step 4: Step 5:
Pre-Deal Due Integration Implementation Post-Deal
Diligence Planning

• HR has it’s own implementation team(s)

• HR’s role
• Announce deal and start ongoing communication to both companies
• Execute HR Integration Plans & adapt as necessary
• Provide ongoing change management for both companies (e.g., management ability to deal
with people issues, training, motivation, systems integration, job security/career concerns,
realistic merger preview, Ethics & Compliance standards)
• Monitor people-related integration activities
M&A Phases
Post-Combination

Step 1: Step 2: Step 3: Step 4: Step 5:

Pre-Deal Due Integration Implementation Post-Deal
Diligence Planning

• HR is a member of the Deal Evaluation Team

• Deal Team evaluates the successful capture of synergies and
achievement of original strategy
• HR’s role
• Capture lessons learned from the management of the project
• Evaluate organization, people, processes, systems (e.g., 24 th month audit)
• Suggest process improvements
• Align with Business Strategy of the Future
• Learn from this deal to be ready for the next deal
• Ongoing involvement in integration of culture
Data to be collected from seller
 Human Audit – numbers, levels, locations, pay
levels & Union Affiliations.
 Human Cost –obstacles to rationalization such as
merger and employment law.
 People quality – Key Players, corporate culture, age
profile, skills inventory.
 Personnel Policies – pensions, employment
contracts, medical provisions etc
 Employee Relations.
 Organization Structure.
Key Participants
Issues to be handled by HRM
 Preparation of Due Diligence Report.-
recruitment, training, performance appraisal,
compensation, labour relations & legal compliance.
 Creation of Manpower Plan-
delineate roles & reporting relationships.
 Communication
 Retention Strategy- Retention Bonus Plans.
 HR Integration –HR Systems, Policies &Practices
 Cultural Integration.
Role of HR Department

 Formulation Strategy.
 Creating Teams.
 Creating Organization Structure.
 Developing a Communication Plan.
 Creating a Transition system.
 Facilitate to guide Transition Teams
 Help Managing Stress
 Team Building. Training
 Deal With Problems
 Prepare HR Strategy
 Avoiding Job cuts
Reinforcement of New Culture
 Find out through surveys what cultural values are
valued and which of them should be preserved
 Enlist all of them and request feedback from each
management level
 Provide the management with development tools
and ideas to implement the result of the surveys
and feedbacks
 Finally, it can conduct a survey of all levels of
management about 3 months after the deal is
through in order to assess the progress towards
the new culture.
Communication
 Keeping all employees informed (Frequent
broadcasts from CEO, HR Director) of all crucial
decisions.
 Instilling a sense of security among all employees,
so that the issue of dovetailing employees can be
dealt with.
 Especially, in the case of acquisitions, the HR needs
to ensure an equitable and fair treatment of
employees
 In case of lay-offs, offer outplacement services
and just severance packages
 Have a definitive plan with specific dates for
individual communication
 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
 Enhance effective communication by
involving line managers
 Establish an helpline for employees
 Advocate family assistance programs to
make the employee that he/she is cared for
Competencies of HR Managers
 Understanding overall business strategy as well as
people and organization issues associated with that
strategy
 Gaining knowledge about business in general and
M&As in particular
 Being able to contribute to another company’s value
 Planning and leading complex M&A strategies
 Understanding and spending more time with
operating managers to help support them in M&As
TCS- Tata InfoTech Merger

 Consideration of prior experience.

 Designation, fitment & pay scales.
 Joining dates.
 Legal issues , promotions & policies.
 Induction & Project Allocation.
Satyam Acquisition by Tech
Mahindra
 Tech Mahindra-23,000 employees.
 Satyam – 45,000 employees.
 HR-Department faced challenge to retain the
Employees & their Clients.

-Sales Reboot Campaign.

-Special Induction Programmes.
-Recognition & Reward Schemes.
-Communication Channel.
Cross border M&A’s
 Nationality (home) of the aquirer makes a
significant difference to style & culture of
new organisation.
 National (host) diffrences in pattern of
HRM and Industrial Relations.
 Language Barriers
 Legal Issues
 Political Issues
 Geographical Issues.
Daimler-Chrysler (DCX) Merger –Clash
of Cultures.
 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 – 2 Chrysler CEOs 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.
Daimler Benz- Chrysler
 Dieter Zetsche ,CEO Chrysler Group, March 27,
2002
“Like many other executives who have lived through a
merger, DaimlerChrysler executives now
understand that it is not enough to manage the
legal, financial, and operational elements of mergers
and acquisitions. Maximizing the value of a deal
requires that the human side of organizational
change must also be managed well “.
BIG Animation
 Shifted from Bangalore to Pune -2007
 250 Employees shifted - Only 6 refused.
 Choice for Housing , location , school, children , Domestic
Connections, Licenses, bank loans for vehicles.
 Two Special task force teams -8 to 10 members (one each in
Pune and Bangalore)
 Identifying good properties in each location (coordination with
around 75 estate agents )
 distributed forms to every team member wherein they were
asked to specify their budgets, what features they were looking
for in a location, whether they preferred to stay alone or as a
group and other such details.
 Every Friday, the company arranged to fly a batch of 20 artists
from Bangalore to Pune. Each batch had the mandate of
choosing and finalizing their accommodation in Pune in five days
time post which they would return to Bangalore and continue with
the production work.
 arranged for vehicles that would be with the artists
right from the time they landed till they took off, and
also arranged for well endowed Service Apartments
for their five day stay
 Artist (employees) would then tour the locations, first
two days would be spent in zeroing in on the choice
of location, the third and fourth day on freezing on
apartment of choice and day five in finalizing the
deal with the agents
 Team had also arranged for Sample L&L
Agreements, on-board Lawyer, Printers and
Computers at the Service Apartments, to facilitate
the deals in a quick and secure manner
 the entire process of each artist finalizing residence
took about 3 months and one additional month for
the actual relocation to happen wherein the
company hired an official Mover & Packer agency
that took care of the shifting logistics for each artist.
 Schools, Ration Cards, Driving Licenses, Gas
Connections, Bank Accounts, Vehicle Loans, and
Mobile Connections, all had been taken care of .
 In more than 6-7 cases, the company actually took
the bio-data of the spouses of their artists and went
about securing jobs for them in Pune
THANK YOU !!