HR Issues in Mergers & Acquisitions

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INTRODUCTION TO MERGERS AND ACQUISITIONS
INTRODUCTION TO MERGERS AND ACQUISITIONS

All our daily newspapers are filled with cases of mergers, acquisitions, spin-offs, tender offers, & other forms of corporate restructuring. No firm is regarded safe from a takeover possibility. On the more positive side Mergers & Acquisitions may be critical for the healthy expansion and growth of the firm. Successful entry into new product and geographical markets may require Mergers & Acquisitions at some stage in the firm's development. Successful competition in international markets may depend on capabilities obtained in a timely and efficient fashion through Mergers & Acquisition's.
MERGER
Merger is defined as combination of two or more companies into a single company where one survives and the others lose their corporate existence. In other words, two entities merge together to form a single entity having combined organizational norms and culture. The survivor acquires all the assets as well as liabilities of the merged company or companies. Generally, the surviving company is the buyer, which retains its identity, and the extinguished company is the seller.
Merger is also defined as amalgamation. Merger is the fusion of two or more existing companies. All assets, liabilities and the stock of one company is transferred to Transferee Company in consideration of payment in the form of : Equity shares in the transferee company Debentures in the transferee company Cash A mix of the above modes
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ACQUISITION
Acquisition in general sense is acquiring the ownership in the property. In the context of business combinations, an acquisition is the purchase by one company of a controlling interest in the share capital of another existing company.
METHODS OF ACQUISITION
Methods of Acquisition
Agreement With The Persons Holding Majority Interest In The Company Management
Purchase Of Shares In Open Market
Purchase Of New Shares By Private Treaty
Acquisition Of Share Capital Through The Following Forms Of Consideration
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The Possible Reasons for An Acquisition:
Procurement of Supplies:
1. To safeguard the source of supplies of raw materials or intermediary product; 2. To obtain economies of purchase in the form of discount, savings in transportation costs, overhead costs in buying department, etc.; 3. To share the benefits of suppliers economies by standardizing the materials.
Revamping Production Facilities:

1. To achieve economies of scale by amalgamating production facilities through more intensive utilization of plant and resources; 2. To obtain improved production technology and know-how from the offeree company
Market Expansion and Strategy:

1. To eliminate competition and protect existing market; 2. To obtain new product for diversification or substitution of existing products and to enhance the product range; to reduce advertising cost and improve public image of the offeree company;
Financial Strength:
1. To improve liquidity and have direct access to cash resource; 2. To dispose of surplus and outdated assets for cash out of combined enterprise; 3. To avail tax benefits and to improve EPS (Earning Per Share).
General Gains:
1. To improve its own image and attract superior managerial talents to manage its affairs; TYPES OF MERGERS 2. To offer better satisfaction to consumers or users of the product.
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TYPES OF MERGERS
Merger or acquisition depends upon the purpose of the offeror company it wants to achieve. Based on the offerors objectives profile, combinations could be vertical, horizontal, circular and conglomeratic as precisely described below with reference to the purpose in view of the offeror company.
Types Of Mergers
Vertical
Horizontal
Circular
Conglomerate
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A. Vertical Combination
A company would like to takeover another company or seek its merger with that company to expand espousing backward integration to assimilate the resources of supply and forward integration towards market outlets. The acquiring company through merger of another unit attempts on reduction of inventories of raw material and finished goods, implements its production plans as per the objectives and economizes on working capital investments. In other words, in vertical combinations, the merging undertaking would be either a supplier or a buyer using its product as intermediary material for final production.
B. Horizontal Combination
It is a merger of two competing firms which are at the same stage of industrial process. The acquiring firm belongs to the same industry as the target company. The main purpose of such mergers is to obtain economies of scale in production by eliminating duplication of facilities and the operations and broadening the product line, reduction in investment in working capital, elimination in competition concentration in product, reduction in advertising costs, increase in market segments and exercise better control on market.
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C. Circular Combination
Companies producing distinct products seek amalgamation to share common distribution and research facilities to obtain economies by elimination of cost on duplication and promoting market enlargement. The acquiring company obtains benefits in the form of economies of resource sharing and diversification.
D. Conglomerate Combination
It is amalgamation of two companies engaged in unrelated industries. The basic purpose of such amalgamations remains utilization of financial resources and enlarges debt capacity through re-organizing their financial structure so as to service the shareholders by increased leveraging and Earning Per Share, lowering average cost of capital and thereby raising present worth of the outstanding shares. Merger enhances the overall stability of the acquirer company and creates balance in the companys total portfolio of diverse products and production processes.
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2 . INTRODUCTION TO HUMAN RESOURCE MANAGEMENT
Human Resource Management (HRM) is a strategic and coherent approach to the management of an organizations most valued assets: the people working there who individually and collectively contribute to the achievement of its objectives.
Features of Human Resource Management

The treatment of people as assets rather than costs they are regarded as a source of competitive advantage and as human capital to be invested in through the provision of learning and development opportunities; An approach to employee relations that is unitarist rather than plutarist it is believed that employees share same interests as employers (the principle of mutuality) rather than that these interests will not necessarily coincide.
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Human Capital Defined

Human capital represents the human factor in the organization; the combined intelligence, skills and expertise that gives the organization its distinctive character. The human elements of the organization are those that are capable of learning, changing, innovating and providing the creative thrust which if properly motivated can ensure the long term survival of the organization.
Enhancing Motivation, Commitment and Job Engagement
An important goal of the HR function is to help with the enhancement of motivation, commitment and job engagement as a means of improving performance and retaining talented people. Motivation is the process of encouraging people to apply their efforts and abilities in ways that will further the attainment of organizations goals and values of the organizations.
Commitment is about identification with the goals and values of the organization, a desire to belong to the organization and a willingness to display effort on its behalf. Job Engagement takes place when people are interested in and thus motivated and enthused by their work.
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However, the challenges do not cease for the HRM. Modern organizations can survive in the dynamic, competitive environment of today only if they capitalize on the full potential of each employee. The recruitment and selection of the best employees is a very difficult obligation. Even companies that are voted in the top-ten places to work at, often endure long periods of hard work to realize that human element is all an organization should care about. Therefore, the use of proper Human Resources techniques is a really powerful way for organizations to overcome these challenges, and to improve not only their quantitative goals but also their organizational culture, and their qualitative, cognitive aspects.
Model of the Link between Human Resource Management and Performance Source : Effective People Management Initial findings of the future of work survey, London
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3 . HUMAN RESOURCE ISSUES IN MERGER AND ACQUISITIONS
When a merger is announced, employees of the company become worried about issues like job security, role conflicts, interpersonal conflicts, cultural adaptations, etc. Such factors hold the power to make or break the deal. It is believed that most of the overseas mergers fail because of people centric issues as the management fails to deal with them aptly. It becomes the responsibility of HR personnel of the organization to take care of such issues before and after the amalgamations takes place.
Prevalent HR Concerns
The success of M&A always depends on the how well the HR issues are managed after the merger takes place. There are also some major human resource concerns that need to be dealt with before the merger actually takes place. HR issues that form greatest challenge to the success of a M&A deal include the following:
Employee Communication
D o v e t a ili n g E m p lo y e e s
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Prevalent HR Concerns Differences In Organizational Structures
C u lt u r a lIn t e g r a t io n
Prevalent Human Resource Concerns
1. Dovetailing Employees
The uncertainties of M&As shift the focus of employees from productive work to issues related to interpersonal conflicts, layoffs, career growth with the acquirer company, compensation, etc. mergers involve downsizing, hence the first thing that comes to the minds of employees is related to their job security. Mergers also lead to changes in the well defined career paths of employees, as defined by the acquired company. Due to these reasons, employees find themselves in a completely different situation with changes in job profiles and work teams. This may have a negative impact on the performance of the employees.
2. Cultural Integration
An organization's culture defines its managerial style, structure and organizational practices. Each company has its own set of values which may conflict with those of the acquired company. The employees may not be able to accommodate themselves in a new culture and thus may lead to cultural shock. Inability to adapt to a new culture increases stress levels among employees and results in low job performance. The need therefore is to follow a structured approach in dealing with cultural differences.
3. Employee Communication
Whenever there is news of any merger in an organization, anxiety prevails among the employees. This atmosphere of apprehensions leads to company wide rumors. The employees lose faith in their organization and tend to become de-motivated. To free employees from such fears, proper communication has to take place between the management and the employees. Moreover apprehensions about the new company also create anxiety among employees. If they fail to adapt to the new culture they face high levels of stress and thus end up leaving the organization.
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4. Differences In Organizational Structures

