HR ISSUES: MERGER &

ACQUISITION

Group 17
MERGERS AND ACQUISITIONS

MERGERS ACQUISITIONS
Two organizations cease Purchase of a company by
to exist individually. But another company.
exists in a joint entity.

Shareholders of transferor Acquirer company

co. will become share- shareholders have
holders of transferee co. controlling interest.

Usually by negotiations May be friendly or hostile.

HR Issues & their Implications on Various Stages of
M&A
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 process 

The 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 transfer 
Stage 2: Combination (Integration of the Companies)

 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
 Communicating to and involving the stake-holders 
 Deciding on HR policies and practices 
 The 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 
 Deciding on who stays and who goes 
 Establishing a new culture, structure, and HR policies & practices 
Stage 3: Solidification & Assessment

 The HR issues in the 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 process 
 The HR implications in the 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 
 Roadblocks to M&A Success HR Interventions/ Activities during M&A
(Schmidt2003)

Clash of
Power status and Facilitates
management
prestige changes Facilitates Transition
Transition Teams
Teams
styles
Develop
Develop Newly
Newly Formed
Formed Teams
Teams
Reinforce
Reinforce the
the New
New Culture
Culture
Issues about Pay
Loss of key talent Involve
Equity Involve in
in Planning,
Planning, Transition
Transition &
& Integration
Integration Teams
Teams
Identify
Identify HR
HR Issues
Issues &
& Carry
Carry Out
Out an
an Effective
Effective HR
HR Due
Due Diligence
Diligence
Carry
Carry Out
Out Effective
Effective HR
HR Integration
Integration
Help
Help Line
Line Managers
Managers to
to Communicate
Communicate Effectively
Effectively During
During Transition
Transition Phase
Phase
Incompatible Lack of Managing
Managing Individuals
Individuals with
with Dignity
Dignity
cultures Roadblocks Communication
Developing
Developing &
& Implementing
Implementing Actions
Actions to
to Retain
Retain Key
Key Employees
Employees
Help
Help Clarify
Clarify Roles
Roles
Career
Career pathway
pathway
Team
Team intervention
intervention
Orientation
Orientation programme
programme
Workshops
Workshops on
on vision
vision development
development

Source: Yasmeen Rizvi ,Human capital development role of Human Resource (HR)
Deputation
Deputation to
to acquiring
acquiring company
company
during mergers and acquisitions, African Journal of Business Management Vol. 5(2),
pp. 261-268, 18 January, 2011
 Air India Case Study

Based on primary research

 A brief history
 Tata Airlines was converted into Air India in 1946
 Air India concentrated on overseas operations.
 Indian Airlines was formed with the merger of 8 domestic airlines and
concentrated on domestic operations.
 Indian Airlines went through a complete rebranding phase in 2005 by
spending 45 billion. Shares dipped by 25%.
 The two companies merged in 2007. The merger was a 150 billion company
with 150 fleets but also incurred a total debt of Rs 440 million.
 Merger helped the company to strategically position itself against its
competitors.
 The merger aimed at significant potential synergies between the two airlines
in the areas of sales and distribution network, fuel procurement, material
procurement, passenger amenities, ground handling and parking facilities.
 HR Issue(1)
Business Issue:- Difference in objectives/goals:-
 The merger concentrated initially on the international

operations.
 This led to the decrease of domestic market share.

HR Perspective:-
 Indian Airlines employees had to re-orient themselves to

the vision of the merged entity.

 The vision was different from that of Indian Airlines.

 This resulted in employee resent and decreased

productivity.
 HR Issue (2)
Business Issue:- Bad financial performance of the conglomerate
The conglomerate faced tremendous losses due to economic
slowdown, cut throat competition in domestic and foreign
markets, rising ATF prices and so on.
HR Perspective:-
 The losses directly affected the employees and their

wages. Wages were not paid for months.

 Increments were stopped and even a few executives and

pilots were sent on leave for indefinite period.

