IILM M&As - HR

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Implications of M&As

:Is there a case for Human Values

Presentation by :

Dr. Narinder Kumar BhasinAXIS Bank Limited

Vice President - Retail Banking Branch Head

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Scope of the presentation

Introduction

Change Management

Stages in M&A process Reasons for Wishing away HR aspects

Role for Union /Associations

Human Aspects in M&A Final Integration

Role of Key HR person

Function of HR in M&A process

Conclusion

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M&A`s - Introduction

Companies come and go, chief executives riseand fall, industry sectors wax and wane , but an

outstanding feature of the past decade hasbeen the rise of mergers and acquisitions.

Growth through acquisition has been a criticalpart of the success of many companiesoperating in the new economy .The plain fact is

that acquiring is much faster than building .Andspeed to market, speed to positioning ,speed tobecoming a viable company is absolutelyessential in the new economy.

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Mergers have been happening from timeimmemorial but most of them have resulted in

non realization of goals . Yet they continue torecur .Why ?

Because market forces such as :

1.Changing customer demands

2.Rapidly advancing technology and 3.Increasing globalization

forces organization's to look for quicker growthand thereby large profits .

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Organization's attempt to acquire anotherorganization to get access to the latter's :

1.High Value Customer's 2.Large Distribution network 3.Market tested skills rather than building these over time on their

own. M&A`s have become an integral part of the

corporate finance world. Innumerable M&A transactions have brought

together separate companies and tuning theminto large ones .

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Institutions decide to merge because theyperceive that they can together create greater

shareholder value than what they could whenthey were separate.

Merger is essentially a partnership betweenequals where as acquisition is offer made by astronger entity of a weaker one.

M&A`s are a part of corporate finance strategyand often used by firm's to increase their assetsize, gain market share and diversity.

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Introduction

Corporate Restructuring of business is an integralpart of the new economic paradigm.

As controls and restrictions give way to competition

and free trade, restructuring and reorganizationbecome essential. Restructuring usually involvesmajor organizational change such as a shift incorporate strategies to meet increased competitionor changed. Many successful executives haveexperience with mergers and acquisitions.

With so many experienced executives, why do overhalf of US mergers fail? Think about it. What lessonswe have learned about successful organizationalintegration?

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HR Synergy.forgotten

Password Various synergies like operating , financial ,

managerial , sales are considered as the

additional benefit that can be derived fromresources of two companies

But most important motive and synergy

which is either forgotten or given a back

seat is Human Resources Synergy which in

fact is necessary for converting the vision ofM&A through Economic Value Added and

Market Value Added .

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There is always a better way

The press release announcing any new mergeror acquisition is always quick to announce thebenefit to the consumer first, the stockholder

maybe second, and the principals (CEOs,investment bankers, lawyers ) and employeesnever.

For employees such announcement mean lossof job , profile , humiliation or disregard butthere can be a different and better way ofhandling this issue as human being haveemotions.

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M&A announcements..

Times of India , 5th Oct ,2007

India beats China in overseas M&As

Indian companies have surprassed theirChinese counterparts in making cross bordermerger and acquisitions with a 126% annualgrowth , while the Asia Pacific register a rise of36% in overseas M&As

Australia Most acquisitive nation with $ 38.billion spent on 217 deals outside the region

China and India are the second and third with $17.3 and $ 16.1 billion respectively.

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M&A announcements

Business Line ,6 th OCT ,2007 : Bharti ,Vodafone ,Idea may merge tower Biz :

This could be one of the biggest mergers in the

telecom industry .After entering into agreementto share their infrastructure ,GSM mobilecompanies are now exploring possibility ofmerging their passive infrastructure to form amega tower company

Apart from leveraging an operational efficiency ,the merger is aimed at getting a valuation fortheir countrywide infrastructure .

The three companies together own more than70000 towers across the country

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Case Study Merger of ANZ Grindlays Bank with

Standard Chartered Bank

Abstract of the case and Synergies :

In July 2001, this merger helped the merged bank achieve

significant synergies through operating efficiencies andrevenue enhancements. The deal added to the strength ofStandard Chartered Banks management resources andhelped it become number one in India. It also helps increate premier international banking business in MiddleEast and Asia, thus emerging as a leading consumer bankin the region.

Benefits of Merger accrued, Synergies of combined entityresulted in positive post merger performance This is whatthe WORLD knows but what the World donot know iswhat happened to employees of the acquired entity.

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Case Study Merger of ANZ Grindlays Bank

with Standard Chartered Bank

VRS , forced retirement , lowering of retirementage from 60 to 58 to 55 , golden hand shake forstaff aged 53 -55 , interviews for existing staff

members for survival of their same job positionin the merged entity , pressures to opt formanagement cadres for clerical staff , transfer ofclerks to Resource Management Cell ( No workand made to sit idle) .