Another problem is the difference between the organizational structures of the companies. Since the organizational structures are different, differences in compensation packages, and designations can take place. The company has to maintain employees at equal levels. Unable to do so, employees can feel dissatisfied. Human Resource Department should also concentrate on areas like Team Building, Downsizing and Redeployment, as well as Resistance from Labour
Corporate mergers fail at alarming rates. What seem to be soft issues, like aligning corporate cultures, can sink a promising merger just as thoroughly as any financial tussle. HR managers should be prepared to take the initiative at the earliest discussions in proposed mergers to minimize the risk of failure
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INTERVENTION OF HUMAN RESOURCE DEPARTMENT
The success of a merger and acquisition depends on how well an organization deals with issues related to its people and cultural integration. The HR department of an organization acts as a strategic partner. So formulating strategies while ignoring the employees can be critical for the organization. The role of HR becomes strategic when it takes decisions about what kind of people, capability and commitment the company would want after the deal. To efficiently handle this phase many companies undertake feasibility studies based on which it decides what part of the workforce is to be retained.
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3 . 1 . INDUSTRIAL ISSUES IN MERGERS AND ACQUISITONS
A great many articles and studies on mergers dwell on why mergers fail to achieve their potential. A common theme is that people-related issues were not addressed early enough or effectively enough. A survey of 500 companies found that the top reasons why mergers failed were not financial issues, but people-related issues: incompatible cultures, inability to manage the acquired company, inability to implement change, synergy overestimated, failure to forecast foreseeable events, or clashing management styles or egos.
Mergers often go right in part because leaders worked effectively with senior management to ensure that mergers and acquisitions are well conceived, planned, and executed with regard to people. As leaders, communication of a clear business rationale, attention to people-related risks in the deal, and effective integration planning can be ensured. One can ensure effective implementation of the merger by integrating and retaining vital talent, maintaining commitment and performance through the transition, and aligning peoplerelated systems, processes, and organization with the new entitys strategic direction. Some issues that needs to be attended to are :
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Does the Merger Make Sense

Stating that the merger will enable us to become more competitive globally or to become the technology leader in our industry says very little to employees. Beyond increased shareholder value, an acquiring company should define specific benefits expected and how they will be realized. People may not always agree with the merger rationale, but their understanding of it guides decisions and actions, motivates them to devote the energy and time to changes, sustains their performance and retention during the merger, and develops an enthusiasm for a better future
The People-Related Issues

Early in the merger process, one can identify people-related issues by raising questions through due diligence and by beginning integration planning even before the deal is done.
The People Related Issues
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Integrating And Retaining Talent

A company needs to pay close attention to its key talent to make sure they will stay through the transition and ideally five or ten years beyond. When a company is acquired, they arent simply acquiring its current products; but acquiring the next generation of products through its people. Capable leadership is vital for the success of a merger. The selection process should be based on objective assessment of skills and competencies, not on political compromise.
Aligning People-Related Systems, Processes, And Organization

Because much of the value of a merger lies in achieving synergies, it is vital to determine the extent to which the organizations will be integrated and how this integration will be achieved. To build a truly high-performing organization, it is necessary to align the organization structure, business processes, people and culture with strategy.
Maintaining Commitment And Performance During The Merger Process

While communications is critical in any business change, mergers require extraordinarily effective communications and change management. Managers and employees in both the acquiring and acquired organizations want to know how the merger will affect their jobs, their pay, and their careers One can ensure that communications is interactive. Listening to the merger-related questions and concerns of employees allows management to tailor communications to needs.
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3 . 2 . LEGAL ISSUES IN MERGERS AND ACQUISITIONS
Nature of Sale
As an HR professional, the very first thing to consider during the sale of a business is whether the transaction gives rise to a change of employer. If a new major shareholder buys a publicly listed companys shares, there is no change of employer and no transmission of business. However, as experts points out, share sales, including private equity buy - outs can result in post-sale restructuring that affects employees. A change of employer generally occurs where there has been a sale of assets. Depending on how the deal is structured, employees may be offered new employment with the buyer. This is especially the case in the current tight labour market, where purchasers want to retain key staff.
Common Issues
Experts work daily on many of the common employment issues that arise during acquisitions and mergers. The key issue in any asset sale is whether everybody is going to be offered a position with the buyer, and what terms they are going to be offered. They can be the same, equivalent or different, but it can be a requirement of the deal that conditions must be overall no less favorable
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Experts say that purchasers have to be careful about conditions of key employees they want to retain. For example, there may be a restraint of employment clause in their contract, preventing them from working for a competitor for a period of time after leaving the company. That restraint may be unrelated to the new business. It has been pointed out that in some agreements, the sale of a business can be a technical trigger for redundancy payments. These technical triggers can also happen in contracts at the top end, bringing forward long-term incentives. During any pre-sale due diligence, employment terms set out in contracts, industrial instruments and policies need to be reviewed. Also, any immigration issues, such as employer-sponsored visas, should be noted, as they are not automatically transferable and must be reapplied for by the purchaser. Employees also have to be made aware of any new default superannuation fund and the Human Resource Department has to understand its notification requirements One of the obligations of HR during a sale is to retain key employees, especially during the transition phase. Confidentiality and retention agreements should be negotiated with these people. Clear communication with employees and consistency of message during the process is important.
Prevention Is Better Than Cure

It is said that the key to a smooth transition of employees from the vendor to the purchaser is most likely when Human Resource issues are considered from the outset. The real problems occur if no one considers the employment law issues until late in the transaction. HR issues are a part of the commercial considerations of a transaction. You have to know what you want to achieve from an HR perspective and structure the transaction accordingly. It is important for HR to ensure that key employees are on board and that there is an appropriate communication system and consistency in the messages given to staff.
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3 . 3 . EMOTIONAL AND PSYCHOLOGICAL ISSUES IN MERGERS AND ACQUISITIONS
Much has been written recently in the financial press and various business school publications on what makes a merger or acquisition a success or failure. One of the most striking things however, seems to be the lack of attention paid to the emotional reactions of individuals, groups and indeed whole corporations to this process, which is now almost an every day occurrence.
Once a merger or acquisition has been announced the emotional brain takes over, it acts more quickly than the rational mind and people start to behave in all sorts of irrational or illogical ways.
Daniel Goleman in his book Emotional Intelligence gives some solid information on the different types of emotions and how they may be experienced and how our perceptions can colour our vision in times of distress.
1. ON A HIGH
2 . FOG
4. SOUP
3. SHARKS
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"On a high" - I might get a better job, Im for the high jump (Ill get fired). Individuals will respond differently depending on their personal history and level of optimism about the process. "Fog" - Im afraid, I cant see my way through, Am I the only one with this feeling?, I cant see how others are reacting and Im alone with my fear, Dare I say how I feel? "Sharks" - Once the two companies are brought together as part of a merger (very few are actually mergers) usually one culture dominates. Then the company which is not the winner often feels that they are in shark-infested water and need to be ultra-cautious about what is said and to whom (paranoia). This paranoia is, of course, based on reality as they can no longer rely on their informal network (the way things get done around here) for support. New rules now apply and they dont know them. "Soup" - This is more positive than might appear. Once some informal communication has begun then people begin to realize that they are often in the same place. Even people in the acquiring culture are fearful of change (most of us are at some level) and honest dialogue can begin to take place.
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Psychology in Mergers and Acquisitions

Commercially focused occupational psychologists studies on What Effects the Ensuing Uncertainty Has on the People Caught up in It, and moreover, How Can The Negative Effects In Business Be Minimized. There can be periods of mass uncertainty, where the acquirer is appraising their purchase, resulting in a state of limbo for job incumbents. Organizational causes of stress for the individual include overwork, feeling of being undervalued, poor communications, job ambiguity and conflict with colleagues. Companies and HR departments should try and understand what people are feeling and thus try to avoid the pitfalls, preferably learning from others mistakes before they are repeated.
There exists little research on how the people involved are affected by the uncertainty of a merger or acquisition brings. This may result in the same mistakes being repeated if useful reference material is hard to find. One can look to group and social psychology literature to try and understand what those people affected may be feeling and suggest what the best way forward might be to bring about the desired collaborative relationship. These can include:
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Identifying What Can Bring The Two Groups Together

