HR issues in mergers & acquisitions

1. HR Issues in Mergers & Acquisitions
Dr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt)
Professor
Al-Qurmoshi Institute of Business Management,
Hyderabad - 500005
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A merger occurs when two organizations of equal
size unite to form a new unit
Mergers are usually voluntary and involve stock
swaps or cash payments to the target
Amalgamation is a another term used to describe a
merger, but usage is confined to accounting subject
Nature of Mergers & AcquisitiNature of Mergers & Acquisitionsons

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MergersMergers
Mergers may beMergers may be
Horizontal Merger: when two organizations
producing a similar product combine.
Vertical merger: when two organizations working
at different stages in the production of the same
product combine.
Conglomerate mergers: when two organizations
operate in different industries.

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AcquisitionAcquisition
Acquisition takes place when a large company buys
out a small unit or vice versa.
The small unit loses its identity and it becomes one
with the large company, which continues to function
in its name.
Where the buyout is forced on the target, it
becomes a hostile take-over

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Motive behind M&AMotive behind M&A
M&A are preformed in hope of realizing economic gains
To provide improved capacity utilization
To make better use of the existing sales force
To reduce managerial staff
To gain economies of scale
To smooth out seasonal trends in sales
To gain access to new suppliers, distributors, customers, products and
creditors
To gain new technology
To reduce tax obligation

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Pitfalls of MergersPitfalls of Mergers
Undue focus on financial aspects
Employees lose personal effectiveness as a result of
rumours, misinformation and worry
Infrequent and irrelevant communication
Perceived lack of authority and understanding of
the employee when the ‘new’ organization forms
Leadership changes and failure to communicate
the vision and goals to the employees

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People-related factors that contribute toPeople-related factors that contribute to
acquisition successacquisition success
Retention of key talent
Effective communication
Executive retention and
Cultural integration

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Cultural & People Issues
Cultural & people issues that have a major
impact on success/failure of cross-border M&A
deals:
Composition of new board
Who will occupy which job?
Integration of culture
Undertaking a human capital audit and selecting the
management team

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Cultural & People Issues (Contd.)
Effective communication
Retaining talent & creating new culture
Aligning performance evaluation & reward
systems
Managing the transition
Integration

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Cultural & People Issues (Contd.)
Effective communication
Retaining talent & creating new culture
Aligning performance evaluation & reward
systems
Managing the transition
Integration