PGDM - B

Stress Post Merger

Group
1
SIESCOMS, Navi Mumbai
Group 1

and Acquisition
A Project Report
Submitted By:

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Acknowledgements
These days most newspapers carry details of Merger and Acquisition deals. In
most of the cases, the Merger or Acquisition is a strategic move to improve the
companies’ financial standing. When a change of this magnitude occurs, the
people in the organizations also undergo change. The Merger and Acquisition
phenomenon simply can’t be neglected any more.

But are employees really happy with these changes and how does it affect them.
It is in this milieu, that we attempt to study through our research the stress
experienced by employees in the post Merger & Acquisition.
Rashmi Singh 65 Jaae Powle 66
It has been a great pleasure in preparing this project report on “Stress Post
Merger and Acquisitions”. Vijesh Nair experience
The whole 67 was Razin Naik
a rewarding one,68
especially in terms of knowledge and information.
Melvin Mathew 99 Catherine Paul 105
We are highly indebted to a multitude of people. This project would not have
Neha
materialized without the help Singh
and guidance 114 Vivek
of several Singh
people. 130
Firstly we would
like to thank Prof. Nitin Vazirani for giving us this opportunity to work on this
project.

Further, we extend our gratitude to the employees of the organizations who

responded to our survey inspite of their busy schedules without which this report
would not have materialized –

A note of thanks to all the students of PGDM who helped us out whether it was
with the surveys, the analysis or waiting with us. Thank you.

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Table of Contents

Introduction 4

Merger and Acquisition and Stress 5

Research Methodology and Objectives 8

Survey Analysis 9

Conclusion 17

References 18

Annexure
Survey Questionnaire 19

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Introduction
Mergers and acquisitions (M&A) and corporate restructuring are a big part
of the corporate finance world. Every day, Wall Street investment bankers
arrange M&A transactions, which bring separate companies together to
form larger ones. When they're not creating big companies from smaller
ones, corporate finance deals do the reverse and break up companies
through spinoffs, carve-outs or tracking stocks.

Not surprisingly, these actions often make the news. Deals can be worth
hundreds of millions, or even billions, of dollars. They can dictate the
fortunes of the companies involved for years to come. For a CEO, leading
an M&A can represent the highlight of a whole career. And it is no wonder
we hear about so many of these transactions; they happen all the time.
Next time you flip open the newspaper’s business section, odds are good
that at least one headline will announce some kind of M&A transaction.

But what happens to the employees of the two companies? How will they
adjust to the new corporate environment? Will some choose to leave?
When a merger is announced, company employees become concerned
about job security and rumors start flying creating an atmosphere of
confusion, and uncertainty about change.
As a result, increased stress is experienced by the employees of the
respective companies. It thus becomes imperative to understand how this
stress is manifested in employees. What are the most likely causes of the
stress? And how does it manifest itself in the professional life of the
employee?
Only if sufficient information is available can necessary steps be taken to
manage stress experienced by employees in the Post Merger and
Acquisition scenario.

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Mergers and Acquisitions and
Stress

Although mergers and acquisitions (M&As) form an integral part of today's

corporate landscape they are highly susceptible to failure. Cartwright and Cooper
(1996) present research evidence suggesting no more than 50 per cent of M&As
achieve standards of success initially anticipated. People issues are largely
dismissed when negotiating M&As at the expense of financial aspects and this
has been identified as an important factor in merger failure (Holbeche, 1998).

Strategic Drivers of M&A

Market Dominance
Companies merge in order to gain economies of scale and control over
distribution channel.

Geographical Expansion
Companies use acquisitions to extend geographical reach and global market
share through new market entry.

Leveraging Competence
Companies merge to leverage their competence in NPD, credit risk and debt
management, etc.

Resource & Capability Acquisition

Companies also merge to gain resource and capability acquisition, which they
may lack, and would otherwise be difficult for them to build on their own.

Adjusting to Competition
Companies are sometimes forced into acquisitions by the acquisition strategy of
their principal competitors.

HR has a three phase/stage model during M&A. First phase is the Pre-Merger
which includes the planning of the M&A and here we need to first identify the
need for M&A. This period involves an assessment of the cultural and
organizational differences, including the identification of the organizational
cultures, role of the leaders in the organizations, management styles etc. Second
stage is where the above mentioned activity from phase one come to life, and
finally the third stage is the solidification or Post-Merger of the new entity.
During the third phase the HR issues like staffing, assessing the new strategies,
structure and new culture are some of the main issues faced by an HR.