It has been found that even when two quite different groups are brought together, they assimilate much better when they share a common goal. Identifying this as early as possible and communicating this shared goal effectively is the key.
Creating Clear Boundaries

Is this a merger or an acquisition? Is my boss still going to be my boss? It is important to provide structure to decision making processes and interfaces between the two entities. Firstly knowing how the two entities are expected to interact, and then communicating this to staff will help to alleviate any ambiguity and its associated anxiety.
Establishing Forums to Review The New Relationship

The quality of the relationship between the two entities must be assessed via an agreed forum. Are strategic plans working effectively, do they need adjusting or are they working as planned. The measurable outcome will be the bottom line of the new entity, but problems in profitability are likely to have reared their head much earlier in the quality of the business relationship. Only by reviewing this partnership can the early warning signals be detected and used to the companys benefit. Once issues are brought to the surface then it is important that the structure is in place to decide what the next step should be.
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3 . 4 . CULTURAL ISSUES IN MERGERS AND ACQUISITIONS ORGANIZATIONAL CULTURE
Organizational or corporate culture is the pattern of values, norms, beliefs, attitudes and assumptions that may not have been articulated but the ways in which people behave and things get done. Values refer to what is believed to be important about how people and the organizations behave. Norms are the unwritten rules of behavior. The definition emphasizes that organizational culture is concerned with abstractions such as values and norms which pervade the whole or part of an organization.
They may not be defined, discussed or even noticed. Put another way, culture can be regarded as a code word for the subjective side of organizational life (Meyerson and Martin, 1987). Nevertheless, culture can have a significant influence on peoples behavior
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Culture represents the social glue and generates a we feeling, thus counteracting processes of differentiations which are an unavoidable part of organizational life. Organizational culture offers a shared system of meanings which is the basis for communications and mutual understanding. If these functions are not fulfilled in a satisfactory way, culture may significantly reduce the efficiency of an organization.
DEVELOPING AN ORGANISATIONAL CULTURE

The values and norms that are the basis of culture are formed in four ways:
Developing Organizational Culture First, culture is formed by the leaders in the organization, especially those who have shaped it in the past. Second, culture is formed around critical incidents important events from which lessons are leant about desirable or undesirable behaviours. Third, culture develops from the need to maintain effective working relationships among organization members, and this establishes values and expectations. Finally culture is influenced by the organizations environment. P a g e | 24
CULTURAL ISSUES DURING MERGERS AND ACQUISITIONS
Culture has emerged as one of the dominant barriers to effective integrations. In one study, culture was found to be the cause of 30% of failed integrations. In another study, 55% of respondents rated incompatible cultures as a major obstacle to integration Companies with different cultures often find it difficult, if not impossible, to make good decisions quickly or to operate effectively. For the purpose of the corporate Merger and Acquisition decisions, culture is the longstanding values and unwritten rules that shape employee attitudes and behaviors. If people acted solely on the basis of rational calculations mergers would be effective or not based on the soundness of their economic underpinnings. But participants in mergers are human and driven both by their shared culture and individual personalities. Cultural influences during an integration effort have the potential to be broad and far reaching.
Broken into these dimensions, its easy to see the role culture plays in issues that quickly affect the bottom line and integrations that fail to achieve desired synergies.
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Culture affects Decision-making style (for example: consensus contrasted with top-down)
Resulting in Different decision-making styles can lead to slow decision-making, failure to make decisions, or failure to implement decisions all during a time when rapid decision-making is imperative.
Leadership style (for example: dictatorial or consultative, clear or diffuse)
A shift in leadership style can generate turnover among employees who object to the change. This is especially true for top talent, who are usually the most mobile employees. Loss of top talent can quickly undermine value in integration by draining intellectual capital and market contacts.
Ability to change (willingness to risk new things, compared with focus on maintaining current state and meeting current goals) Differing attitudes and aptitudes toward change can cause unwillingness, resistance, or passivity when it comes to implementation of new strategies and working through the inevitable difficulties of creating a new company.
How people work together(for example: based on formal structure and role definitions or based on informal relationships
If the values and behaviors of newly merged or newly connected functional units are inconsistent, then processes and handoffs may break down with each units employees becoming frustrated by their colleagues failure to understand or even recognize how work should be done.
Beliefs regarding personal success (for example; companies that focus on individual stars, or on teamwork) If people who believe they have to achieve goals as a team integrate with people whose notion of success emphasizes individual performance, the resulting situation is often characterized by personal dislike and lack of support for getting the job done
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The DaimlerChrysler Merger
When the German prestige car manufacturer Daimler-Benz merged with US-based Chrysler Corporation in 1998, the deal was acclaimed by analysts as a strategic win-win. Described as a merger of equals, the combined entity had revenues of $155.3 billion and sold more than 4 million cars and trucks. It ranked third in the world in terms of revenues, market capitalization and earnings, after GM and Ford. But two short years later, DaimlerChrysler reported quarter-on-quarter losses of more than half a billion dollars. In 2001, 26,000 job cuts were announced at its Chrysler division. And in 2006, the combined organization reported a loss of 12 million euros. In May 2007, Daimler sold Chrysler for 3.74 billion to private equity firm Cerberus Capital. Without Chrysler, Daimler AG reported profits in its fourth-quarter results for 2007. What happened to erode value so significantly? Why was the promised value never created in this transaction? It is well-documented that misaligned cultures and management styles obstructed the realization of synergies. At the leadership level, there were issues of transparency and follow-through. Daimler-Benzs CEO, Jurgen Schrempp, initially proclaimed the merger as a merger of equals. In 2000, however, he was quoted in the financial press as saying, The merger of equals statement was necessary to earn the support of Chryslers workers and the American public, but it was never reality. At the level of organizational practices and ways of getting work done, the two organizations were fundamentally different. Daimler-Benz was known for its methodical, centralized decision making and high regard for tradition and hierarchy; its philosophy was quality at any cost. Chrysler, by contrast, reputedly had a risk-taking, assertive cowboy style that encouraged creativity, flexibility and adaptability, and valued efficiency, equality and empowerment; its philosophy was about producing costefficient and well-priced vehicles. These differences, as well as key leadership losses at Chrysler and the installation of a German management team in late 2000, accelerated the destruction of value and fueled the organizations losses.
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Acquisition Strategy of Cisco
The acquisition strategy of Cisco is an excellent example of how thorough planning can help in successful acquisitions. After experiencing some failures in acquiring companies, Cisco devised a three step process of acquisition. This involved, analyzing the benefits of acquiring, understanding how the two organizations will fit together how the employees from the organization can match with Cisco culture and then the integration process. In the evaluation process, Cisco looked whether there is compatibility in terms of long term goals of the organization, work culture, geographical proximity etc. For example Cisco believes in an organizational culture which is risk taking and adventurous. If this is lacking in the working style of the target company, Cisco is not convinced about the acquisition. No forced acquisitions are done and the critical element is in convincing the various stakeholders of the target company about the future benefits.
The company insists on no layoffs and job security is guaranteed to all the employees of the acquired company. The acquisition team of Cisco evaluates the working style of the management of the target company, the caliber of the employees, the technology systems and the relationship style with the employees. Once the acquisition team is convinced, an integration strategy is rolled out. A top level integration team visits the target company and gives clear cut information regarding Cisco and the future roles of the employees of the acquired firm. After the acquisition, employees of the acquired firm are given 30 days orientation training to fit into the new organizational environment. The planned process of communication and integration has resulted in high rate of success in acquisitions for Cisco.
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Addressing Culture When Two Companies Integrate

A rigorous program with clearly stated objectives should be put in place to address cultural integration. Too often, culture is presented as a wooly and soft topic. When that happens, executives tend to slight the issue. This can generally be avoided by linking the cultural program to measurable business results during change management
Make Culture a Major Component of the Change

Often the main change management task during integration is providing
communications. This focus may adversely impact the role of change management, if communications becomes reporting the decisions of others, belatedly, rather than driving actual decisions. When culture is recognized as a major challenge and is the responsibility of the change management team to address, then this team can assume an essential role in achieving integration goals. However, the change management team needs resources whose numbers and caliber are consistent with enacting a critical role.
Identify Who Owns Corporate Culture

Choose owners from both companies to the integration to facilitate representation of all views, even in a takeover. These owners typically will be senior Human Resource or Organizational Development practitioners.
Focus On the Tangible and the Measurable