 HR Issue (3)
Business Issue:- Reshuffling of the manpower
 A single hierarchical structure had to be deployed for the
conglomerate.
 But the top management posts were given to the Air India executives.
 Indian Airlines executives were denied such promotions even though
they deserved by virtue of seniority or capability
HR Perspective:-
 This resulted in lack of confidence amongst the Indian Airlines staff
and they refused to work under the assigned management.
 Productivity of employees declined.
 The deadlock went on for a few months and is still not fully resolved.
 HR Issue (4)
Business Issue:- Difference in pay structure
The pay structures of the two individual entity were different.
HR Perspective:-
 The pay structure of the two organizations rationalized to

bring it at par with each other.

 Whilst integrating at any particular level, there will be

harmonization of policy and wages and review of productivity

norms and linked incentives were all harmonized and made
uniform across the company.
 This was time consuming and very challenging and faced a lot

of internal obstacles.
 HR Issue (5)
Business Issue:- Cultural misfit
The two independent companies faced a lot of cultural
issues like wage structure, channels of communication,
organization structure etc.
HR Perspective
 This led to dissent amongst the employees on both sides

and the government had to establish a committee to

address the issue and resolve them.
 The failure of the merger is attributed primarily to the

cultural misfit of the two organizations.

 HR Issue (6)
Business Issue:- Frequent change of leadership at the top
 Top management frequently changed.
 No fixed direction to the company
 The employees had no one to look up to.
 Erosion of brand image in the industry
HR Perspective
 Lack of confidence amongst the employees
 Sudden high attrition rate.
 Very few people willing to join the company at managerial levels
even after the things are slowly settling down.
 Acquisition of Hutchison Essar by Vodafone

In February 2007, British

telecom giant Vodafone One of the biggest brand transition exercises : Hutch, country’s 4 th largest
mobile service provider was renamed Vodafone(Sept 21,07)
acquired a 67% stake in
Hutchison Essar from Strategic Intent: To start operations in India (fastest growing mobile
market, overtaking China in Sept 2006)
Hutchison Telecom
International for about One of the most successful acquisitions in the telecom industry
$11 billion

Roles of HR during acquisition of Hutchison by

Vodafone

Pre-acquisition Post acquisition

HR due diligence role: •Employee advocacy role
•An informal transition team of 40 •Functional expertise role
comprising of business heads and HR heads. •Human capital development role
•Extensive talent profiling had been done
 Employee Advocacy Role:
• To counter the negative feelings of uncertainty,
anxiety, loss of faith, and career doubt,
communication was used as an effective tool.
• The MD of Hutch (India), Mr. Ashim Ghosh
started the Web Cast.
• Every seven days, corporate HR had a meeting
with employees and communicated directly what
the company was doing
Functional Expertise Role:
• Not a single employee was laid off
• Early warning system was used to retain
employees.
• The pay cycle changed from April-March to July-
June: 10 - 15% hike
• Schemes such as 200 - 300% of CTC as part of
ESOP continued
Human Capital Development Role
• Training workshops and OD
interventions used as methods of
facilitating change.
• Orientation programme to change from
the Hutch model to the Vodafone model
• Changed perception of red colour among
employee
• 1st training Programmes(3.5 days): Band
1 & above: 5% of employees in
association with ISB through case Study
Method
• The 2nd training programmme(11.5
Days) was held to communicate the
values of vodafone-red, rock solid and
restless. These values were linked with
the values of Hutch-brave, positive,
simple and gorgeous
• The values of Vodafone were
communicated to each and every
employee, both fulltime (8000) as well
as outsourced (25000)
• Assessment centers assessed employees
and promotions were offered to the
performing employees
• A workshop called ‘Huddle’ conducted
for 14 - 15% of employees across 4 - 5
verticals. In that, the positive and
negative aspects of the organization
were discussed. informal and full of fun.
• An employee satisfaction survey was
also conducted across the company
JET SAHARA DEAL