Clerical staff was offered waiver of loans whereas management staff that the organization wantto throw out were labeled as non performer.

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Change Management

Change has become an inevitable part of the organizationalworking , survival and continuation of an organization dependson how it can foresee and tune its corporate objectives towardsthe changing environment

Stiff competition , impact of globalization, technologyadvantages entry into new markets have made Merger's andAcquisitions as an avenue being used increasingly byinstitution's to expand their operations and position themselvesin the globally competitive market

When the process of M & A takes place , the changes that

resonate both at the acquirer and the acquire entity areinexplicable .

For the entire process of M & A to be smooth , the foremostrequirement is proper Change Management

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Stages in M & A process

Primary Plan - Manpower pattern - Age profile

- Knowledge Level - Organizational Structure - Infrastructure &

Technology - Territorial geographical

distribution of branches

/offices - Union / associationrepresentation /recognition

Conduct of Due Diligence - Wage , Salary , &

Allowances

- Policies , procedures ,guidelines - Method of

categorization - Work flow patterns &

methodology - Dissemination of

powers & mode ofexercising

- Infrastructure fortraining & development

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Primary Plan Stage

The seed is planted and the germination starts

The acquirer organization in case of acquisition

or the entities in a merging process scouts for asuitable takeover in the case of former or for amatching partner in the case of the latter

Meeting of minds , an offer and initial scheduleor plan

This stage can be correlated with the presentstate in the change management process

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Conduct of Due Diligence

Stage Where the financial and other audit are

conducted to estimate and forecast the

overall health of the organization and itsrelevant impact after the M & A process

This stage can be correlated with thetransition stage in the change

management process though a smallportion in this state can also be relatedto the primary plan stage

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Final Integration Stage

Combines the two entities resulting in the genesis of anintegrated efficient new organization

This stage can be correlated with the desired state in the

change management process The primary and plan stage and the due diligence stages

are the important stages in M & A

In these stages attention is more towards financial ,infrastructure , operational and legal elements of M & A `s

In spite of best attention and synergy these elements are

taken adequate care , in final integration it is found thatthere are delays in the integration that the integratedentity has not come in its desired shaped , revealingdeviations.

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Reasons for Wishing away HR

aspects Emphasis is more on the other functions such as finance

, infrastructure technology etc. The hypothesis that the human issue is more sensitive

but will settle in due course after initial resistance The ignorance of the fact or taking for granted that the

people related issues are less critical The absence of proper representation to give voice to the

people related view in M & A team Recognition of human resource issue as one of the

indicators for the success or failure of any M & A process

is therefore imperative The importance of this factor is not limited to any stage in

the M & A process but is omnipresent in each of thisstage

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Disparities

The multifaceted dimension of the humanresource aspects in banks and corporatereflects the following disparities :

Work methodology and work flow

Individual and cultural aspects

Policy and technology

Structural aspects

Salary structure Representation and recognition difference of

employees ( small ) unions / association

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Human aspects in M & As Final

Integration Coming together

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Final Integration

Retaining and enhancing the confidence ofemployees

Synergy of staff

Rationalization & redeployment of manpower

Rationalization of wage structure

Culmination of policies / procedures andguidelines

Technology matching Adoption of new work pattern & its uniform

implementation

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Role of Key person or Core

Group by HR Person First point of contact as regards HR issues A compass to provide necessary direction to the top

management Strategy makers to come out with appropriate organizational

structure An analyst to study the personnel policies , procedures and

guidelines in both the entities without any bias or halo effect Abridge between the representatives of the workforce i.e.

unions and associations and the management and serve as anadvocate / arbitrator / negotiator

An catalyst or as a main functionary in the relationship building

process An conduit and a shock absorber in chalking a smooth road

map for the people related issues in the M& A process Mode of selection of HR personnel who will be a pert of M&A

team

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Distinct Traits of HR person or

team Unbiased Attitude : Both entities are represented Flexible Mind : Best of practices in various processes for

new entity Sensitivity to needs : Emotions and mind set or

employees to carefully addresses without conflicts Commitment :Integrate HR systems and processes in the

new entity Good communication skills Knowledgeable

Result orientation Vision orientation Analytical orientation Ability to mentor

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Functions of HR personnel

/Team in the M&A process Initiation of new System : Integration of HR system of both

companies Assessment of HR related functions : SWOT analysis or a

diagnostic study

Chalking out initiatives Creating new organizational structures Defining job and responsibilities Formation of appropriate forums / teams to oversee the

transition process Formulating plans for communication Structuring training and development Creating the HR Structure Competency , mapping and management development of skill

sets Correlation of technology and HR

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While dealing with human resource during the M&A process

requires an empathetic approach giving respect to sentiments

and human angle ..feeling and healing process.

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Thank You

Dr.Narinder Kumar Bhasin

[email protected],

dr.narinder.bhasin @ gmail.com

mobile no : 09910110182

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IILM M&As - HR