The Integration Steering Committee should reject soft, vague, and poorly defined presentations of culture. Instead, culture owners should be required to discuss issues that are specific, well defined, and supported by specific examples that can be tied to business results.
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Consider the Strengths of Both Existing Cultures

When two companies merge, the assumption is often made that they should take the best of each companys culture and integrate them, much like creating a Best Of CD from a bands previous recordings. We can only wish that mixing cultures were as simple as sequencing tracks on a mix CD! Corporate strengths are sometimes incompatible. One means to achieve this is to retain separate core capabilities where possible. Where the cultures are different, there should be an assessment of whether the elements can be integrated. When the integration is problematic, choices to act should focus on the relationship between cultural assumptions and business results. Only address those cultural issues that are critical to the business.
Put People with Culture Change Knowledge

The organizational model defines how a merged entity will go to market and how it will integrate its back office functions. Where there are business-critical integration points (for example, sales force integration, hand-offs from R&D to manufacturing or from manufacturing to field support) and a short time available for integration, it is important to focus on the flow of work: how objects or information are passed from group to group or whether information is shared effectively.
The interfaces have to be designed, improved, or fixed so that they help create business value. If employees start to act in ways that lead to achieving desired goals, that can create trust and mutual respect among employees who have not worked together before. Underlying cultural beliefs should then tend to combine around effective and enjoyable shared behaviors.
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Implement A Decision-Making Process That Is Not Hampered By Cultural Differences.

Decision-making style is often deeply ingrained in a companys culture. However, few things have a greater impact on integration effectiveness than the ability to make speedy decisions. Customer and employee loyalty can erode quickly if a company is perceived as unable to make decisions. Leaders of integrating companies find themselves thrust into a situation where they have to make decisions quickly. The leaders of the integration project must address this with the support of the culture team by
Identifying decision-makers for each area of the integration. Understanding the decision-making style of each company both in terms of what the style is and the assumptions, processes and structures that support that style. Use this as a basis for assisting decision makers in moving beyond their assumptions to a point where they can act effectively. Communicating expectations to those decision-makers, including the deadlines when decisions are required. The demand for speed can be used to force changes in how decisions are made.
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Culture must be a focus in efforts to integrate companies, because when left to itself culture will often undermine value creation. Efforts to address culture should be based on the recognition that culture is both powerful and implicit, that employees are unlikely to change their cultural beliefs in response to exhortations to adopt new cultural values, and that culture can be rigorously linked to behaviors that affect business value.
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Human Capital Due Diligence
Human Due Diligence is a private capital equity solution that gives you powerful competitive insight into the people that will run the organization you are seeking to acquire. Human due diligence is also an in-depth, comprehensive analysis of management capability and future potential.
Human due diligence lays the groundwork for smooth integration. Done early enough, it also helps acquirers decide whether to embrace or kill a deal and determine the price they are willing to pay. In hostile situations, its obviously more difficult to conduct due diligence. But there is still a certain amount of human due diligence that companies can and must do to reduce the inevitable fallout from the acquisition process and smooth the integration.
Due diligence is the thorough investigation an acquirer performs prior to purchasing a target company. Insightful and material due diligence prior to consummating the deal greatly increases the likelihood that the acquirer will achieve the expected strategic goals and synergies.
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Human capital due diligence is an important piece of the overall due diligence process, yet for some reason it is too often underestimated or undervalued. Thorough human capital due diligence is much more than just benefits and compensation analysis.
The Four Key Domains of Human Capital Due Diligence Human capital due diligence is a critical results factor when it comes to M&A. Human capital due diligence can significantly increase the likelihood that a deal will meet its objectives. As human capital practitioners, we must bring our depth of knowledge, breadth of experience, and utmost integrity so that we provide the highest level of due diligence service to our clients.
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4 . HUMAN RESOURCE PRE DURING AFTER THE MERGER OR ACQUISITION

Deals fail not because somebody got the math wrong. Deals can go sideways because of miscues regarding the human element or the cultural attributes. HR needs to be at the table from the very start for this reason. The line executives who put these deals together understand the business proposition but often arent trained to go more deeply into what the Human Resource ramifications are. It is advisable for HR to plan well ahead of time, in order to address issues before the transaction takes place. Workplace lawyers should work with commercial and corporate lawyers to structure the deal. Human Resource needs to take a lead role in pre - merger and post-merger communication. The new structure must be well understood by the leaders, with clear, quick and accurate communication about how the transaction will impact every persons role. What are the people-related obstacles? What are the human pieces? How close are the cultures to each other? What are the expectations of the leadership? What do policies and programs that are in place tell you about the company? These are the issues that the HR professionals need to address to make sure that deals do not derail. If HR people are not involved in this part of the transaction, they will not have the credibility or knowledge to contribute as the company moves further into the deal. The first role of the HR professional is as a Business Member of An Executive Team. It is trying to understand what we are buying, asking if we know what we are buying, is it a good fit for the strategies of the business, and are we doing it for the right reasons?
The second is getting beneath the organizational levels to see the show stoppers lurking in the woods: things that might be problems down the roadcompensation structures, benefit issues, dormant litigation issues, and true identification of synergies.
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Example 1 : Kraft bought a little coffee company in Canada. It was a unique West Coast coffee company that had its own culture and was very successful. Kraft was buying a small company. Kraft is a big company and was going to basically take this smaller one into its systems. The upfront frankness helped people understand that Kraft was going to buy their brands, then take them into its systems, infrastructure, and culture. Kraft management did not paint a false picture of what was going to remain true in that company. It turned out to be a very successful acquisition, whereas, in the past, Kraft might have out of the goodness of its heart said that it would preserve things down the road. But that is not a smart thing to do in the end.
Example 2 : A consultancy was called in to facilitate a merger for a company from the consumerpackaging world. The company that initiated the merger was a strong, forceful leader. In embarking upon the process of aligning its senior team with that of the smaller company, it became apparent that the members of the smaller companys team did not feel comfortable expressing their viewpoint or raising issues with the bigger companys team. What ended up happening was that a key contingent of the smaller company was going underground. They felt they were not able to address these key issues. If key people are not able to talk openly, first they go underground, then they decide to leave. You do not want this to happen. So the lesson learned is that if there is resistance in the room bring it into the open because, if you dont, the issue will eventually come back to haunt you.
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Many a times, on paper and from a financial standpoint, the mergers and acquisitions look a perfect deal. But when a glance is made at some of the people issues inside the companythe culture, work practices, employee programs, labor relations, pension plans, and policiesit is realized that it is not a good match. Culturally and operationally the differences between two companies are sometimes too great to overcome. It makes it very difficult to make changes and get the required operational flexibility, given the differences between the two companies. If HR is absent at the table, the deal would most probably be made a reality, but then prove to be a failure.
HR ROLE PRE DURING AFTER THE MERGER OR ACQUISITION
Areas Where HRD Can Contribute To M&A Change
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Mergers present opportunities and hazards for both the company and the Human Resource Employees. The HR manager has an opportunity to influence events so that each company comes out. Before, during, and after the merger, HR Department may be responsible for assuring that cultural issues do not derail integration; for increasing innovation; for keeping communication going in all directions (upwards, downwards, across departments, across organizations); and for lessening the impact on those who are reduced and on the survivors. Even at the highest level of the company, HR can have a role. The new leadership team will need to work together on a daily basis, despite cultural and personality differences, power issues, and other barriers. HR can act as a facilitator, and also as a coach to individual executives. Personal and team assessments can be helpful in enabling team members to work together constructively.
Opportunities for Human Resource Department
Mergers and acquisitions are often planned and executed based on perceived cost savings or market synergies; rarely are the people and cultural issues considered. Yet, it is the people who decide whether an acquisition or merger works. The opportunity for HR lies in the fact that customer and employee reactions determine whether the newly combined company will sink or swim...
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HUMAN RESOURCE DEPARTMENTS ROLE BEFORE THE MERGER

