The document outlines the critical role of Human Resources (HR) in mergers and acquisitions (M&A), emphasizing the complexities and challenges involved in the process. It details the objectives of M&A, strategic reasons for merging, and identifies key HR responsibilities such as managing cultural integration, addressing employee concerns, and ensuring effective communication. Additionally, the document highlights factors contributing to M&A success and failure, underscoring the importance of careful planning and management in achieving desired synergies.

1. Role of HR in
Mergers &
Acquisitions
Dhruv Seth
Gaurav Agarwal
Kushal shah
Saurav Pandey
Urvi shah

2. Merger & Acquisition
• Merger & acquisition represent the ultimate change for a business.
• No other event is more difficult, challenging, or chaotic as a M & A.
• Hence it is imperative that everyone involved in the process has a clear
understanding of how the process works.

3. Some interesting M&A figures
• Virtually every major company in the United States today has experienced a
major acquisition at some point in history.
• And at any given time, thousands of this companies are adjusting to post
merger reality.
• For example, so far in this decade of the 1990’s (through June 1997), 96020
companies have come under new ownership world wide in deals worth a
total of $3.9 trillion & that’s just a counting acquisitions valued at $ 5
million & over.
• Add to this the many smaller companies & non profit & government entities
that experience mergers every year, & the M&A universe becomes large
indeed.

4. Why you need to know this?
• Well for starters, M&A are now a normal way of life within the business
world.
• In today’s global, competitive environment mergers are sometimes the only
means for long term survival.
• In other cases, such as Cisco systems mergers are a strategic component for
generating long term growth.

5. M&A defined
• When we use the term “Merger”, we are referring to the merging of two
companies where one new company will continue to exist.
• The term “Acquisition” refers to the acquisition of assets by one company
from another company.

7. Objectives
• Objective of merger is to achieve economy of scale & to carry on business
more economically & efficiently.
• Objective of an acquisition is self- evidently growth & expansion of the
acquires assets, sales & market share.

8. Mergers can be categorized as follows:
vertical
conglomerate
horizontal

9. Reasons for M&A
• Every merger has its own unique reasons why the combining of two
companies is a good business decision.
• The underlying principle behind mergers & acquisitions is simple:2+2=5
synergy value can take three forms:
1. Revenues: By combining the two companies, we will realize higher
revenues then if the two companies operate separately.
2. Expenses: By combining the two companies, we will realize lower
expenses then if the two companies operate separately.
3. Cost of capital: By combining the two companies, we will experience a
lower overall cost of capital.

10. Strategic Reasons
• However, the best mergers seem to have strategic reasons for the business
combination, they are;
• Positioning: Taking advantage of future opportunities that can be exploited when
the two companies are combined.
• Gap filling: One company may have major weakness (such as poor distribution)
where as the other company has some significant strength.
• Organizational competencies: Acquiring human resources & intellectual capital
can help improve innovative thinking & development within the company.
• Broder market access: Acquiring a foreign company can give a company quick
access to emerging global market.

11. Basic Business Reasons
• Bargain purchase: It may be cheaper to acquire another company than to
invest internally.
• Diversification: It may be necessary to smooth out earnings & achieve more
consistent long-term growth & profitability.
• Short term growth: Management may be under pressure to turnaround
sluggish growth & profitability.
• Undervalued target: The target company may be undervalued & thus, it
represents a good investment.

12. The M&A Process
2. Search
& screen
targets
3.
Investigate
& value
the target
4. Acquire
through
negotiation
5.Post
merger
integration
1.Pre
acquisition
review

13. Typical M&A process

14. HR ROLE
Why the role of HR is important in M&A

15. HR department in M&AActivity
• Developing key strategies for a company’s M&A activities
• Managing the soft due diligence activity
• Providing input into managing the process of change
• Creating transition teams, especially those that will
• Overseeing the communications
• Managing the learning process

16. The human side of M&A
• The belief that they are too soft therefore, hard to manage.
• Lack of awareness or consensus that people issues are critical.
• No spokesperson to articulate these issues
• No model or framework that can systematically understand
• Attentive focus M&A activity is on finance, accounting & manufacturing
• People issues occur at several phases or stages
• Retention of key talent, communications

17. Successful leaders description
• Sensitive to cultural differences
• Open- minded flexible
• Able to recognize the relative strengths & weakness of both companies
• Committed to retaining key employees
• Good listeners
• visionary

18. HR issues
• A substantial number are human resource related e.g. acquisition of key
talent
• Creation of a dedicated senior executive
• M&A failure is the lack of a capable leader
• The selection discussion of which one to chose
• A well-thought plan for managing the rest of the M&A
• Diminish the possible success of the combination
• Planning to learn from the M&A process

19. Role of HR in M&A
• A company's human resource department as well as the human resource
workers in the other company play a vital role in the process.
• Role of HR in M&A process are:
Company culture
Benefits problems
Employee concerns
Changing roles & structure

20. Company culture
• HR must have a firm grasp on the culture of the company for which they
work & must study the culture of the other organization to make such a
determination
• Culture differences may include
How organizations define & measure success
How problems are handled
Management styles
Overall attitude of employee & managers

21. • Benefits problems:
Human resource from the purchasing company assess the benefits structure
of the other company to uncover any potential problems.

22. • Employee concerns:
Human resources can detect & address any rumours about layoffs, office
relocation or other changes employees fear, giving feedback to management
about employee concerns.

23. • Changing roles & structures:
When one company merges with or acquires another, some changes to both
organizations may occur.
Human resources communicates to employees changes in who they report to
within the company, what team or work group employees are assigned to as
well as any changes to different positions roles in the organization.

24. Why are companies acquiring?
Improved market access by far the number one driver of M&A activity:

25. A reality check why M&A fail
• Poor strategic fit- the two companies have strategies & objectives that are
too different & they conflict with one another.
• Cultural & social differences- it has been said that most problems can be
traced to “people problems”. If the two companies have wide differences in
cultures, then synergy values can be very elusive.
• Incomplete & inadequate due diligence- due diligence is the “watchdog”
within the M&A process. If you fail to let the watchdog do his job, you are
in for some serious problems within the M&A process.

26. • Poorly managed integration- The integration of two companies requires
very high level of quality management. Integration is often poorly managed
with little planning & design. As a result, implementations fails.
• Paying too much – In today’s merger frenzy world, it is not unusual for the
acquiring company to pay a premium for the target company. Premiums are
paid based on expectations of synergies. However, if synergies are not
realized, then the premium paid to acquire the target is never recouped.
• Overly optimistic- if the acquiring company is too optimistic in its
projections about the target company, then bad decisions will be made within
the M&A process. An overly optimistic forecast or conclusion about a
critical issue can lead to a failed merger.

27. Reason for success
• Leadership, key talent retained
• Well-thought out goals & objectives
• Due diligence on hard & soft issues
• Well-managed M&A team
• Successful learning from previous experience
• Planning for combination & solidification steps completed early
• Extensive & timely communications to all stake holders.

28. At the company level
• It is important that business & integration strategies be clear.
• Financial expectation must be made clear
• For M&A in new markets, it is essential to understand market dynamics &
customers
• Avoid ambiguity in decision making guidance

29. At the HR level
• Best people in charge of implementing M&A deals
• Early planning of the integration process
• Difficult decisions should be dealt with quickly
• Completion, integration of a deal should not be underestimate
• It is important to be sensitive to cultural differences

30. Question & Answer

31. Kushsshah.blogspot.com