Merger and Acquisition

Mergers & Acquisitions

Merger
 Two firms agree to integrate their operations on a
relatively co-equal basis
Acquisition
 One firm buys a controlling, 100 percent interest in
another firm with the intent of making the acquired
firm a subsidiary
 Difference in Merger & Acquisition

Merger Acquisition
 Merger of two  Buying of one company
companies into one. by another
 Merger is a mutual  It can be friendly or
decision. Hostile.
 Dilution of ownership of  Dilution of ownership of
both. one firm.
 More time consuming  Less time consuming.
 Increase shareholders  Only acquiring firm's
net worth. shareholders get
benefited.
 Types of Merger

1.Vertical Merger
Merging of two firms operating at different levels.
Eg. Vodaphone with Hutch, TATA Motor with Jaguar landrover.
2.Horizontal Merger
Merging firms are competitors.
Eg. Hero honda
3.Congeneric Merger
Firms are in related but not competing business.
Eg. Newspaper with TV Channels
4.Conglomerate Merger
Firms are in entirely different fields.
Eg. PNG (pantein, pampers etc.) merge with clorox co.(producer of
household cleaning produts)
 Types of Acquisition

1.Horizontal Acquisitions
Acquirer and acquired companies compete in the same industry.
Eg. Clothing Manufacturer acquire textile mill
2.Vertical Acquisitions (Vertical Integration)
Firm acquires a supplier or distributor of one or more of its goods or
services,Leads to control over additional parts of the value chain.
3.Related Acquisitions
Firm acquires another company in a highly related industry ,Creates
value through synergy and integration of resources and capabilities.
Eg. automobile manufacturing company acquiring a tire
manufacturing company
 Merger & Acqusition procedure

 Preliminary assessment or business valuation

 Phase of proposal
 Execute plan
 Structured marketing
 Stage of integration
 Merger & Acquisition

Friendly Procedure Unfriendly Procedure

 Target firm's  Target firm's
management approves management resists,
and cooperates with takes defensive measures
acquiring company to stop takeover
 Negotiation occurs until  Acquiring firm makes a
agreement is reached tender offer to the
Proposal submitted for target's shareholders
stockholder vote.
 Merger & Acquisition Categories

1.Rescue
Response to a raid or financial bail-out
2.Partnership
Both parties actively desire the combination
3.Adversarial
Only one firm has a strong interest in the deal
4.Hostile Takeover
Acquisition target actively resists the take-over
 Reasons for Merger & acquisition

1.Increase market share

2.Increased diversification
3.Lower risk to developing new products
4.Learning and developing new skills
5.Economies of Scale
6.Acquiring Assets Cheaply
7.Tax Losses
 Impacts of Merger & Acquisition

 Diseconomies of scale if business become too large ,

which leads to higher unit costs.
 Clashes of culture between different types of
businesses can occur, reducing the effectiveness of
the integration.
 May need to make some workers redundant ,
especially at management levels this may have an
effect on motivation.
 Clash of ego at strategic level
 Role of HR in Merger & Acquisition

HR plays important role at every phase in the process of

international M&A

1. Pre- Combination:
HR is closely involved with each of these steps- initial
target screening and pre- bid courtship of the potential
target firm, the due diligence review of the target
company, the pricing and negotiation

2. Combination Planning
HR plays the major role in the providing advice on the
implement deal and anticipated problems that will occur
during the implementation.
 Role of HR Merger & Acquisition

3. Implementation of deal:
Communicate about the vision for the business.
HR will perform training of employees and to fit
into new situation, developing new compensation
and benefits system etc.

4. Provide timely and actionable input before,

during and after the deal.

5. Continue welfare deals of employees

 Advantages of Merger & Acquisition

 Require less cash for expansion

 Increase shareholders net worth
 Reduce competitiveness
 Greater monopoly
 Increase managerial talent
 Market share
 Failure of Merger & Acquisition on part of HR

 They don't follow the companies policies

 Lack of the authority with in the hands of HR.
 They don’t openly communicate with the employees.
 They don’t build a trust worthy relationship among
the organization.
 They don’t express vision clearly.
 They don’t perform their task on time.
 HR tasks in Merger & Acquisition

 Avoid Employees dissatisfaction

 Conduct common understanding programs with
employees which are going to takeover.
 Negotiate and make the union leaders understand about
the entire issues and their future positions after M&A.
 Understand all the legal cases pending with the
acquiring company and take cases to take next steps.
 Proper audit with related to fixed and tangible asset to
be done and according to value to be determined.
 Proper retrenchment policy to be implemented for the
excess staff.
How to prevent failure on part of HR

1.Continuous communication
2.Transparency
3.Training to employees
4.Create joint culture
5.Work according to proper rules
6.Job security
7.Friendly atmosphere
 Important Merger & Acquisition

 Flipkart’s acquisition of eBay India

 Axis Bank’s acquisition of FreeCharge
 Vodafone-Idea merger
 Google’s acquisition of Halli Labs
 Airtel-Telenor merger