Before the merger takes place, the Human Resource Department of both organizations - at least, of the dominant firm - should have a strategy mapped out, including communications to employees and customers, where layoffs will take place (if any do), and how the cultures should be merged. A SWOT (strengths, weaknesses, opportunities, and threats) analysis should be done for the combined company. If possible, a brief culture survey should be undertaken in both companies to discover what the cultural differences are. If the real purpose of the merger is to acquire another companys assets, in terms of a particular product or brand, its factories or patents, etc., that should be acknowledged and dealt with up front. If employees are fooled at first by pleasant words, they will react more strongly when those words become taunts. Finally, before the merger or acquisition takes place, the Human Resource Department should consider the non-financial issues. Will people in the two companies be able to work together? Will acquiring a company, or merging with it, destroy the properties or drive away the talent that made it worth having? Can a simple partnership, alliance, or even stock ownership without integration provide more benefits than combining the two companies? The HR manager may need to raise the issue of culture - how people work, how they think, what they value, and, of some importance, how they view the other organization. If the acquired (or acquiring) organization is viewed with disdain, these issues must be addressed up front. Some cultural differences are obvious (e.g. one culture values teams and bottom-up innovation, the other favors command-and-control tactics) but others may be subtle (e.g. how and whether individuals and teams are rewarded for innovations). Likewise, severe cultural differences must be addressed.
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The HR leadership may, because of its skill and background, be placed in the uncomfortable but important position of persuading corporate leaders to admit the truth to themselves, and to employees.
HR AS AN INTERNAL CONSULTING GROUP
HR is often one of a few units which can work as an internal consulting group during a merger or takeover, along with quality or process engineering teams. In this light, HR managers may be able to use management coaching skills to help managers and executives to communicate effectively and completely, to address power issues, and to deal with cultural issues. In some cases, HR may take a more active role; in others, HR should act as a coach.
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KEY ISSUES IN MERGERS
Communication
As people look inwards to try to find their place in the merged company and attempt to see their future in it - or outside it - productivity drops. The grapevine can become a major source of headaches. Constant, consistent, and honest communication from leaders and HR is essential.
Power and Conflict

It is essential to bring confiict out to the surface and deal with power issues honestly. If one group is obviously in charge, that should be admitted early on so people dont waste time with second-guessing. Often, people get wrapped up in turf wars which are destructive to both sides, rather than trying to figure out roles for both sides and have a win-win situation.
Culture
Organizational culture is an organizations shared values, beliefs, and preferred ways to behave - is a key to success, and though many talk about it, few seem to have the skills to grapple with culture and work with both organizations to assure a good fit. Many organizations use a brief cultural fit survey to assist them during mergers.
Operations
Ideally, processes can be examined to see where true synergies lie. In many mergers and takeovers, power relationships determine operational changes, rather than actual efficiencies or quality concerns. By making changes with facilitated cross-platform teams, HR can help to ensure that the best of the two organizations are preserved.
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WRAPPING IT UP
By knowing what makes mergers succeed, keeping an eye on the human issues as well as the financials, and using appropriate tools, companies can make mergers work. The job of an HR manager is to quickly develop a strategy for helping the company to achieve the synergies it needs and develop HRs game plan for leading the process. It helps to have achievable goals, with stretch targets, and concrete milestones (supported by good, valid measures) for implementation. The most important step may be to sell the process - because the best change plans are useless unless they are implemented.
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5 . USING THE PERFORMANCE PRISM TO BOOST THE SUCCESS OF MERGERS & ACQUISITIONS
According to a long parade of authoritative studies, mergers and acquisitions have no better than a 50-50 chance of creating value for the acquirer. Mergers go sour for many reasons: poor strategic concepts, personality problems at the top, cultural differences, poor employee morale and incompatible information systems. But the most ubiquitous cause is the failure by management to successfully integrate the two entities. In the maelstrom of deal-making, executives invariably fail to install effective post-merger integration tracking and monitoring processes.
Here, the Performance Prism, helps to extract maximum value from performance management systems. While the commonly used (and abused) "balanced scorecard" approach addresses only the needs of two stakeholders, investors and customers, the Performance Prism goes further and considers employees, suppliers, intermediaries, regulators and communities. Uniquely, it also addresses both stakeholder satisfaction and contribution.
Tracking all the elements of post-merger integration at the appropriate level of detail is critical. Comprehensiveness is particularly important in merger situations, where integration of two businesses often involves complex trade-offs and specific interdependencies. The Performance Prism prompts managers' thinking, ensuring attention to all the key post merger integration success factors and potential pitfalls.
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The Performance Prism in Practice
Each of the Performance Prism's five interrelated facets represents a key area that determines success. The weight given to each will depend on the particular strategic objectives of the deal: e.g. cost reduction, brand enhancement, research synergies and so on.
The fundamental questions to ask are: Who are our key stakeholders and what do they want and need? What strategies are we pursuing to satisfy these wants and needs? What processes do we need to put in place to achieve these strategies? What capabilities are necessary to operate and enhance these processes? What do we want and need from stakeholders to maintain and develop those capabilities?
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Prism Facet One: Stakeholder Satisfaction

The goal of mergers and acquisitions is to enhance shareholder value - everything else can be considered "damage limitation." Notwithstanding some cost-driven post-merger redundancies, it is vital that those executives and employees selected for retention do not become disaffected by the decline in morale that frequently occurs. A merger also has to ensure that customers' wants and needs are better satisfied after the merger than before. Measurement can help to detect and prioritize solutions to declining morale and service to customers. The Performance Prism makes a broad range of stakeholders, including employees, customers, suppliers and regulators, the focus of measures design.
Prism Facet Two: Strategies

The key elements of a business combination's strategy will typically be to: Leverage the merged companies' brands, products and services to customers Strengthen market share or competitive positioning Improve net cash flows through substantial cost savings Deliver the benefits anticipated at the business unit level Manage budgeted costs for the post-merger integration. The Performance Prism enables relevant monitoring to determine whether strategic goals are being met and to provide the data for informed executive decisions.
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Prism Facet Three: Processes

Business processes play a vital cross-functional role in post-merger integration. They are the engines that enhance value Supporting revenue generation through integration Spurring cost reduction through shrinking headcount and facilities Optimizing procurement and logistics channels.
Prism Facet Four: Capabilities

Capabilities are the amalgam of people skills, business practices, leading technologies and physical infrastructure that create value for stakeholders. They are the fundamental building blocks of a corporation's ability to compete distinctively and thus present many challenging issues for post-merger integration implementation teams. What is the right level of employee headcount and facilities? What functions should be moved from one place to another? Which are the unique product and process technologies and best operating practices of the merging organizations?
Prism Facet Five: Stakeholder Contribution

The Performance Prism addresses not only what all stakeholders want and need from the newly merged enterprise, but also what the company reciprocally wants and needs from them. Most importantly: A stronger investor profile A positive response from securities analysts and business media Retained employees loyal to the new enterprise No erosion of its combined customer base by opportunistic competitors. The Performance Prism is a broad-gauged tool that deploys a deliberately wide variety of measurement perspectives. These should be installed early in the merger planning phase and maintained for as long as they provide the data on which insights and judgments are needed to ensure a merger's benefits realization
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6 . MANAGING HR IN INTERNATIONAL MERGERS AND ACQUISITIONS
The Role Of HR Managers In IM&As
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"It's clear that you cannot stay in the top league if you only grow internally. You cannot catch up just by internal growth. If you want to stay in the top league, you must combine." - Daniel Vasella, Chairman and CEO of Novartis
International mergers and acquisitions represent the end of the continuum of options companies have in combining with each other. Representing the least intense and complex form of combination is licensing. Next come alliances and partnerships and then joint ventures. Mergers and then acquisitions conclude the combination options. In a merger, two companies come together and create a new entity. In an acquisition, one company buys another one and manages it consistent with the acquirers needs.
During the past two decades, cross-border acquisitions have exploded.
Many companies seem to be confronted with the need to do mergers and acquisitions, yet the odds of doing so successfully are relatively low. These odds can be increased, however: firms that have gained more experiences and that take a systematic approach to learning from experiences in their deal making are more likely to be successful. As part of their systematic approach to completing successful IM&As, managers pay attention to HR issues that exist throughout the stages of international mergers and acquisitions. On the other hand, with there being more IM&As overall, there are more inexperienced executives, too. Inexperienced executives are less proactive and tend to underestimate HR issues and therefore not to involve HR or only late in the process
The key HR issues that arise in IM&As vary somewhat depending on the specific circumstances or type of IM&A under consideration. Some mergers are mergers of equals. Examples of these include the merger between Citicorp and Travellers forming Citigroup; and between Ciba-Geigy and Sandoz forming Novartis. Other mergers take place between firms that are clearly unequalat least in total size and market value.
Similarly there are various types of acquisitions, e.g., those involving acquisition and integration such as those typically made by GE, Siemens and Cisco Systems; and those P a g e | 48
involving acquisition and separation such as between Unilever and Bestfoods. There are also friendly acquisitions and hostile acquisitions, although cross border hostile acquisitions are relatively rare. Acknowledging the different types of mergers and acquisitions is necessary in order to understand the many different HR issues that arise in IM&As.
For example, a merger of equals often compels the two companies to share in the staffing implications, whereas a merger of unequals results in the staffing implications being shared unequally.
Here we emphasize on the HR issues associated with the different types of IM&As. Again, the HR issues that may arise in IM&As may differ depending on the objectives behind the deal.
The Numerous Reasons for Companies To Merge or Acquire

