Merger and acquisition

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Merger and acquisition

  1. 1. Merger & Acquisitions SHRM CASE STUDY By Group 2
  2. 2. <ul><li>Using acquisitions as a strategic weapon for increasing market share while enhancing customer satisfaction. </li></ul><ul><li>Targeting companies that provide best fit for CISCO’s own strategic direction and corporate culture. </li></ul><ul><li>Determining success based on the level of post purchase retention and the integration of newly acquired personnel and intellectual capital. </li></ul><ul><li>Cisco looks whether there is compatibility in terms of long term goals of the organization work culture and geographical proximity. </li></ul>1. Q. Investigate the approach that Cisco Systems has used in its many successful acquisitions. What are some of the human resource practices that have made its acquisitions successful?
  3. 3. <ul><li>Cisco believes in an orgn culture which is risk taking and adventurous. If this is lacking in the target company, then cisco is not convinced and backs out from the acquisition. </li></ul><ul><li>No forced acquisitions . </li></ul><ul><li>The company insists on no layoffs and job security is guaranteed to all the employees of the acquired company. </li></ul><ul><li>The acquisition team evaluates the working style of the management of the target company, the caliber of the employees, the technological systems and relationship style with the employees. Once the acquisition team is convinced, an integration strategy is rolled out. </li></ul><ul><li>A top level integration team visits the target company and gives clear cut information regarding cisco and the future roles of the employees of the acquired firm. </li></ul><ul><li>After the acquisition, employees of the acquired firm are given 30 days of orientation training to fit into the orgn environment. </li></ul>
  4. 4. 2.Q. If human resources are a major source of competetive advantage and the key determinant of an organisation’s ability to pursue a given strategy, why have human resource aspects of mergers and acquisitions been ignored or handled poorly in so many instances in the past? <ul><li>To kill Competitors ( Vodafone & Hutch) </li></ul><ul><li>To increase market share (Bharati & Zain) </li></ul><ul><li>To strengthen its functions which are related to the core functions (Capgemini & Kanbay, acquisition ) </li></ul><ul><li>most companies forget that M&As are not just about balance sheets, cash flows or marketing synergies; they are also about people who make the synergies happen. </li></ul><ul><li>One major fallout of M&As is often the flight of top-quality people. </li></ul>
  5. 5. 3.Q. interview someone who has been through a merger or acquisition. Find out how they felt as an employee. Determine how they and their coworkers were affected. Ask about the effects on productivity, loyalty, and morale. Find out what human resource practices were used and obtained their evaluations of what was helpful or harmful. <ul><li>Interview-1 </li></ul><ul><li>TECH-MAHINDRA & SATYAM </li></ul><ul><li>Fear, Frustration due to hostile merger </li></ul><ul><li>Had to adapt with new technology </li></ul><ul><li>Employee Turnover in first few days. </li></ul>
  6. 6. <ul><li>HUMAN RESOURCE PRACTICES </li></ul><ul><li>after the merger, the management was perpetually in a fire-fighting mode, dealing with HR issues instead of devoting time to business operations. </li></ul><ul><li>Verbal assurance by Anand Mahindra </li></ul><ul><li>HR & other operational policies were strengthened </li></ul><ul><li>Training & salary hike for employee retention </li></ul><ul><li>Everyone on project; no one on bench </li></ul>
  7. 7. <ul><li>Reasons for Merger </li></ul><ul><li>Tech Mahindra has less than half the workforce of Satyam and needs people. </li></ul><ul><li>Its talent pool mainly specializes in the software skills related to telecom. So the company needs to retain Satyam employees who have non- telecom domain skills. </li></ul><ul><li>Third, Satyam's employee strength has already come down to 48,000 -- it was 53,000 before the scam broke out. </li></ul>