From the people perspective, M&As have been conceptualised as stressful life
events; in terms of the social readjustment rating scale (Holmes and Rahe, 1967)

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they have been equated with the stress from gaining a new family member or
becoming bankrupt. (Panchal,S,Cartwright,S (2001))

The exposure to a new culture during the M&A leads to a psychological state
called culture shock. The employees not only need to abandon their own culture,
values and belief but also have to accept an entirely different culture. This
exposure challenges the old organizational value system and practices leading to
stress among the employees.( Pande,A.,Krishnan, S.K.)

Stress
The word stress is derived from the Latin word "stringi", which means, "to be
drawn tight". Most people think of stress as a mental state but it is in fact, very
largely, a physical condition

It can be defined as a dynamic condition in which an individual is confronted with

an opportunity, constraint, or demand related to what he or she desires and for
which the outcome is perceived to be both uncertain and important.

Sources of stress or stressors

1. Environmental Stressors
• Economic uncertainties of the business cycle: When the economy is
contracting for example the recent Recession leading to job layoffs and
stock market crash.
• Political uncertainties of political systems: Unstable government and ever
changing policies.
• Terrorism in threats to physical safety and security: Constant attacks and
threat to life.
• Civic amenities: Lack of infrastructure and various other amenities.
• Caste and religion conflicts: Continuous religious conflicts based on
differences.
• Technological uncertainties of technical innovations: New technology and
innovations leads to constant change in working pattern and requires new
skills.

1. Organizational Stressors
• Role Conflict or Role Ambiguity
• Organizational structure
• Work Load and Rotating shifts
• Participation & Control
• Organizational Leadership
• Poor performance of the Organization
• Organizational Changes
• Inter Personal Relationship & Inter Group Conflicts
• Lack of Social Support & Group Cohesiveness

1. Individual Stressors
• Personality
• Family and personal relationships
• Economic problems from exceeding earning capacity

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 • Career Changes
• Frustration

Major stress on the accompany merger or acquisition activity are: -

* Power status and prestige changes
* Loss of identity
* Uncertainty

Unequal compensation may become issue of contention among new co-workers.

Consequences of Stress

Stress shows itself in a number of ways—physiological, psychological, and

behavioral symptoms.

1. Physiological symptoms:

Most of the early concern with stress was directed at physiological symptoms
due to the fact that specialists in the health and medical sciences researched the
topic.

2. Psychological symptoms:

Job-related stress can cause job-related dissatisfaction.

Job dissatisfaction is “the simplest and most obvious psychological effect” of

stress. Multiple and conflicting demands—lack of clarity as to the incumbent’s
duties, authority, and responsibilities—increase stress and dissatisfaction.

The less control people have over the pace of their work, the greater the stress
and dissatisfaction.

3. Behavioral symptoms:

Behaviorally related stress symptoms include changes in productivity, absence,

and turnover, as well as changes in eating habits, increased smoking or
consumption of alcohol, rapid speech, fidgeting, and sleep disorders.

Managing Stress

Stress can be and should be managed to enable survival. Post M&A scenario may
create tremendous personal and occupational pressures, which need immediate
management and successful resolution. Stress management techniques are
many and all of them try to control this fight-flight response. Stress has to be

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managed with rational, calm, controlled and socially sensitive approach.

Stress prevention and management should be addressed in two critical contexts:

the organization and the individual. Adopting a preventive perspective allows
both workers and organizations to anticipate stressors and shape responses,
rather than simply reacting to a crisis when it occurs.

Research Methodology and

Objectives
The survey was conducted to understand to what extent employees experience
stress at the work place post M&A. The various stressors were identified through
literature review. The survey tries to address the extent to which each of the
stressors contribute to the overall stress experienced by individuals. The related
the effects of the stress are also identified. Qualitative data was collected to
identify the measures taken by Human Resources professionals of the respective
companies to address these issues.

To ensure that the study was a true reflection of actual sentiments shared by
employees, both male and female employees were surveyed. Also, an attempt
was made to collect data from both experienced as well as less experienced
employees.

The survey was conducted across four organisations which have undergone M&A
in the past two years.

Objectives

The project objectives were as follows:

• To understand how stress experienced by individuals is manifested

• To identify the causes of stress post M&A
• To identify the effects of stress experienced by employees post M&A
• To gather information about any initiatives taken by Human Resources
professionals of the respective companies for employees post M&A

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Research Instrument

The research instrument used was a questionnaire. Since detailed information

was required from the survey, the questionnaire was prone to becoming very
lengthy. So it was decided to make a mix of close-ended and open-ended
questionnaire, using objective multiple-choice questions.

Sampling Plan

The sample size was 120 employees across four organizations which have
undergone M&A in the past two years.