To Promote Growth and Manage Technology As a Response to Government policy To Take Advantage of Exchange Rates, Which Can Affect: As a Response to Political and Economic Conditions Reduce Labour Costs and/or Increase Productivity To Diversify and Manage Risk Achieve Greater Vertical Integration As a response to shareholder and/or analyst pressure for growth, innovation, internationalization, etc.
In recent years, people-related reasons have become more common and with industrialized countries dramatically aging population, this motive is likely to increase in significance. In industries where intellectual capital is critical to business success, as it is for semiconductor and optical networking firms, technically skilled employees are seen as more valuable than the companys product. Some banks even make dollar estimates of the value of a firms employees.
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Retaining talent after any merger or acquisition can be difficult. It may be even more difficult when employees in the target firm are expected to shift from working for a wellregarded domestic firm to working for a foreign-owned company, which may have less status or prestige or is simply unknown or vice versa.
A simple three-stage model of the IM&A process can be used it to outline several HR issues that arise during IM&As. This model provides the foundation for developing propositions regarding how effective human resource management can contribute to IM&A success.
Three Stage Model Of International Mergers And Acquisitions

The three stages shown are (1) Pre-combination; (2) Combination and integration of the partners; and (3) Solidification and advancement of the new entity
Stage 1 : Pre Combination
Identifying reasons for the IM & A Forming IM & A team/leader Searching for potential partners Selecting a partner Planning for managing the process of the IM and/or A Planning to learn from the process
Stage 1: Pre-Combination
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The pre-combination stage includes all of the activities that occur before the IM&A is completely legally. Thus it includes the process of determining the reasons for becoming involved in a merger or acquisition (as a buyer or a target), searching for possible partners (whether domestic or international), evaluating the alternatives, selecting and negotiating with a specific partner, and planning for the eventual implementation of the deal. The activities in stage 1 establish a foundation for stages 2 and 3. For example, in order for Stage 2 to be effective, it is important that the partners have already carefully planned and prepared for it during in Stage 1. A key HR activity in Stage 1 is the performance of a HR due diligence. The HR due diligence process should assess the human capital of an organization. It is, however often carried out by lawyers and financial experts focusing on financial costs and contractual obligations. If HR is involved in this process it will go beyond to give insight in how much a business is supported by its human capital, what culture drives the company and how does it impact on performance, what added value is the human capital capable of creating in a merger and how can it best be released and developed.
Stage 2 : Combining and Integrating the Companies
Selecting the integration manager Designing/implementing teams Creating the new structure/strategies/ leadership Retaining key employees Motivating the employees Managing the change process Communicating to and involving stakeholders Deciding on the HR policies and practice
Stage 2 : Combination and Integration
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The stage of combination and integration begins after a merger or an acquisition is announced and pre-combination activities are completed. The general approach used to integrate and combine IM&A firms can be characterized as fitting one of four approaches: 1. Portfolio, 2. Blending, 3. New creation, 4. Assimilation.
In the Portfolio approach managers in the two companies retain a great deal of
autonomy. Although the alliance creates legal and economic interdependencies, the top management team assumes that the two organizations will continue to operate more or less as they had operated prior to the IM&A. Presumably, the strategic value of the alliance does not lie in the integration of the separate organizational systems, so differences are managed by maintaining segregated organizations. This scenario often occurs when one firm acquires another firm as a pure investor or in order to diversify into another business or region and then allows the acquired firm to operate as a relatively autonomous subsidiary.
The blending scenario arises when top managers intend for the two organizations to
come together or merge into a new organization that retains the best aspects of the original partners. In this scenario, the intention is to manage diversity through integration, with members of each organization adapting to the procedures and culture of their alliance partner. The blending approach is perhaps most common in IM&As that occur within an industry and between firms that are believed to complement each others strengths and offset each others weaknesses.
A New Creation arises when the partners agree to create a new firm that is truly
different from either of the original partners. One indication that an IM&A is intended to form a new creation is that the resulting firm takes on a completely new name.
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Novartis, which was created through a merger of Sandoz and Ciba-Geigy, is one example. Although it is not strictly speaking an international M&A, cultural differences of these two global life science players were important. They focused strongly on culture from the start and spared no effort to create a totally new culture from day one.
Finally, in some acquisitions, the buyer clearly intends to take over and control the target. Typically General Electric and Siemens do this with many of their acquisitions. Such experienced integrators use proven integration processes which they regard as critical growth competencies. Consequently, they invest time, people, and resources to develop the processes, functions and responsibilities, checklists and full-time integration managers long before IM&As occur. The target firm may be an attractive candidate for an acquisition because it has some valuable assets, yet for various reasons it is clear that it cannot survive on its own.
In this scenario, the expectation is that the target firm will lose its identity and adopt the management practices of the acquiring firm. In other words, the target firm is expected to assimilate into the acquirer. Successful integration is a key challenge in Stage 2 of IM&As
Stage 3 : Solidification and Assessment of the New Entity Solidifying leadership and staffing Assessing the new strategies and structures Assessing the new culture Assessing the new HRM policies and practices Assessing the concerns of stakeholders Revising as needed Learning from the process
Stage 3: Solidification and Assessment
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As an IM&A takes shape, it faces issues of readjusting, solidifying and fine-tuning. These issues take on varying degrees of intensity, although not important, depending upon the approach to integration that the firms adopt. The intensity can be quite high for an international merger of equals that is intended to lead to the creation of a new entity, and failure to address the HR issues effectively is likely to mean that the intended strategy is never successfully implemented. For DaimlerChrysler, Stage 3 lasted more than two years. Effectively managing international mergers and acquisitions requires dealing successfully with many significant HR issues. Each stage of the IM&A process presents new challenges as well as new opportunities to create value by managing people effectively.
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7 . 1 . CORPORATE EXAMPLE 1 HUMAN RESOURCE AT RELIANCE : SOARING AND STRONG
Human Resource is recognized as the most powerful bastion of the organizational brand and of the employees. It is no more the systemizing, policing arm of the executive management. However, Reliance had to go a series of transformational phases in Human Resource to witness Reliance infrastructure as it stands today: Soaring and Strong.
It started in 2003, when Reliance took over BSES (Bombay Suburban Electric Supply). They faced the challenge of standing tall alongside the giant brand name PSU. Despite the low compensation structures and the bureaucratic environment, they had to be sensitive towards the values and customs that were deeply ingrained within the employees. They discovered that the key to their success lay in being slow and steady until they caught up, and now they are known for their Speed, Efficacy and Efficiency.
As part of Human Resource in EPC (Engineering, Procurement and Construction) business, they had to face tough situations. From the quality of recruited manpower, to talent management and engagement, it had not been a cakewalk.
Human Resource at Reliance Infrastructure underwent a sea change. They were able to hire the best talent, while retaining most of their intellectual capital. This helped them bag some of the biggest projects in the country.
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The reasons that helped them make all this possible : IDEOLOGIES and SUPPORT OF THE TOP MANAGEMENT COMMITMENT and DRIVE to go beyond excellence in every employee An initiative that helped them create the culture of performance was the Redefined Online PMS. Employees, their supervisors and the management team were critical of this partnership.
Employees at all levels actively communicated with their supervisors about their performance, planning their development, being accountable for their actions and continually striving for excellence.
Supervisors were responsible for developing performance expectations with the employees, recognizing successful performance, and ensuring that the employees had the tools to carry out their duties successfully.
Management team was responsible for providing an effective and fair PMS that encouraged effective communication between employees and supervisors, and ensured that the supervisors had the skill and time to carry out performance management successfully.
The output of PMS was fed into several Human Resource systems such as compensation reviews, career progression, etc. Human Resource thus worked in tandem with demands of a changing organization and acted as a catalyst for change management.
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7 . 2 . CORPORATE EXAPLE 2 PINK FEAR: SATYAMS MARKETING EXECUTIVES WORRIED A LOT

