1. Managing Human Side of Mergers & Acquisitions
Savita Sawant
Roll No: 8249

2. Contents Definition (M & A) Types of Mergers & Acquisitions
Reasons for M&A.
Issues During M&A.
Stages in M&A.
Issues to be handled by HRM
Re-inforcement of culture
Communication
A Few Cases.

3. Acquisition
One company takes over another & cleary establishes itself as the new owner.
Acquisition may be ‘Friendly’ or ‘Hostile’.

4. Merger Two Companies come together to form a new entity
A single new Company rather than being separately owned and operated.
Both companies stocks are surrendered and new company stock is issued in its place.

5. Types of Mergers Horizontal Merger Vertical Merger
Market-extension Merger
Product-extension Merger
Conglomeration

6. Reasons of M&A Increasing Profitability. Gaining Market Share.
Cross-Selling.
Developing Synergies.
Economies of Scale.
Acquiring new technology.
Improved Market Reach and Industry visibility.
Taxation.

7. Merger Waves Period Name Facet 1889-1904 First Wave Horizontal Mergers
Second Wave
Vertical Mergers
Third Wave
Diversified Conglomerate Mergers
Forth Wave
Hostile takeovers
2000-
Fifth Wave
Cross-border Mergers

8. Sample Tools Defining the End State
high
Absorption
Acquired company conforms to acquirer
Transformation
Both companies find new ways to operate
Degree of Change in Acquired Company
Best of Both
Additive from both sides
Use in pre-combination to get both sides on the same page. Go function by function – the entire deal doesn’t need to (and usually doesn’t) end up in the same place. This is particularly important for the buyer to understand what they really want before the deal. Once decisions are made, can better identify people and organizational risks, issues, costs, savings, etc.
Preservation
Acquired company remains independent
Reverse Merger
Unusual case of acquired firm leadership
low
low
high
Degree of Change in Acquiring Company
*Mitchell Marks, Joining Forces

9. Issues during M&A Profitability (Finance issues)
Resource Optimization (Operational Issues)
Market Study (Marketing Issues)
Technological Issues (IT Issues)
Human Related Issues ???

10. Issues That can be handled by HR-Managers.
Underestimation of the difficulties of merging two cultures.
Underestimation of the problems of skill transfer.
De-motivation of employees of acquired company.
Departure of key people in acquired company.
Too much energy devoted to ‘doing the deal’, not enough to post-acquisition planning and integration.
Decision-making delayed by unclear responsibilities and post-acquisition conflicts.
Neglecting employee welfares of existing business due to the amount of attention going into the acquired company.

11. Impact of M&A on Employees
Stage
Characteristic Response
Denial
Not Accepting that the merger will take place.
Fear
Afraid with regard to future prospect.
Anger
Resentment towards those considered responsible.
Sadness
Mourning & grieving for what's past.
Acceptance
Recognition of futility-a positive approach starts to develop.
Relief
Recognition that the situation is actually better than expected.
Interest
Increasing feeling of security
Liking
Recognition of new opportunities.
Enjoyment
Satisfaction that the merger is working out well.

12. Actions from HR Actions from HR
Psychological & Cultural Impact on Employees
Communication
Raises questions among employees
What is Happening?
Business Strategy
Employees Question the rational
Why is it Happening?
Organization Structure
Employees Question their Short –term Future
Where will I be in 6 months?
Appointments & Exits
Employees Question their Long term prospects
Will I have a job?
Terms and Conditions
Doubts raised about financial benefits
Will I loose out?
Managing performance
Questions about management expectations from personnel
What is expected of me?
Training & Development
Further questioning the future
Do I have a future?

13. if people issues are so critical, why are they neglected
if people issues are so critical, why are they neglected? Possible reasons include:
• Executives believe that they are too “soft” and, therefore, too hard to manage.
• Social costs and benefits are regarded as secondary.
• There is a lack of awareness or consensus that people issues are critical.
• There is no spokesperson to articulate these issues.
• There is no model or framework that can serve as a tool for us systematically to understand and manage the people issues.
• Therefore, the focus of attention in M&A activity is on other business aspects such as finance, accounting, strategy, and manufacturing.

14. Step 3: Integration Planning
M&A Phases
Pre-combination
Step 1: Pre-Deal
Step 2: Due Diligence
Step 3: Integration Planning
Step 4: Implementation
Step 5: Post-Deal
HR is on the M/A Deal Team
Each step is a new level of commitment towards the deal and requires more information and analysis
Pre-Deal: Identify the strategy driving the M/A, locate and select targets, determine potential business opportunity, define critical success factors, and notify target of intent
HR’s role: educate team on HR implications, conduct high-level analysis of people, org, & culture fit based on available information, identify people-related issues, plan for due diligence
Due Diligence: collect and analyze information from the target, assess leadership team, summarize findings, issues, and risks, and make go/no go decision
HR’s role: collect and analyze HR related information, identify issues, risks, costs, savings
Integration Planning: set deal terms, use information previously collected to create plans to combine companies with minimal business interruptions, close the deal
HR’s role: secure key talent from target, collect more information where necessary, create integration team for HR, create HR integration plans (e.g., culture, organization, people, HR processes, HR systems and policies)
Notes:
Steps 1, 2 and 3 are intertwined and can happen simultaneously. Degree of intertwining depends on the nature of the deal (size, speed). The steps are not linear
Different people are often involved in the pre-deal and due diligence phases so it is better to keep them separate.