 HR CHALLENGES:
 Retention of key people
 Communicating that the move would increase value of
the organization
 Addressing the cultural issues
 Integration
Combating the challenge
 Key people were taken into confidence
 Proper roles were allocated which suited the interest without
compromising on growth and values.
 Each team had the working freedom to operate and grow
 All employees were treated with respect and provided a challenging
work environment
 Ensured a core set of shared values amongst the group
 Effectively evaluated the compatibility of corporate cultures to ensure
integration
 All change-management expertise were called upon to address
employees’ anxieties about the acquisition and the employees were
updated in real time on all the developments
ROLE played by the HR
Before the Acquisition:
• Assessed cultural fit and synergies

• Analysed the effectiveness of the integration based on leadership

ability of the target policies, processes
• Alignment of compensation and benefit plans, organizational
structure, decision making and all critical to most M&A
finalization
Post acquisition:
• Brought the organization together ensuring that two entities mesh
as one through the championing of the entire change management
intervention
• Organized regular employee engagements activities by making
them feel as a part of a bigger organizations with strong employee
centric values
• They have a very transparent working system and a monthly open
Satyam- Tech Mahindra Deal
 Reasons :
 Bring Tech Mahindra into new industries, from
manufacturing to financial services,
 Tech Mahindra will be India’s fourth-largest outsourcing
firm, by employee count
 HR Issues for Tech Mahindra:
 Forming a new leadership team and the role of existing
top management in the team will be a key challenge as they
have to shortlist the existing key leaders .
 Marrying the work cultures, winning the trust of the
employees of two organizations
Daimler-Benz and Chrysler Merger
Conceptual framework for culture: Hofstede’s
cultural constraints in management theories
 Hofstede developed a model in which worldwide differences
in national cultures are categorized according to five
independent dimensions
 Allow analysis of:
 The way their society operates,
 The management processes and
 Theories applicable to their management
Daimler-Chrysler merger: Reason for merger

 In 1998, Daimler- Benz Ag and Chysler corporation signed

merger agreement to build the world’s 5th biggest automaker
 Luxury car Vs sports utility car
 Opportunity for synergy:
 shared technologies
 Distribution
 purchasing and know how
 Opportunity for Synergy:
Daimler- Benz Chrysler
engineering skills innovation
Technological advances speed in product development
bold marketing style
Reason for Merger’s Failure: culture clash
 Critical reflections
 Both the top-management paid a lot of attention to
rationality and strategic goals
 Clear on financial and market terms
 No attention paid to culture aspect
 No Culture analysis done
Acquisition strategy of GE Capital

The GE Capital uses a successful model called

"Pathfinder” for acquiring firms. The model
disintegrates the process of M&A into four
categories :
 The pre-acquisition phase(due diligence, negotiations
and closing of deals ) :the model involves
 culturalassessments
 devising communication strategies
 evaluation of strengths and weaknesses of the business
leaders
 Foundation building(integration plan is prepared)

 A team of executives from the GE Capital and the acquiring

company is formed.
 A 100 day communication strategy is evolved and the senior
management involvement and support is made clear.
 The needed resources are pooled and accountability is
ensured
 Integration phase (actual implementation and correction
measures are taken ):
 The processes like assessing the work flow, assignment of roles etc are
done at this stage.
 This stage also involves continuous feedbacks and making necessary
corrections in the implementation

 Assimilation process(Integration efforts are reassessed )

 Long term adjustment and looking for avenues for improving the
integration.
 organization actual starts reaping the benefits of the acquisition.

The model is dynamic in the sense that company constantly

improves it through internal discussions between the teams that
share their experiences, effective tools and refine best practices.
Lessons Learnt
 Companies consider cultural fit and employee
communication to be the most critical and
challenging HR issues to overcome during M&A.
This is similar to companies in other regions of the
world.
 These issues, along with leadership assessment,
will receive more attention in future M&As.
THANK YOU.