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Role of HR in Mergers and

Acquisitions
Section D, Group 3:
PGP/18/17
8
AKSHEY BHOGRA
PGP/18/18
0
AMRITANSHU ROY
PGP/18/19 KANDIRAJU KRISHNA
4
SINDHU
PGP/18/19
5
KARIDI SIDDHARTHA
PGP/18/21
7
SAURABH AUDICHYA
PGP/18/22

MERGERS AND ACQUISITIONS


Mergers
Two companies mutually agree
to merge when they feel they
can do something together that
they could not achieve on their
own.

STRATEGIC
MANAGEMENT
CORPORATE
FINANCE
HR
MANAGEMENT

A+
B
+

AB

Acquisition
Anacquisitionis the purchase
of one business or company by
another company or other
business entity. Such purchase
may be of 100%, or nearly
100%, of the assets or
ownership equity of the
acquired entity.
Types
Horizontal
Vertical
Conglomerate

FUTURE
GOALS
INCREA
SE
MARKE
T
SHARE

MUTUA
L
BENEFI
TS

REASO
NS FOR
M&A

WHY M&A?

EXPANS
ION OF
BUSINE
SS

ECONO
MIES
OF
SCALE
DIVERSI
FICATIO
N OF
RISK

People Cost Aspects

Pension
and
benefits

Usual focus on financial liabilities and neglect of


people cost liabilities
Underestimated obligations which are not
immediately apparent

Contracts
liability

Jubilee
Payments

Rewards
liability

People
Costs

Structural Aspects
Absence of good
organizational design
ambiguous goals, lack of role
clarity, inefficient decision
making
Alignment of structure,
process, governance, metrics,
people to fulfil the methodology
of newly integrated company
Work structure, information
flow, KPA re-definition, rightsizing

Unused
Vacations

Health
care
costs

Terminati
on
indemniti
es

Company A took over


company B

Company A merged with


Company B

Gain entry into newly


related market
A might retain the
organizational
structure of B
Structural changes at
top management level

New organizational
mission objectives and
strategies
Orientation
programmes, training
people for new roles
Introducing suitable
horizontal and vertical

TALENT RISKS

CULTURE RISKS

Key
Key Talent
Talent Retention
Retention

Leadership
Leadership Style
Style

Harmonizing
Harmonizing Talent
Talent Processes
Processes

Decision
Decision Making
Making Process
Process
Change
Change Receptiveness
Receptiveness
Working
Working Style
Style
Personal
Personal Interactions
Interactions
Beliefs
Beliefs Around
Around Personal
Personal Success
Success

REGULATORY ASPECTS
Regulator
y Aspect

Engagemen
t Aspect

Laws affecting human capital might vary from place to


place
Labor laws and HR contracts with unions are a major
area of concern
This is a sensitive issue can make/break a deal
especially in manufacturing and other such labor
heavy industries
Job losses, restructuring, imposition of a new
corporate culture and top leadership changes may
lead to reduced engagement levels
Disengaged and on the fence employees back
hold on extra effort

HUMAN RESOURCE BEST PRACTICES

M&A
Human Resources evaluation
Involving HR in early Merger
discussions: HR staff should conduct
cultural audits to ensure that the
organizations are compatible.
If there are discrepancies in management
styles, corporate values, or organizational
structures, HR practitioners can provide
recommendations as to how the
companies can overcome their differences
and establish a common culture
Increasing Communication:
Organizations should inform all
employees concurrently or in advance of
any press release or radio announcement
of merger plans
This will avoid the negative effects of
rumours and gossip which tend to distort
or misrepresent reality
Open and honest communication tends to
explain the employees the reasons for the
mergers and their own position after the

prior to integration: Conducting


quick assessments to identify who
are the keepers and determine the
actions necessary to retain the
talented individuals
Identify gaps in talent and nurture
and coach employees so as to avoid
impeding of management
Stress
reduction through
succession
employee assistance programs:
Employee assistance programs help
employees to manage post merger
stress
Counselling to employees helps
them assess career opportunities
and preview future alternatives
Policies and processes: Compare
and study HR practices of both the
companies and identify sources of
differences between them
Ensure minimum loss to employees
on account of change in policies

Informing employees about Downsizing


and Staffing in advance: Information
about downsizing and staffing should be
openly and honestly communicated to the
employees as soon as possible
Employees experience more stress and
anxiety when they are uncertain about their
future
Resulting decrease in morale and
productivity and an increase in turnover and
absenteeism
Compensation: Determination of
compensation comparisons between the
companies must be done
Compensation should be based on criticality
of function and skills and knowledge
Post merger some job may not be as critical
as they were previously
Develop and deliver clear compensation
guidelines through one on one interactions
with functional managers

Facilitating in development of
new organizational structure: HR
personnel should ensure that a new
organizational structure is developed
Clear well-defined reporting
relationships are established as soon
as possible.
Identifying Leadership: Clearly
specifying the leadership roles in the
merged entity and removing any
ambiguity
This helps to make transition
smoother
Job Grading/ Banding: Perform a
competency assessment
Pay attention to organizational
culture and willingness of the
leadership to implement
Differences in number of job grades
must be properly accounted for
keeping in mind the sensitivity of this
issue

EXAMPLES OF M & A
Successful
Disney and Pixar

Unsuccessful
Daimler Benz and
Chrysler
Exxon and Mobil
Sears and KMart
Tata Motors and JLR
AOL and Time Warner
Arcelor Mittal
Quaker and Snapple
Hindalco and Novelis HP and Compaq

Source:
http://www.cnbc.com/id/34467713

EXAMPLES OF M & A
Successful

Disney acquired Pixar in $7.4 Bn in 2006


The addition of Pixar significantly enhances
Disney animation, which is a critical creative
engine for driving growth
Disneys animated films were failing at the
box office
Pixar had a creative engine while Disney had
the distribution channel and scale
The deal proved to be a success with Disney
establishing the market leadership

Unsuccessful

The Daimler-Benz merger with Chrysler in


1998 is probably the most famous of all
international mergers then ended in failure
How much money was paid by Daimler for
Chrysler in 1998? $38 billion
How much money paid by Cerberus Capital
for Chrysler in 2007? $7.4 billion

Examples of M & A: Analysis from HRM Perspective


Successful

Unsuccessful

KEY TAKEAWAYS
As people look inwards to try to find their place in the merged company and attempt to see their
Commun- 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
ication
It is essential to bring conflict 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 secondPower and guessing. Often, people get wrapped up in turf wars which are destructive to both sides, rather than
Conflict
trying to figure out roles for both sides and have a win-win situation.
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
Culture
assist them during mergers
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
Operations concerns. By making changes with facilitated cross-platform teams, HR can help to ensure that the
best of the two organizations are preserved

CONCLUSION
It is important to avoid quick changes since they cannot be based on a popular
understanding of the acquired organization

Companies should be wary of undertaking radical integrative actions early on


Any workforce reductions that are undertaken should be based on objective, fair, and
consistent criteria clearly communicated to all employees. The automatic elimination
of redundant positions should be avoided.
HR manager has 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

THANK YOU