Survey Analysis
Participant Profile

Participants were surveyed across the food industry, housing finance industry
and information technology industry.

The following table shows the participant profile.

Femal
Male e Total
less than 6
months 5 1 6
6-24 months 11 12 23
2-4 years 12 15 27
More than 4
years 26 9 35
Total 54 37 91

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A graphical representation of the same is as follows:

Causes of Stress: Analysis

Stressors were identified through literature review. A list was drawn up and
respondents were asked to rank them. The most significant cause of stress post
M&A was identified across males and females and across employees with varying
experience.

The survey research showed that among the female employees in the sample,
the importance of job security as a reason for stress was the least. ‘ Inability to
voice opinion’ was considered as the most prominent cause of stress post M&A
closely followed by ‘adapting to change in work culture’. ‘Little or no
appreciation of work’ and ‘work load’ also had relatively high rating wherein
workload was rated lower than the former .

Among male employees surveyed, it was seen that inability to voice opinions
was rated the highest reason for stress post M&A, closely followed by little/No
appreciation of work. Work load, adapting to change in work culture and job
security were rated almost at par.

The employees in the sample having less work experience (less than 6 months
and 6-12 months) rated ‘inability to voice opinions’ the highest closely followed
by ‘change in work culture’. ‘No/ little appreciation for work’, ‘work load’ were
rated almost at par and ‘job security’ was rated the least.

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The employees in the sample having more work experience (2-4 years and more
than 4 years) rated ‘inability to voice opinions’ the highest closely followed by
little/no appreciation of work. This was followed by work load and job security
which were rated at par. In this case it was found that employees who have more
experience find it comparatively easier to adapt to change in work culture hence
it has been rated the least among the five.

Effects of Stress: Analysis

A section of the questionnaire surveyed respondents for the implications of
stress experienced by employees of an acquired company post M&A.

The following are the responses for the survey.

1. I have been away from work more often post M&A

52% of the respondents did not believe that the Merger or Acquisition was a
reason for them to be absent from work. Most of them believed that they still
continued to work in the same way as before.

2. I work less in the office post M&A

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58% of the respondents did not believe that the Merger or Acquisition was a
reason for them to work less in office. Most of them believed that they still
continued to work in the same way as before.

3. I have been making frequent mistakes in the jobs assigned to me

post M&A

43% of the respondents did not believe that the Merger or Acquisition was a
reason for them to make mistakes in the assigned jobs. Most of them believed
that they still continued to work in the same way as before.

4. I find it difficult to trust my new colleagues

36% of the respondents believe that the Merger or Acquisition was a reason for
them to find it difficult to trust their new colleagues while 28% believe that M&A
was not the reason. Therefore M&A has been a major factor affecting the
perceived credibility of Co-workers.

5. I do not feel motivated in my job post M&A

44% of the respondents believe that the Merger or Acquisition was a reason for
them to feel less motivated in their job while 24% believe that M&A was not the
reason. Therefore M&A has been a major factor affecting the motivation of
employees.

6. I feel that my colleagues dislike me

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51% of the respondents believe that the Merger or Acquisition was not a reason
for them to feel that their colleagues dislike them while 20% believe that M&A
was a reason to dislike colleagues. As a result, M&A is not a major factor
affecting the work relationship among employees.

7. I feel the stress post M&A has caused many of my close friends to
quit the job

The analysis shows that, 35% feel that M&A resulted in their friends quitting
the job, whereas 32% do not feel M&A is the reason.

Qualitative Analysis

We had asked an open ended question to get a better insight into how the HR
department of various acquired companies helps its employees cope with the
changing environment. There were many interesting answers coupled with a few,
which indicated that no significant measures were adopted by the Human
Resources department. The answers varied from meetings to ‘Best Team Policy’
across organizations.

Employees from one of the companies surveyed said that they had something
called ‘Townhalls’. On a little research we found that it was a general meeting
with the Senior Management, Human Resources department and the employees.
Employees from another company reported of ‘Best Team Policy’. It is practised
so that relations between new employees are forged and the working
environment is more amiable. Also, a few employees mentioned blogs as being
tools to foster communication.

Thus is can be seen from the analysis that the HR departments in most
companies actively took initiatives to make sure that their employees’ transition
could be as smooth as possible.

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Conclusion

The survey was conducted among the employees from different sectors like IT,
Food and housing and development. This was done with a view to make the data
collection more reliable across different sectors. From the study it was concluded
that the employees of acquired companies undergo stress post M&A. The major
causes of stress and their subsequent effects were identified.

