Roles of HR manager in merger & Acquisition

1. Role of HR in Merger and Acquisitions,
UNIT 1

2. • The Human Resource department acts as a trusted adviser to the
employees of an organization along with the management who
intend to enter to an M&A deal.
• A merger is when two or more entities come together under one
management style, combining forces for whatever reason. A
merger is generally defined as the joining of two or more different
organizations under one common owner and management
structure
• Acquisition, which is when a company buys another company and
absorbs them under their management style. This is in the news a
lot with tech companies because larger companies want to absorb
the technology created by a smaller team and bring those coders
and engineers onto their roster instead of competing with them.
• An acquisition is the process of one corporate entity acquiring
control of another corporate entity by purchase, stock swap or
some other method.”

3. Results of Mergers and Acquisitions
• According to SHRM, 70 to 90 percent of all mergers and
acquisitions fail in a financial sense with most companies
missing their objectives. They say that this is largely due to HR
related activities, such as:
– Incompatible Cultures
– Management Styles
– Poor Motivation
– Loss of Key Talent
– Poor Communication
– Loss of Trust
– Uncertainty
• In other words, “people issues” are largely to blame when it comes to the
failure rate of mergers and acquisitions.

4. To ensure a successful M&A, it is important to involve HR . Its
Role is .
– Culture
– New policies
– Compensation Benefits
– Retention and Downsizing
– Boosting the Morale of Anxious Employees

5. Culture
• Cultural fit is a major part of M&As. Ensuring both company
cultures come together and do not clash is one of HR’s biggest
roles in the entire process. If the cultures do not fit, the
merger or acquisition very often fails.
• M&A deals are made to create growth and open up a
multitude of opportunities for the buying company. However,
if there is friction between the two companies, it can be
detrimental to the success of the merged business. To ensure
this does not happen, HR needs to assess the selling
company’s culture and identify any areas that may be an
issue. Finding these problems before the transaction occurs is
essential to the success of the M&A.

6. New Policies
• In merger or acquisition, new policies will need to be created
in order to ensure a smooth transition. This includes,, new
policies for benefits, vacation allowances and notice periods.
There is a wide range of areas these policies will have to cover
and once the transaction is over, employees will have lots of
questions, such as what will happen to their healthcare and if
they need to take any actions to ensure they are covered by
the new policies.
• Lots of these policies may not change because they contain
best practices that are used by many organizations. However,
it’s also a good opportunity to update any outdated policies
and ensure they’re in-line with the latest research and
trends.

7. Compensation and Benefits
• Similar to creating new policies, HR also needs to work with
managers to make new benefits and compensation plans for
both workforces. Employees at the buying and selling
company will want to know if their bonuses and raises will be
impacted, how they can book time off or if they are still
entitled to the same (or better) healthcare.
• If these issues are not addressed quickly, employees may
decide to leave the company due to uncertainty and lack of
communication. This is why it is HR’s role to convey any
changes to all staff, providing updated information regularly.
Often, a training session is held by HR to ensure these
changes are understood by the workforce.

8. Retention and Downsizing
• M&A bring together whole companies, meaning there may be a lot
of roles at the new company that are no longer needed. This
depends on the M&A, as not all decide to combine the two
companies into one, single unit.
• An example : when eBay bought PayPal in 2002. eBay chose to keep the PayPal
brand and did not combine the two into one company. PayPal became a
subordinate under eBay, so it is technically the same business but maintains its
own corporate culture and departments.
• As a whole, redundancies tend to happen after M&A. For example,
it is likely that both companies will have a marketing department, so
the buying company will need to consider if two marketing teams
are necessary or just one? It is possible to combine the two teams
but that may not be the best way forward.

9. • Another thing to consider is if the selling company is in
another country. The employment law will be different
meaning you may not be able to lay off employees of the
selling company and if you do, you may have to pay
severance.
• Deciding whom to retain and whose contract to terminate is
an important decision and it’s equally crucial to ensure the
processes are managed effectively. Ideally, HR and
management teams will work together to assess the skills,
capabilities and potential of key employees at the new
company.
• Historically, there have been a lot of mergers and acquisitions
that have failed for reasons that could have been avoided.