Source Times of India
Tech Mahindra acquiring controlling stake in Satyam has evoked mixed feelings among employees of the scam hit IT firm. While the stable financial condition of the mid sized outsourcer has restored confidence in Satyamites their salaries and other remunerations are guaranteed. Tech Mahindras large pool of staffers on the bench has created an air of unrest among some Satyamites, who feel that Larsen and Toubro (L&T) would have been a better bet.
Satyam and Tech Mahindra are companies in the same league and both have equal number of people on the bench. Tech Mahindra might want to place their staffers on projects and, in the process, hand over pink slips to Satyamites on the bench. On the other hand, Larsen and Toubro being a bigger and more established brand, could have managed to accommodate everybody said a senior project manager from Satyam. P a g e | 57
Apart from those on the bench, the fear of getting pink slipped has also hit employees of the marketing department of Satyam. They fear they would be the first ones to be sacked if the company decides downsizing. Considering that Tech Mahindra already has a strong marketing team in place, Satyams marketing executives believe their presence may well be questioned.
Techies have nothing to fear, especially those on projects. There is a lot of work for them and Tech Mahindra, too, has a huge client base. So getting projects will not be difficult. Why would they want to keep extra staffers in the marketing team when they already have a good one in place? I think, over a period of time, some of us will be shown the door, said a marketing executive of Satyam.
While senior officials in the company say no one will be fired at least in for now they, too, agree that Satyams marketing team stands an extra 20% chance of getting sacked. Despite such concerns, a large number of Satyamites are relieved with the completion of the bidding process as they feel the company would now get back on track and there would be steady flow of work like before.
Tech Mahindra is free of any controversy, has good clientele and enough resources. This will help Satyam Computer Services win more projects and get back to its earlier stature, said a Satyam associate, who has been working for the firm for close to four years. She further added that several of her colleagues have remained unaffected by the news. They feel that it does not matter as long as they get to work for a recognized brand. Whether it is Satyam or Tech Mahindra is not their concern, the associate added.
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KELLOGGS
ANALYSIS OF THE DATA:
An Organization is not an individuals piece of cake. It is a combination of people and they are involved in every aspect of that organization. Mergers and Acquisitions have huge impact on the employees of the organization. Merger is the combinations of two equals whereas an acquisition is the action where a bigger enterprise takes over a smaller organization. Any merger or acquisition leads to integration of stake holders, creates duplication of jobs, and is meant for fair returns on investments and with a view to achieve organization goals, and increase profitability and productivity. The 3 main employee issues that come into limelight during Mergers and Acquisitions are: Job Duplication Seeping Culture Productivity of Employees
Job Duplication: Case:

Banks A and B were two local banks on the same lane. While A was flourishing, B experienced losses. With a view to expand their area of operation, profit and clientele, A decided to acquire the stakes of B. This proposal was readily accepted by management of B, as they could sense profit in the decision of acquisition. After the Acquisition, They decided on shifting to another location where the two banks could together operate under the same roof. Due to this decision, there was a duplication of jobs in some areas. Two managers were not required at the same position. Even if both the managers were to supervise, one had to loose his seniority to the other. Even at the base level, only one security guard was needed which meant firing the other guard.
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Seeping Culture: Case:

It is not an easy job for any entrepreneur to start any manufacturing unit or organization from point zero. Organic growth is a slower option when a company decides to expand to different countries. At that time, the option of choosing to merge or acquire comes as a solution. It is observed that even two different localities in the same country have varied culture, so when the question arises of cross border merger or acquisition, the level of cultural clashes cannot be neglected. Suppose a FMCG firm in China plans to merge with a firm in the United States of America, the cultural disparity will be a major issue. When firms in China believe in Organizational Growth, the American organizations give more importance to Personal Growth. It is always expected that one culture seeps into another for greater productivity, but it is very difficult to accept the cultural changes in ones working environment readily. This affects employee morale gradually.
Productivity of employees: Case:

Even before the employees get to know about the mergers and acquisitions formally, the rumours play their part. Thus, even before the big decision is formally announced by the board of directors and the management to the employees, they start fearing lay offs and loosing their jobs. This affects the employee commitment and productivity much prior to the merger or acquisition in announced. Once the decision of the management is announced, this triggers the fear among the employees. Even the highly productive and efficient employees start searching for other employment options and thinks about what next?. These leads to a decreased job commitment
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The Human Resource Department needs to look at the legal side of the merger or acquisition. It has to study the employee bonds and contracts that the employees had signed prior to becoming an employee of the independent organization. It also becomes essential for the HR department to check the job descriptions of the combined entity. It is very important that the organization retains the most efficient employees. The HR Department should be fair to the employees while dealing with their fears. it is no use giving false promises. The decision of selecting the right employee at the time of organizational transformation is crucial and needs to be taken effectively. After the Merger or Acquisition becomes a reality, it is necessary to provide counseling to those employees who will not be continuing with the transformed organization.
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Case Study MERGERS AT KELLOGS
There were a variety of factors that drove the change process in the Kellogg organization. Kellogg as a whole was a company driven by growth and change. Therefore to continue growth they were always developing new products and making old products better. A key element to this growth was their frequent mergers and acquisitions of other companies, which allowed Kellogg to be able to enhance product lines and increase the diversity of the companys products. Frequent mergers meant change at Kellogg, and that is one of the reasons that drove change for this organization. Leadership in the Kellogg organization has been an ever important issue with these new leaders driving the forces that have helped change Kellogg. We are a company of dedicated people masking quality products for a healthier world this statement was made by W.K. Kellogg the founder of the Kellogg Company. This dedication is why Kellogg has become such a successful organization and continues to be successful today. Founded in 1906 Kellogg is a global company with head quarters located in Battle Creek, MI. Although a global company, Kellogg is similar to a local business in that they are very involved in the Battle Creek community and in every community they are present in. P a g e | 62
Kellogg is the worlds leading producer of cereal and one of the largest producers of convenience food. Kellogg makes a wide range of foods, from cereal and breakfast bars to cookies, snacks and meat alternatives. Some of Kelloggs most popular brands include Keebler, Pop Tarts, Eggo, Morning Star Farms, Famous Amos, and Austin. Kellogg acquired the Worthington Company at the turn of the twentieth century; which brought Kellogg into the vegetarian market, which was something new for them. At the time of the merger Worthington owned Morning Star Farms, Natural Touch, and Loma Linda.
Another large historical event for Kellogg took place in 2001, was the merger with the globally known company Keebler, who is the second-largest cookie and cracker manufacturer in the country. This expanded Kelloggs snack food selection drastically.
Mergers are one of the most common actions that cause organizations to go through transition phases. Mergers are not the only item to bring change to Kellogg; new leadership throughout the years also brought change and this superior leadership is a good reason why Kellogg has been able to be so successful with each merger. In nearly one hundred years Kellogg has seen three CEOs in its history. W. K. Kellogg was the companys founder and served on the board of directors and as chief executive officer till the age of 85. At this time William La Mothe stepped in to take over the position of CEO. Since 1989 the job of CEO belongs to Carlos M. Gutierrez who is currently still running the Kellogg Company.
Each of these men had a phenomenal impact on the direction of the company as a whole and have contributed to Kelloggs success. Kellogg has gone through a wide range of changes that has lead to the success of this multi-million dollar global company. From mergers and acquisitions to a number of changes in leadership and leadership styles the company has been forced to make changes to stay competitive and remain successful in this industry. By examining the factors that drove each change and how Kellogg dealt
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with these factors it makes it possible to break down the aspects that have helped this organization become the success it is today.
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KELLOGS TAKE ON KEEBLER MERGER
Carlos Gutierrez was head of the Kellogg organization when the merger between Kellogg and Keebler took place. In 2002 at a Worldwide Leadership Meeting he stated, When people said weve got to work on the culture I thought to heck with that, weve got to work on our numbers. I was wrong. The more we think about it, the more we work with these values, and the more we realize what they can do for our company, the more we recognize how powerful they can be.
As a large organization that continues to grow there is a variety of issues that Kellogg is forced to deal with when it comes to factors that cause change, these solutions to these issues are their driving forced behind their continuous change processes. These factors include the ever-changing economy and their desire to stay above the competition and to keep W.K. Kelloggs initial values in mind. In the Kellogg organization these changes are frequent and often complicated with the merging of multiple companies and the changing of leaders within the organization.
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In the case here of the Kellogg Company, the management were the leaders and were forced to become the change agents because of the nature of the change, merging two companies together. This change resulted in the employees of each organization becoming divided. The effectiveness of change strategies in organizations is dependent on the change agents implementing them.
This was difficult for Kellogg because of the merger between Kellogg and Keebler, it doubled this task by trying to happily merge the two companies who were both already well established organizations with each company having their own set of values and organizational cultures to bring to the merger. Obviously there was some resistance to the merger from employees from both organizations. There are a number of reasons that employees in this situation resist change, one is the probability of a loss of control they will encounter when merging with a new organization.
Especially in this situation with two large companies that are well established it makes loss of control harder especially when there is too much being done to the employees rather than with the employees of the organizations. Especially in areas where employees once had an input and now may no longer have one, therefore it is hard for them to deal with the change and leaves them with much resentment towards the new change. Also too much uncertainty, confusion and surprises make it difficult for employees in change situations and therefore cause resistance.
When the future is uncertain for employees and information about the next step in the change process is unavailable it may cause a panic in employees because of the uncertainty of the future of their jobs and the organization as a whole. When employees have new decisions sprung upon them without preparation it may make it difficult for employees to adapt to the change, because as in many organizations a change of this magnitude takes some time and would have a better reception as a gradual process.
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To achieve the change needed with this merger the Kellogg Executive Management Committee along with Carlos Gutierrez developed a new set of values that incorporated the spirit of Kelloggs rich heritage as well as Keeblers Uncommon Values. The result was an updated and refreshed set of values along with guiding behaviors that will support lasting change at Kellogg. These new values set forth are called the K Values.
Therefore at Kelloggs to make the merger beneficial for both companies involved and to satisfy employees the K Values were developed to incorporate each companys values, heritage, and cultures to make the change process as smooth as possible.
K VALUES We Act With Integrity And Show Respect