The survey research for the causes of stress post M&A shows that across
genders and work experience, ‘inability to voice opinions’ was considered as the
major cause of stress post M&A. Whereas adapting to change in work culture and
job security were rated the least.

The survey research for the effects of stress shows that post M&A the following
effects of stress were observed among the employees-

• Difficulty in trusting new colleagues

• Lack of motivation at work place
• High turnover

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The survey also indicated that organisations do take measures to help
employees overcome stress post M&A. However, more research needs to be
done to come up with concrete measures to tackle the situation.

These measures will go a long way in deciding the success of a Merger or an

Acquisition.

References
Robbins, Stephen P., Organizational Behaviour

http://www.imaainstitute.org/docs/m&a/towersperrin_04_why%20hr%20can
%20make%20or%20break%20your%20M&A.pdf

www.citehr.com/215270-mergers-acquisitions.html

Alaranta, M.,(2004) Turku Centre for Computer Science and Turku School of
Economics and Business Administration, Turku, Finland. Retrieved from:
http://is.lse.ac.uk/asp/aspecis/20040003.pdf

Mann, Sally E.( Nov 25, 1996). Employee stress an important cost in mergers
Business Insurance. Chicago

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Cartwright,S.,Cooper,C..(1997). Managing merger, acquisition and strategic
alliances: Integrating people and cultures(pp33-46). Calafornia

Pande,A.,Krishnan, S.K. IIM, Ahmadabad. Retrieved from:

http://stdwww.iimahd.ernet.in/~sandeepk/merger.pdf

http://www.cdc.gov/niosh/topics/workorg/tools/pdfs/Rationale-For-NIOSH-Generic-
Job-Stress-Questionaire.pdf

Annexure
Survey Questionnaire

Questionnaire on Stress Post Merger And

Acquisition
General Information

O Female O Male

1. Age

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 O 20-29 years O 30-39 years O 40-49 years O 50 or more years

2. How long have you worked in your present job for your previous employer?
O Less than 6 months O 6-12 months O Enter years

3. Merger/acquisition has increased the Workplace stress

O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

Measuring Stress

During the past year/month/week how often did you experience the following :

1. I was disturbed by the changes at the work place post the M&A

O Rarely O Occasionally O Sometimes O Fairly Often O Very Often

2. My eating habits have altered.

O Rarely O Occasionally O Sometimes O Fairly Often O Very Often

3. I felt that I was not given importance or credit for my work post M&A

O Rarely O Occasionally O Sometimes O Fairly Often O Very Often

4. I wasn’t able to concentrate on my work

O Rarely O Occasionally O Sometimes O Fairly Often O Very Often

5. I was thinking about work even in the company of family members.

O Rarely O Occasionally O Sometimes O Fairly Often O Very Often
6. My sleep pattern was affected post M&A

O Rarely O Occasionally O Sometimes O Fairly Often O Very Often

7. I was not comfortable interacting with the new employees

O Rarely O Occasionally O Sometimes O Fairly Often O Very Often

8. Post M&A, I felt
Rarely Occasionally Sometimes Fairly Often Very often

Sad

Lonely

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 Insecure

Low

Reasons for stress:

Job Security Rarely Occasionally Sometimes Fairly Often Very Often

Adapting to
change in
work culture
New
responsibilities
Work load
Little / No
appreciation of
work
Inability to
voice opinions
Opening up to
new co-
workers
Grapevine at
work

Effects of Stress:

1. I have been away from work more often post M&A.

O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

2. I work less in the office post M&A

O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

3. I have been making frequent mistakes in the jobs assigned to me post M&A

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 O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

4. I find it difficult to trust my new colleagues.

O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

5. I do not feel motivated in my job post M&A

O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree
6. I feel that my colleagues dislike me.
O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

7. I do not spend enough time with my family members post M&A

O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

8. I feel the stress post M&A has caused many of my close friends to quit the job.
O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree
Steps taken by Organisation:

1. HR communicated the changes post M&A to all employees adequately

O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

2. A competent transition team was formed to ensure smooth transition into new roles
O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

3. There were sufficient training sessions to acquaint employees with new processes

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 O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

4. Regular staff meetings are held to help employees discuss issues arising post M&A
O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

5. Focus groups were formed to discuss specific issues plaguing employees post M&A
O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

6. HR conducted counselling sessions for employees who were troubled about changes
post M&A
O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

7. Family assistance was provided to employees whose families were affected post
M&A
O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree
8. Innovative practices like internal blogging were encouraged to help employees cope
with the new environment
O Strongly agree O Agree O Neither agree nor disagree
O Disagree O Strongly Disagree

9. Mention any other initiative taken by the organisation to help employees deal with the
M&A

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