  8. 8. <ul><li>Interview-2 </li></ul><ul><li>CAPGEMINI & KANBAY </li></ul><ul><li>KANBAY: <7,000 Employees; Chicago;Financial services </li></ul><ul><li>CAPGEMINI: 82,000 Employees; Paris; france; IT, consultancy </li></ul><ul><li>HOW IT AFFECTED PEOPLE: </li></ul><ul><li>No fear of lay-off </li></ul><ul><li>Employees of Kanbay felt, Kanbay’s policies were better </li></ul><ul><li>Technology changed </li></ul><ul><li>HR PRACTICES </li></ul><ul><li>No layoff, but less salary hike </li></ul><ul><li>Power and authorities were with Capgemini </li></ul><ul><li>The top management of Kanbay were there without power or themselves they left the company </li></ul>
  9. 9. Daimler-Benz (Germany) & Chrysler (USA) <ul><li>Operating Industry: (Daimler Benz) Cars, (Chrysler) Jeeps </li></ul><ul><li>OBJECTIVE OF MERGER </li></ul><ul><li>The transaction will create a world-class automotive corporation ranked in the world's top three in terms of revenues, market capitalization and earnings. </li></ul><ul><li>to exploit the growth opportunities of the global automotive market in terms of geographical and product segment coverage. </li></ul><ul><li>DaimlerChrysler will be a world leader in transportation. </li></ul><ul><li>Both companies have dedicated and skilled workforces and successful products, but in different markets and different parts of the world. By combining and utilizing each other's strengths, we will have a pre-eminent strategic position in the global marketplace for the benefit of our customers. We will be able to exploit new markets, and we will improve return and value for our shareholders. This is a historic merger that will change the face of the automotive industry.&quot; </li></ul>
  10. 10. <ul><li>Culture Clash </li></ul><ul><li>Mercedes is universally perceived as the fancy, special brand, </li></ul><ul><li>Chrysler, Dodge, Plymouth and Jeep were the poorer, blue </li></ul><ul><li>collar relations </li></ul><ul><li>This fueled an undercurrent of tension, which was amplified by the fact that American workers earned appreciably more than their German counterparts, sometimes four times as much. </li></ul><ul><li>The dislike and distrust ran deep, with some Daimler-Benz executives publicly declaring that they &quot;would never drive a Chrysler“ </li></ul><ul><li>Irate Chrysler managers responded, that &quot;The Jeep Grand </li></ul><ul><li>Cherokee earned much higher consumer satisfaction ratings than the Mercedes M-Class&quot; </li></ul>
  11. 11. <ul><li>Much of this clash was intrinsic to a union between two companies which had such different </li></ul><ul><li>wage structures, </li></ul><ul><li>corporate hierarchies and </li></ul><ul><li>values. </li></ul><ul><li>At a deeper level, the problem was specific to this union: Chrysler and Daimler-Benz's brand images were founded upon diametrically opposite premises. </li></ul>
  12. 12. Southern Pacific and Union Pacific <ul><li>In 1996, Union Pacific acquired Southern Pacific Lines. </li></ul><ul><li>Its system expanded by over 14,000 miles. </li></ul><ul><li>It even brought eastern and western halves of the nation's first transcontinental railroad under common ownership. </li></ul><ul><li>Union Pacific currently ranks as North America's largest railroad operator, with over 37,000 miles. </li></ul>
  13. 13. Effect after the acquisition <ul><li>By 1997 the much-expanded railroad was plagued by accidents, late arrivals, and congested rail lines. </li></ul><ul><li>The railroad's inability to fully integrate Southern Pacific meant massive delays that ultimately cost the company $1 billion in lost business in 1997. </li></ul><ul><li>In addition to the transportation problems that arose, Union Pacific had to pay $34 million in cash to shareholders who claimed the company failed to disclose material facts. </li></ul>
  14. 14. <ul><li>In 1999 the corporation split the railroad operation into three semiautonomous units (for the northern, southern, and western sections of the system). </li></ul><ul><li>It spent $600 million on new locomotives, and laid out $366 million on new track in Nebraska. </li></ul><ul><li>The railroad also hired 6,500 new employees and made plans to hire 60,000 more by 2010. </li></ul><ul><li>The new workers are expected to replace retiring workers and to meet increased business demands. </li></ul>
