NATIONAL LAW INSTITUTE

UNIVERSITY, BHOPAL

Research Methodology and Legal

Education
(2018-19)
PROJECT SYNOPSIS

STATUS AND LIABILITIES OF EMPLOYEE’S IN

PRE AND POST MERGER SCENARIO

SUBMITTED TO: - SUBMITTED BY:-

PROF. (Dr.) TAPAN R. MOHANTY SAGAR CHANDRAKAR

2018 LLM 38
 Introduction
Merger is a restructuring tool available to Indian conglomerates aiming to expand and
diversify their businesses for various reasons whether it is to gain competitive advantage,
reduce costs or unlock values. In commercial parlance, merger essentially means an
arrangement whereby one or more existing companies merge their identity into another
existing company or form a distinct new entity. Company law in India is undergoing a
complete overhaul and a new law was finally passed in 2013. However, provisions relating to
mergers covered in Sections 230 to 240 are yet to be notified. Until then, this court driven
process will continue to be governed by Section 391-396A of the Companies Act, 1956 and
the Companies (Court) Rules, 1959 (collectively referred to as "1956 Act").

Corporate restructuring has facilitated many organizations to re-establish their sustainable

competitive advantage, respond more swiftly and effectively to new opportunities, threats and
unforeseen challenges of the marketplace. Growth opportunities come in a variety of ways
and if an industrialist does not respond on time than great amount of energy and resources
may be shattered. M&As offer grand opportunity for companies to grow and add value to
shareholders’ wealth. Organizational changes affect the performance of the employees during
the course of a merger. Cultures of one of the firm determine the level of stress among
employees. It is quite obvious that when a merger is announced respective employees of the
firm may feel stressed, disoriented, frustrated, confused and even frightened. At a personal
level, these feelings can lead to a sense of loss, psychosomatic difficulties, and marital
discord as well.

Objectives
 To analyze employees conditions in pre and post merger periods.
 To identify the differences in status and liabilities of employees in the said periods.
 To mention the solutions to curb the problem of labour turnover.

Hypothesis
Lots of M&A are taking place in today’s era so as to avoid the gross consequences of loss
and recession. Companies are absorbing, blending, combining so that it can survive and face
the increasing rate of competition in global market. In this rush the personnel indulged in
these activities they usually forget to consider and they try to overlook the conditions of
employees and their rights and liabilities post merger. This results in labour turnover which in
turn makes the very reason of adopting mode of M&A useless. Human forms the main part of
company and are the best resources with their own intellect so it’s better to think about them
as well and then take decisions regarding anything. We assume that today there are pros and
cons of each aspect and so does of M&A. so not only they are facing problems but also there
are lots of benefits that they will be gaining out of these schemes.

Moreover, members of the smaller pre-merger partner experiencing a greater amount of

negative changes imposed on them in terms, for example, status loss, autonomy at work, job
control, etc. in relation to the ones from the larger pre-merger partner, are likely to exhibit
heightened post-merger stress and poorer physical and psychological health. As some
evidence indicates increased stress for employees of the dominated pre-merger partner in
absorb pattern and greater insecurity experienced in hostile as opposed to a friendly
acquisition, we can expect that perceived loss of job control and feelings of job insecurity
would be more evident in the absorb than the transformation pattern, resulting in higher post-
merger stress.

Research methodology
The research is analytical, action and doctrinal in nature.

The matter of this project involves analysing the collected data in order to explain existing
state of affairs from available data and helps to reach to a conclusion by finding solutions to
the situations faced by the employees and improving existing circumstances at its earliest.
Also legal statutes and concepts are referred to understand and solve the issues dealt in this
paper. Materials are collected largely from secondary sources of information such as
websites, books, dictionaries etc.

Review of literature
Schweiger and Weber (1989) suggested that Mergers and acquisitions (M&As) are corporate
events that have the potential to create severe personal trauma and stress which can result in
psychological, behavioural, health, performance, and survival problems for both the
individuals and companies involved. With the increasing size and number of M&As
transacted and the number of employees affected, it is essential that executives and human
resource professionals pay greater attention to understanding the sequence of actions and
reactions associated with the process.

Cartwright and Cooper (1993) studied the human aspects of merger and acquisition and the
impact of such a major change event has on employee health and well being which has
received relatively little research attention. They found that Post-merger measures of mental
health to be a stressful life event, even when there is a high degree of cultural compatibility
between the partnering organizations

Bibliography

 Companies Act 2013

 Companies Act 1956
 http://www.psychologicabelgica.com/articles/10.5334/pb-45-3-
207/galley/151/download/
 Schweiger, D.M., & Weber, Y. (1989). Strategies for managing human resources
during mergers and acquisitions: An empirical investigation. Human Resource
Planning, 12, 69-86.
 Cartwright, S., & Cooper, C.L. (1993). The psychological impact of merger and
acquisition on the individual: A study of building society managers. Human
Relations, 46, 327-347.
 Schoennauer, A.W. (1967). Behavior patterns of executives in business acquisitions.
Personnel Administration, 30, 27-31.
 Marks, M.L., & Mirvis, P.H. (2000). Managing mergers, acquisitions, and alliances:
Creating an effective transition structure. Organizational Dynamics, 28, 35-47.
 Panchal, S., & Cartwright, S. (2001). Group differences in post-merger stress. Journal
of Managerial Psychology, 16, 424-433.
 Hambrick, D.C. & Canella, A.A. (1993). Relative standing: A framework for
understanding departures of acquired executives. Academy of Management Journal,
36, 733-762.