Demonstrate a commitment to integrity and ethics Show respect for and value all individuals for their diverse backgrounds, experience, styles, approaches and ideas
Speak positively and supportively about team members when apart Listen to others for understanding Assume positive intent
We Are All Accountable

Accept personal accountability for our own actions and results Focus on finding solutions and achieving results, rather than making excuses or placing blame
Actively engage in discussions and support decisions once they are made Involve others in decisions and plans that affect them Personally commit to the success and well being of teammates
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We Are Passionate About Our Business, Our Brands And Our Food

Show pride in our brands and heritage Promote a positive, energizing, optimistic and fun environment Serve our customers and delight our consumers through the quality of our products and services
Promote and implement creative and innovative ideas and solutions
We Have The Humility And Hunger To Learn

Display openness and curiosity to learn from anyone, anywhere Solicit and provide honest feedback without regard to position Personally commit to continuous improvement and are willing to change Admit our mistakes and learn from them Never underestimate our competition
We Strive For Simplicity

Stop processes, procedures and activities that slow us down or do not add value Work across organizational boundaries/levels and break down internal barriers Deal with people and issues directly and avoid hidden agendas Prize results over form
We Love Success

Achieve results and celebrate when we do Help people to be their best by providing coaching and feedback Work with others as a team to accomplish results and win Have a "can-do" attitude and drive to get the job done Make people feel valued and appreciated
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DATA ANALYSIS
Various Human Resource issues that an organization comes across during mergers and acquisitions are insecurity of employees, merging cultural issues, duplication of job, dealing with union of workers and political issues, creating synergy and a new corporate structure, legal issues in contracts or employments, compensation differences, seniority and promotions etc.
The role of Human Resource Department thus starts prior to the merger or acquisition takes place officially, considering dealing with the legal aspects and job descriptions of the combined entity, deciding on how many employees will be staying back and how many employees will have to leave the organization.
During the merger, it is important to see that the communication is open and the employees get to know what is happening in their organization as well as their professional life.
Later, the HRD should choose appropriate retaining tools and provide counseling to the employees, both who are in the organization and who are asked to leave the organization.
Moreover, Hostile Acquisitions are unhealthy in India. In India, SEBI has provided guidelines for takeovers. The guidelines have been strengthened recently to protect the interests of the shareholders from takeovers.
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CONCLUSION
The upheaval associated with any merger or acquisition is a prime opportunity for HR to demonstrate its knowledge and skill in the management of human capital. HR is an intrinsic part of the integration team in an M & A because of its ability to evaluate the compatibility of corporate cultures and different options for combining enterprises. HR must also be the trusted source of information for employees about what the M & A means for them. From the due-diligence stage through the identification and appraisal of people to the management of culture issues and communication, people issues impact every step along the way. Such issues are essential and integral to the process and must not be treated as an afterthought. It's unrealistic to assume that one business can absorb another without being altered.
Merger and Acquisitions success entirely depends on the people who drive the Business, their ability to Execute, Creativity, and Innovation. It is of utmost importance to involve HR Professionals in Mergers and Acquisitions discussions as it has an impact on key people issues. As Mergers and Acquisitions activity continues to step up globally, Companies involved in these transactions have the opportunity to adopt a different approach including the increased involvement of HR professionals. By doing so they will achieve a much better outcome and increase the chance that the overall deal is a total success.
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HR Issues in Mergers & Acquisitions

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HR Issues in Mergers & Acquisitions

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1.

INTRODUCTION TO MERGERS AND ACQUISITIONS

INTRODUCTION TO MERGERS AND ACQUISITIONS

Purchase Of Shares In Open Market

Purchase Of New Shares By Private Treaty

Acquisition Of Share Capital Through The Following Forms Of Consideration

The Possible Reasons for An Acquisition:

Revamping Production Facilities:

Market Expansion and Strategy:

2 . INTRODUCTION TO HUMAN RESOURCE MANAGEMENT

Features of Human Resource Management

Human Capital Defined

Enhancing Motivation, Commitment and Job Engagement

3 . HUMAN RESOURCE ISSUES IN MERGER AND ACQUISITIONS

Prevalent HR Concerns Differences In Organizational Structures

Prevalent Human Resource Concerns

4. Differences In Organizational Structures

INTERVENTION OF HUMAN RESOURCE DEPARTMENT

3 . 1 . INDUSTRIAL ISSUES IN MERGERS AND ACQUISITONS

Does the Merger Make Sense

The People-Related Issues

The People Related Issues

Integrating And Retaining Talent

Aligning People-Related Systems, Processes, And Organization

Maintaining Commitment And Performance During The Merger Process

3 . 2 . LEGAL ISSUES IN MERGERS AND ACQUISITIONS

Prevention Is Better Than Cure

3 . 3 . EMOTIONAL AND PSYCHOLOGICAL ISSUES IN MERGERS AND ACQUISITIONS

Psychology in Mergers and Acquisitions

Identifying What Can Bring The Two Groups Together

Creating Clear Boundaries

Establishing Forums to Review The New Relationship

3 . 4 . CULTURAL ISSUES IN MERGERS AND ACQUISITIONS ORGANIZATIONAL CULTURE

DEVELOPING AN ORGANISATIONAL CULTURE

CULTURAL ISSUES DURING MERGERS AND ACQUISITIONS

Leadership style (for example: dictatorial or consultative, clear or diffuse)

The DaimlerChrysler Merger

Acquisition Strategy of Cisco

Addressing Culture When Two Companies Integrate

Make Culture a Major Component of the Change

Identify Who Owns Corporate Culture

Focus On the Tangible and the Measurable

Consider the Strengths of Both Existing Cultures

Put People with Culture Change Knowledge

Implement A Decision-Making Process That Is Not Hampered By Cultural Differences.

Human Capital Due Diligence

4 . HUMAN RESOURCE PRE DURING AFTER THE MERGER OR ACQUISITION

HR ROLE PRE DURING AFTER THE MERGER OR ACQUISITION

Areas Where HRD Can Contribute To M&A Change

Opportunities for Human Resource Department

HUMAN RESOURCE DEPARTMENTS ROLE BEFORE THE MERGER

HR AS AN INTERNAL CONSULTING GROUP

KEY ISSUES IN MERGERS

Power and Conflict

The Performance Prism in Practice

Prism Facet One: Stakeholder Satisfaction

Prism Facet Two: Strategies

Prism Facet Three: Processes

Prism Facet Four: Capabilities

Prism Facet Five: Stakeholder Contribution

6 . MANAGING HR IN INTERNATIONAL MERGERS AND ACQUISITIONS

The Role Of HR Managers In IM&As

During the past two decades, cross-border acquisitions have exploded.