M&A vs. Business Culture


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M&A vs. Business Culture

  1. 1. Merger & Acquisition (M&A) VS. Business Culture Based on web-site reading ( articles/presentations)
  2. 2. <ul><li>Takeover </li></ul><ul><ul><li>The transfer of control from one ownership group to another. </li></ul></ul><ul><li>Acquisition </li></ul><ul><ul><li>The purchase of one firm by another </li></ul></ul><ul><li>Merger </li></ul><ul><ul><li>The combination of two firms into a new legal entity </li></ul></ul><ul><ul><li>A new company is created </li></ul></ul><ul><ul><li>Both sets of shareholders have to approve the transaction. </li></ul></ul><ul><li>Amalgamation </li></ul><ul><ul><li>A genuine merger in which both sets of shareholders must approve the transaction </li></ul></ul><ul><ul><li>Requires a fairness opinion by an independent expert on the true value of the firm’s shares when a public minority exists </li></ul></ul>Definitions
  3. 3. <ul><ul><li>The Business Culture comprises of : values, rules & </li></ul></ul><ul><ul><li>policies, goals and measures , rewards and recognition, </li></ul></ul><ul><ul><li>staffing & selection, training & development, Ceremonies </li></ul></ul><ul><ul><li>and event, leadership behavior, communication and </li></ul></ul><ul><ul><li>physical environment. </li></ul></ul><ul><ul><li>In short it is “ the way the company does business ”. </li></ul></ul>Definitions (Cont.)
  4. 4. <ul><ul><li>It is the acquisition of a target company that is willing to be taken over. </li></ul></ul><ul><ul><li>Usually, the target will accommodate overtures and provide access to confidential information to facilitate the scoping and due diligence processes. </li></ul></ul>Nice /Friendly Acquisition
  5. 5. <ul><ul><li>It is a takeover in which the target has no desire to be acquired and actively rebuffs the acquirer and refuses to provide any confidential information, and does not cooperate for a successful takeover. </li></ul></ul>Difficult/Hostile Acquisition
  6. 6. <ul><li>1. On workers or employees : </li></ul><ul><li>- layoffs </li></ul><ul><li>2. On top level management : </li></ul><ul><li>- clash of egos </li></ul><ul><li>- variation in culture </li></ul><ul><li>3. On shareholders : </li></ul><ul><li>a) Of acquiring firm : most affected, they are harmed by the same </li></ul><ul><li>degree to which target firm shareholders benefitted </li></ul><ul><li>b) Of target firm : benefitted the most, acquiring company usually </li></ul><ul><li>pays a little excess than what it should </li></ul>Merger & Acquisition impact
  7. 7. <ul><li>A global A.T.Kearney study suggests that 58 % of all mergers, acquisitions, and other forms of corporate restructuring fail to produce results rather than create value. </li></ul><ul><li>Similarly, a KPMG survey found that 83 % of mergers were unsuccessful in producing any business benefits regards shareholder value. </li></ul><ul><li>A major McKinsey & Company study found that 61% of acquisition programs were failures because the acquisition strategies did not earn a sufficient return (cost of capital) on the funds invested&quot;. </li></ul><ul><li>Between 55% and 77% of all mergers fail to deliver on the financial promise announced when the merger was initiated. </li></ul><ul><li>Even though most mergers and acquisitions are carefully designed, they still face major challenges. Nearly two-thirds of companies lose market share in the first quarter after a merger; by the third quarter, the figure is 90 %. In the first four to eight months that follow the deal, productivity may be reduced by up to 50 %. </li></ul>M&A Failures- % .
  8. 8. Top 3 major reasons as seen by CEOs - % Major reasons for M&A failure 61% 66% 67% Business Cultural conflicts Inability to realize synergies Poor Integration Process
  9. 9. <ul><li>1. The Human Factor , </li></ul><ul><li>2. The Business Cultural “Misfit” & </li></ul><ul><li>3. The Process </li></ul>What/who is really behind it?
  10. 10. <ul><li>Poor integration process </li></ul><ul><li>Inability to realize synergies </li></ul><ul><li>Business Cultural conflicts </li></ul><ul><li>Plan in place / clear goals / accountability </li></ul><ul><li>Continually enhance process </li></ul><ul><li>Make the “tough” decisions, don’t delay </li></ul><ul><li>Start integration planning early </li></ul><ul><li>Drive towards common processes and platforms </li></ul><ul><li>Strong integration process </li></ul><ul><li>Give authority / expect accountability </li></ul><ul><li>Respect different ideas and new approaches </li></ul><ul><li>Seek to understand and learn how to manage </li></ul><ul><li>No “Us & Them”; only “We” </li></ul>Issues Mitigation Issues and Mitigation
  11. 11. <ul><li>The company should </li></ul><ul><ul><li>Recruit and promote service oriented candidates, </li></ul></ul><ul><ul><li>Train the workforce in techniques of service </li></ul></ul><ul><ul><li>Set goals that are based on service </li></ul></ul><ul><ul><li>Reward an recognize people for higher level of service </li></ul></ul><ul><ul><li>Other actions. </li></ul></ul>Promote the Business culture
  12. 12. <ul><li>Communication </li></ul><ul><li>Common Business Culture </li></ul><ul><li>Training and Development </li></ul><ul><li>Mutual understanding and respect </li></ul><ul><li>Individual counseling </li></ul>Business Culture HR wise
  13. 13. <ul><li>Making the merger / acquisition work successfully is not that easy as </li></ul><ul><li>here we are not only just putting the two organizations together but </li></ul><ul><li>also integrating people of two organizations with different cultures, </li></ul><ul><li>attitudes and mindsets. </li></ul><ul><li>While making the merger / acquisition deals, it is necessary not only </li></ul><ul><li>to make analysis of the financial aspects of the acquiring firm but also </li></ul><ul><li>the cultural and people issues of both the concerns for proper post- </li></ul><ul><li>acquisition integration </li></ul>Conclusion
  14. 14. <ul><li>Thank you and good luck… </li></ul>