  15. 15. AOL-Times Warner America’s largest merger & biggest failure <ul><li>One of the largest mergers in American history </li></ul><ul><li>AOL purchased Time Warner for $164 billion in January 2000 </li></ul><ul><li>  A clash of cultures set the stage for a spectacular corporate collapse, with AOL executives lording it over their Time Warner counterparts who felt they were being acquired by brash, young interlopers. Just three years later, nearly all the top executives behind the merger had resigned. </li></ul><ul><li>The AOL-Time Warner deal was initially described as a marriage made in heaven. Three years later, however, the description changed to a marriage between a teenager and a middle-aged banker. </li></ul>
  16. 16. <ul><li>. The drop in share value made it difficult for AOL to make good on their end of the various intricacies of the deal. </li></ul><ul><li>Rival Internet providers such as NetZero began cutting into AOL's business with lower subscription rates, and its power was on the wane  </li></ul><ul><li>The stock price of AOL Time Warner dropped from $71 in 2001 to $8.70 in July 2003. </li></ul><ul><li>In May 2009, Time Warner announced plans to end the merger and become a separate company by the end of the year. The merger is considered to be one of the biggest business failures in U.S. history. </li></ul>
  17. 17. Ford Acquisition of Volvo CARS <ul><li>INDUSTRY : Auto mobile </li></ul><ul><li>Country : Ford (USA); Volvo (Sweden) </li></ul><ul><li>Year: 1999 </li></ul><ul><li>Total workforce : 25,000 </li></ul><ul><li>Latest setback : sold to Zhejiang Geely Holding Group in 2010 . </li></ul><ul><li>Post acquisition: </li></ul><ul><li>2,000 workers were laid off </li></ul><ul><li>Over all weak market and material cost </li></ul><ul><li>1200 employees in sweden,300 abroad and 500 </li></ul><ul><li>Cutting one of three shifts at its Torslanda plant in Gothenburg where it produces its bigger car models. </li></ul>
  18. 18. <ul><li>INDUSTRY: Banking </li></ul><ul><li>Country: USA </li></ul><ul><li>Year:1997 </li></ul><ul><li>Rename : Bank of America Corporation </li></ul><ul><li>Status : Largest bank acquisition in history at that time </li></ul><ul><li>Post:four leaders in fewer than 10 years after acquisition </li></ul><ul><li>Job less:30,000 </li></ul>Acquisition of Bank America by Nations Bank
  19. 19. MERGER OF LOCKHEED &MARTIN <ul><li>Lockheed Martin ,headquarter- Washington D.C </li></ul><ul><li>Industry-defence and space, public sector company, rank 179 in fortune 500 company </li></ul><ul><li>Status- operating </li></ul><ul><li>Merger took place between in the year 1995-Formed by the 1995 “merger of equals” of two long-time military contractors—Lockheed Corp. and Martin Marietta Corp.—Lockheed Martin produces a wide range of combat aircraft , combat ships, missiles , space systems , military electronics and even the new Presidential helicopter </li></ul>
  20. 20. <ul><li>HR issues related to the merger to the two </li></ul><ul><li>In 1977 a report prepared by outside directors at the company found that, from 1970 to 1975 alone, Lockheed executives had made up to $38 million in questionable payments. </li></ul><ul><li>The payoff issue would come to haunt the company again in later years. In 1995 Lockheed agreed to plead guilty to one count of </li></ul><ul><li>violating the Foreign Corrupt Practices Act in connection with payments made by a company consultant to a member of the Egyptian parliament. It paid a fine of $28.4 million </li></ul><ul><li>The company was sued for employment discrimination, especially relating to race and age. </li></ul>
  21. 21. <ul><li>Industry-Aviation and Aerospace,company- U.S based </li></ul><ul><li>Merger took place in the year 1998 between the two. </li></ul><ul><li>HR related issues related to the merger of both </li></ul><ul><li>Failure merger case due to people side of the deal and it occurs due to the change dynamics created by the merger. </li></ul><ul><li>Executives not buying better channel distribution and geographic markets </li></ul><ul><li>Fail to accomplish strategic objectives like stock company rises only 23 %, 30 % profit from the merger </li></ul><ul><li>CEO and CFO’S routinely cite culture issue and people problem one of the top factors in fail integrations </li></ul><ul><li>No plan to improve the value of stakeholders which have supported a lot in the outside environment. </li></ul>MERGER OF BOEING & MC DONNELL DOUGLAS

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