M and A
A merger is a strategy through which two firms agree
to integrate their operations on a relatively co-equal
basis because they have resources and capabilities
that together may create a stronger competitive
advantage. HUL and TOMCO merged to serve as a
counter thrust to the P & G-Godrej tie-up
A merger is said to occur when two or more
companies combine into one company. One or more
companies may merge with an existing company or
they may merge to form a new company. DaimlerBenz and Chrysler ceased to exist when the two firms
merged and a new company ,Daimler-Chrysler was
M and A
In a merger there is complete amalgamation
of the assets and liabilities as well as
shareholders’ interests and businesses of the
The fundamental characteristic of merger is
that the acquiring company takes over the
ownership of the other company and
combines its operations with its own
M and A
An acquisition is a strategy through
which one firm buys a controlling stake
or 100 percent interest in another firm
with the intent of using a core
competence more effectively by making
the acquired firm a subsidiary business
within its portfolio.
Most mergers are friendly transactions,
where as acquisitions include unfriendly
M and A
Acquisitions may be defined as an act of acquiring
effective control over assets or management of a
company by another company without any
combinations of businesses or companies. In an
acquisition two or more companies may remain
independent but there may be change in the control
of the target company.
A takeover is a type of an acquisition strategy wherein
the target firm does not/did not solicit the acquiring
firm. Thus when an acquisition is a “forced” or
“unwilling” acquisition it is called a take-over.
Classifications of mergers
Horizontal mergers: take place where two merging
companies produce similar product in the same
Vertical mergers occur when two firms, each working
at different stages in the production of the same good,
Congeneric mergers occur where two merging firms
are in the same industry, but have no mutual
buyer/customer or supplier relationship
Conglomerate mergers take place when two firms
operate in different industries.
SUCCESSFUL M AND As
Renuka Sugar- Equipav
FAILED M AND As
Advantages of M and A
Increased market power-market power is
usually derived from the size of the firm and
its resources and capabilities to compete in
the market place
Overcoming entry barriers-especially when a
new entrant faces differentiated products and
economies of scale.
Cost of new product development-compared
to internal product development process,
acquisitions provide more predictable returns
as well as faster market entry.
Increased speed to market-acquisitions result
in more rapid market entries
Lower risks compared to developing new
products-internal product development
process can be risky. Managers view
acquisitions as carrying lower risks.
Increased diversification-it is difficult for
companies to develop products for new
Avoid excessive competition
Inability to achieve synergy: synergy exists when the
value created by units working together exceeds the
value those units could create working independently.
Too much diversification: in general, firms using
related diversification strategies outperform those
employing unrelated diversification strategies.
However, regardless of the type of diversification
strategy implemented, declines in performance
usually result from over-diversification. Another
problem resulting from too much diversification is the
tendency for acquisitions to become substitutes for
Too large: evidence suggests that a
larger size creates efficiencies in
various organizational functions only
when the new firm is not too large.
Managers overtly focused on
acquisitions: too much time spent
searching for viable acquisition
candidates, completing effective duediligence processes and preparing for
Prior to the 1980s most research on
M&A focused strategic, financial and
operational consequences of M&A.
Current thinking is that cultural clashes
are seen to be the main reason for M&A
Cultural factors in mergers and
Cultural factors in IM and A s can be studied at organizational
and national levels.
Hofstede used six dimensions of organizational culture and four
(five) dimensions of national culture.
Hofstede’s national cultural dimensions include power distance,
uncertainty avoidance individualism/collectivism and
His organizational cultural dimensions are process
oriented/result oriented, employee oriented/job oriented,
parochial/professional, open/closed system, loose/tight control
National culture=values. It is normative
Organizational culture=practices. It is
Process orientation vs. Results orientation.
How things are done vs. what gets done
Concern for employee vs. concern for the job.
Parochial (narrow minded) vs. professional.
Identity taken from the organizational vs.
identity from the outside.
Open vs. closed. Easy to join and work
vs. difficult to join (only specific kinds of
people can work in such organizations)
Loose vs. tight.Casual/improvization vs.
serious/great emphasis on punctuality
Normative vs. pragmatic. Ideological vs.
Human resource implications: the
Denial--------news of the merger
Enjoyment-----commitment to the situation
HR ASPECTS IN MERGERS
ROLE OF HR
OF KEY EMPLOYEES
COMPLIANCE WITH APPLICABLE
ALIGNMENT WITH COMPENSATION
AND BENEFIT PLANS
ISSUES IN M AND A
LACK OF TRAINING
LOSS OF KEY PEOPLE
POWER AND POLITICS
What should be communicated?
If leadership cannot stand up in front of the company and
say the following, resistance will worsen:
“We’re doing this because we must.”
“We’re doing this because we are failing and if we
don’t, we all stand to lose our jobs.”
“We’re doing this because it is going to help us. It is
going to allow us to grow. We’re all going to be better
off during and after this transitional period.”
“We MUST make this change or we may not be in
existence 2 years from now.”
WHERE HR COMES IN-- TRAIN
MANAGERS ON THE NATURE OF
TECHNICAL RE- TRAINING
FAMILY ASSISTANCE PROGRAMMES
STRESS REDUCTION PROGRAMMES
EXPLAINING NEW ROLES
HELPING PEOPLE WHO LOST THEIR JOBS
POST MERGER TEAM BUILDING
HR ROLES--PRE- M AND A PHASE
Assessment of differences
POST M AND A PHASE
Designation for employees
Compensation and PMS
Five top mistakes HR make
being involved early enough
Not understanding employee needs and
Not understanding and empowering
Not working with receiving business unit
Not understanding the time, work that
acquisitions and integrations require.