10. • Boosting the Morale of Anxious Employees
• During the process of M&A, some employees may be reluctant to
adapt to the new work culture thus, creating a serious culture clash.
It is a common human tendency to resist change and since M&As
bring in an element of apprehensions and change for the
employees of both merging companies, Human Resources in both
the organizations should act as a comforting factor and take
measures for sorting out the transition process for employees by—
• Boosting the confidence of employees
• Offering adequate training to managers so that they can acclimatize
themselves to the nature of change and new organizational culture
• Brushing away the fears and doubts of employees, so as to retain
productivity
• Ensuring job security
• Explaining news roles to each employee
• Expounding the hierarchy structure of the organization post merger

11. • Elucidating how the joint venture will affect each employee in
person
• Upholding efficiency by identifying leaders from both
organizations
• Enhancing innovation by placing the right employee at the right
position
• Complying with labour laws
• Supervising personal records
• Keeping the communication channel open through constant
communication with the employees and conveying their concerns
to the management.
• Providing timely input throughout the M&A process
• Conducting orientation programs on welfare schemes,
compensations, benefits, and company policies

12. A few recent mergers and acquisitions in India are provided below.
Tata Group acquired Air India : Tata Group acquired Air India, the nationalised
airline, in 2022. Tata announced the merger of Air India with Vistara, a joint
venture between Singapore Airlines and Tata Sons. Air India had been
struggling in business, and the travel restriction during the COVID-19
pandemic added more struggles. However, Tata is trying to restore Air India
to its former glory.
PVR merger with INOX : India’s two leading cinema franchises, INOX and PVR,
merged in 2022 to establish the largest multiplex chain with over 1500
screens nationwide. The COVID-19 pandemic was tough on the film industry
and theatres. The INOX and PVR merger will result in reduced rental costs,
advertising revenues and convenience fees for the merged entity, called
PVR-INOX.
Zomato acquired Blinkit : Indian food aggregator platform, Zomato acquired
Blinkit, the quick commerce company, for Rs.4,447 crore. Zomato operates
in the food delivery and restaurant hosting businesses, but with the
acquisition of Blinkit, it will also be able to enter the quick commerce field.

14. Cross-border Mergers and Acquisitions
• A cross-border merger means a merger of two companies
located in different countries resulting in a new company. An
Indian company merges with a foreign company or vice
versa in such a merger. Foreign investors are involved in
cross-border mergers and acquisitions.
• The assets and liabilities of the two companies from different
countries are combined into a new legal company. There will
be a transfer of assets and liabilities of a local company to a
foreign company (foreign investor), and the local company will
be affiliated with the foreign company or vice versa.

15. HR Plays a Substantial Role in Merger & Acquisitions
• The HR leadership of both companies should be capable of promptly
developing a strategy to help out the companies in accomplishing the
synergies they are looking for. Before the merger or acquisition takes
place, the HR managers of both the firms should advise the management
to map out a roadmap in advance so that the merging companies can stick
to it as soon as the M&A procedure gets going. The strategy should stress
on the organizational communication structure, layoffs (if any), and
amalgamation of corporate cultures. This initiative by HR leaders helps the
management to conform to a specific set of objectives, thus driving away
all misunderstandings and differences that may come up in future.
• The HR of any organization, by extending their intervention, can facilitate a
successful M&A. Since Human Resource entails employees of an
organization and deals with significant issues pertaining to employees,
involvement of HR professionals is indispensable for successful mergers
and acquisitions. Thus, during an M&A deal, an HR plays the role of a
catalyst as well as a coach to enable employees of merging companies to
work collectively and constructively.

17. Phase of M&A
Integration Role of HR Tasks
Evaluation Stage Setter
Help set the stage and evaluate potential
business ventures and partners based on
company compatibility; Develop criteria
to assess the strengths and weaknesses
of both the organization and people;
Create HR-specific guidelines specifically
for M&A; Educate the deal team on
critical people and change issues.
Due Diligence Deal Enabler
Estimate ongoing people and integration
cost issues (e.g., pension liabilities,
severance, retention bonuses) as well as
costs saved due to workforce reductions
and plan consolidations; Work with
senior management to develop a clear
vision for the transaction and how to
communicate it to employees.

18. Phase of M&A
Integration Role of HR Tasks
Integration Change Agent
Help to define the blueprint for all
aspects of the combined organization
including rewards, change management,
labor relations and talent retention;
Launch employee communications plan
and assess employee attitudes and
engagement levels
Implementation Momentum builder
Act as an advisor to leadership on
various transition issues involving
culture, productivity, working
environment and communications; Align
HR policies, programs and practices
using selected HR systems; Maintain
ongoing change management and
employee communications throughout
the implementation.