Presentation on Merger & Aquisition

8/2/2019 Presentation on Merger & Aquisition

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MERGERS &

ACQUISITIONS

Presented by:

Sajed Hossain (ID#10364035)

Md. Rahat Khan (ID#10364058)

Bonny Adlina D' Cruze (ID#10364048)Md. Mostofa Mahamud Amin(ID#10364036)


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Content

Merger & Acquisition.

Why company Merge

Success Rate of Merger

Impact on Human Resource

Cultural Issues of Merger

HRM issues in Merger.


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Mergers & Acquisitions

Merger: the combination of two organizations to createa third organization.

Horizontal Merger: the merging of two competitors .

Vertical Merger: the merger of a buyer and seller orsupplier.

Conglomerate Merger: the merger of two organizationscompeting in different markets.


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Mergers & Acquisitions

Acquisition: the purchase of a company.

Consolidation: two or more organizations join and form

a new organization (generally taken by a third company generally after the

original companies are dissolved.)

Takeover: one company acquires another company.Usually, a takeover refers to a hostile transaction

against the wishes of its management.


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Why Companies Merge?

Strategic benefits

Financial benefits

Needs of the CEO or Managing Team


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Strategic Benefits of M&A

A quicker solution for companies with growth strategy.

- COMPAQ -> home offices - HP -> home entertainment

Strengthen competitive position by M&A- Pfizer took took over Warner-Lambert to obtain powerful

drug Lipitor

Operating synergy (cost reduction through economies ofscale)

- by spreading the overhead, increased specialization oflabour and management and efficient use of capitalequipment.


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Strategic Benefits of M&A

To gain access to new markets.

- Airline companies operate under star alliance.

Business diversification- A ski resort acquire a golf club to increase number ofguest in summer.

Companies may wish to redefine their business

- Nortel from traditional voice network to internettechnology.


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Financial Benefits of M&A

Reduce variability of cash flow of their own business

- putting eggs in different baskets vs eggs in similarbaskets

Mature cash cow business may acquire a starbusiness and fund.

- may be risky if star is not identified appropriately.

- cash cow employees may not be happy to pour fund

from their business. Tax advantage

Acquisition of undervalued companies may increase

shareholders wealth


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Managerial Needs of M&A

Economic gain of the organization is not always theprimary consideration to the CEO and management.They may love to play corporate game.

Management may peruse their personal interest at theexpense of shareholders. (Agency theory)

Managers unconscious desire, personality (need forpower), ego may also impact M&A decision.


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Success Rate of Merger

Many studies have established that about 50% of M&Afail.

Acquisition of related business is far better then ofunrelated business to the parent company

The novice M&A management team does as poorly asthe experienced team. ( perhaps, each merger isdifferent with different synergies and cultures)

Not only the merged firm at risk but the subsidiaries

may also be at risk Merger occupies so many management time

- Executives of HP and COMPAQ spent more thanone million person hours planning the integration.


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Impact on Human Resources

The real cost of merger may be hidden not evidentwhen analyzing financial records.

Takeover results in human displacement (anxious bestsales rep may not be willing to work for acquired firm)

In large acquisition 50% senior executive leave within ayear and 75% leave within 3 years.

Thousands of jobs are lost due to downsizing and

restructuring of the merged firms. An estimated productivity loss of 15% in 6-18 months

of assimilation period of merger.


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Impact on Human Resources

The loss of employee productivity stems from manysources:

Employees go underground - afraid to make themselvesvisible.

Overt sabotage by deeply affected people

Self-interested survival tactics emerge (hidinginformation to accumulate degree of power)

Resigned attitude. Employees spends valuable time dealing with rumors,

misinformation, job search activities etc.


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Cultural Issues in Mergers

Culture is a social glue that binds individuals together

and creates organizational cohesiveness.

Cultures grows slowly over time, are not easy todescribe, and employees often aware of their corporateculture when they try to integrate with people fromanother organization that has a different culture.

It is estimated that one third of all merger failures arecaused by the faulty integration of diverse operations

and culture.


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Cultural Issues in Mergers

4 options of blending of cultures as per anthropologists:

Assimilation

- One gives up its culture and is absorbed by the culture of theacquirer.

Integration- fusion of two cultures. Rarely occurs- usually one partnerdominates.

Deculturation

- Sometimes acquired org does not value the culture of dominantpartner and is left in a confused, alienated, marginalized state -temporary state until integration or separation occurs

Separation

- two culture resist merging. Merged company operates as two

separate companies or divorce occurs.


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HR Issues in M&A

HR Planning

Selection

Compensation

Performance Appraisal Training and Development

Industrial Relatiions


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HR Issues in M&AHR Planning

The Contingency Plan

Based on the expressed interest of BOD, a contingency planshould be prepared.

The plan should identify the contact person and the merger

coordinator (should have training on merger mgt) The plan should identify

- chain of command - methods for communication

- procedures to follow during takeover

- negotiation skills training , media response training for thesenior team

- identify a transition team


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HR Due Diligence

From HR perspective, a due diligence review on the below:

How the transaction is structured

Collective agreement Employment contracts

Executive compensation contracts

Benefits plans and policies

Incentive, commission, and bonus plans

Pension plan and retirement policies

Employment policies

Any pending legal issues


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Transition Team

A transition team is required because of the following:

Urgency: staffing decisions (terminating, hiring,evaluating, training) become urgent. Planners do nothave the luxury of planning in 3 years.

Information Gap: Both the companies may haveexcellent plan for employees with huge documentations,these plans have to be adjusted to the merged needs.


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Transition Team

Stress: Employees are stressed, the moment the news

of merger is surfaced.- A transition team may be one of the most important

determinant of merger success.

- As the transition team handle the urgent matters, the

HR planners may undertake the revisions necessary toprepare HR plans


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HR Issues in M&A

Selection

Retention and reduction two critical areas must beaddressed immediately

Redundant employees must be separated while highlyqualified employees must be motivated to stay.

How many employees the merged company may need?(benchmarking statistics)

Demotion

Competition for the same job Termination (if not successful in the competition)


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HR Issues in M&ACompensation

Compensation systems of two companies either have tomerge, adopt one or create a new one.

Integration of benefit plans is another major issue.

Benefit plan of terminated employees. Some companiesprovide extended plans for terminated employees.


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HR Issues in M&APerformance Appraisal

Stress of merger may effect the performance of theemployees.

Business is not as usual.

Role of employee in a merged business may change. Manager or managerial role may also change.

Employees need constant positive reinforcement duringthis period.

More counseling and coaching may be required toreduce stress level


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HR Issues in M&ATraining & Development

Once the strategic plan has been developed, aninventory of the KSAs needed to align with the strategyshould be undertaken.

Managers and peers may need additional training in therole of coach and counselor.

Developmental programs such as overseas assignmentor executive exchange, or long-term educationalopportunities may be put on hold while the new

organization establishes long term plans.


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HR Issues in M&ALabor Relations

Will the unionized employees continue with the existingcollective agreement or will the contract berenegotiated?

Provisions for job security, lay-off, terminations,notification period etc. should be closely examined.

Merger experts say unions should be informed andinvolved form the beginning.


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Summary

The financial and other results of mergers are notalways as positive as expected and the effect on staffcan be devastating.

Culture is the most important predictor of merger

success.

The merger has an impact on each of the functionalareas of HR.


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Thank You

Documents

Presentation on Merger & Aquisition