15. Step 3: Integration Planning
M&A Phases
Combination
Step 1: Pre-Deal
Step 2: Due Diligence
Step 3: Integration Planning
Step 4: Implementation
Step 5: Post-Deal
HR has it’s own implementation team(s)
HR’s role
Announce deal and start ongoing communication to both companies
Execute HR Integration Plans & adapt as necessary
Provide ongoing change management for both companies (e.g., management ability to deal with people issues, training, motivation, systems integration, job security/career concerns, realistic merger preview, Ethics & Compliance standards)
Monitor people-related integration activities

16. Step 3: Integration Planning
M&A Phases
Post-Combination
Step 1: Pre-Deal
Step 2: Due Diligence
Step 3: Integration Planning
Step 4: Implementation
Step 5: Post-Deal
HR is a member of the Deal Evaluation Team
Deal Team evaluates the successful capture of synergies and achievement of original strategy
HR’s role
Capture lessons learned from the management of the project
Evaluate organization, people, processes, systems (e.g., 24th month audit)
Suggest process improvements
Align with Business Strategy of the Future
Learn from this deal to be ready for the next deal
Ongoing involvement in integration of culture

17. Data to be collected from seller
Human Audit – numbers, levels, locations, pay levels & Union Affiliations.
Human Cost –obstacles to rationalization such as merger and employment law.
People quality – Key Players, corporate culture, age profile, skills inventory.
Personnel Policies – pensions, employment contracts, medical provisions etc
Employee Relations.
Organization Structure.

18. Key Participants

19. Issues to be handled by HRM
Preparation of Due Diligence Report.- recruitment, training, performance appraisal, compensation, labour relations & legal compliance.
Creation of Manpower Plan-
delineate roles & reporting relationships.
Communication
Retention Strategy- Retention Bonus Plans.
HR Integration –HR Systems, Policies &Practices
Cultural Integration.

20. Role of HR Department Formulation Strategy. Creating Teams.
Creating Organization Structure.
Developing a Communication Plan.
Creating a Transition system.

21. Facilitate to guide Transition Teams
Help Managing Stress
Team Building. Training
Deal With Problems
Prepare HR Strategy
Avoiding Job cuts

22. Reinforcement of New Culture
Find out through surveys what cultural values are valued and which of them should be preserved
Enlist all of them and request feedback from each management level
Provide the management with development tools and ideas to implement the result of the surveys and feedbacks
Finally, it can conduct a survey of all levels of management about 3 months after the deal is through in order to assess the progress towards the new culture.

23. Communication
Keeping all employees informed (Frequent broadcasts from CEO, HR Director) of all crucial decisions.
Instilling a sense of security among all employees, so that the issue of dovetailing employees can be dealt with.
Especially, in the case of acquisitions, the HR needs to ensure an equitable and fair treatment of employees
In case of lay-offs, offer outplacement services and just severance packages
Have a definitive plan with specific dates for individual communication

24. Encourage open houses or forums where employees can come together and discuss the deal and allay their fears and insecurities surrounding it
Acknowledge the problems as and when they arise
Enhance effective communication by involving line managers
Establish an helpline for employees
Advocate family assistance programs to make the employee that he/she is cared for

25. Competencies of HR Managers
Understanding overall business strategy as well as people and organization issues associated with that strategy
Gaining knowledge about business in general and M&As in particular
Being able to contribute to another company’s value
Planning and leading complex M&A strategies
Understanding and spending more time with operating managers to help support them in M&As

26. TCS- Tata InfoTech Merger
Consideration of prior experience.
Designation, fitment & pay scales.
Joining dates.
Legal issues , promotions & policies.
Induction & Project Allocation.

27. Satyam Acquisition by Tech Mahindra
Tech Mahindra-23,000 employees.
Satyam – 45,000 employees.
HR-Department faced challenge to retain the Employees & their Clients.
-Sales Reboot Campaign.
-Special Induction Programmes.
-Recognition & Reward Schemes.
-Communication Channel.

28. Cross border M&A’s
Nationality (home) of the aquirer makes a significant difference to style & culture of new organisation.
National (host) diffrences in pattern of HRM and Industrial Relations.
Language Barriers
Legal Issues
Political Issues
Geographical Issues.

29. Daimler-Chrysler (DCX) Merger –Clash of Cultures.
Daimler Benz
Germany
Planned & methodical way
Stuck to their plans & frowned on failure.
Hierarchical ,Top-Down structure
Bureaucratic
Spoke only German
Formal Dress Code
Lower Compensation
Chrysler Corporation
U.S.
Carefree Attitude, individual instincts & ideas
Experimentation ,Trial & error Approach
Flat Structure
Highly Decentralized
Hardly knew German
Casual Dress Code
Higher Compensation

30. After the Merger…… Compensation system was restructured.
Salaries were revised and made more equitable.
Chrysler employees did not like the lower salaries after merger.
Daimler started exerting pressure on Chrysler employees to adopt most of its policies & Procedures.
Result – 2 Chrysler CEOs left the Company within 19 months
-Chrysler was slowly overshadowed by Daimler in almost all areas.
-Daimler employees were in key positions & took most of the key decisions
-DCX went through major crisis.

31. Daimler Benz- Chrysler
Dieter Zetsche ,CEO Chrysler Group, March 27, 2002
“Like many other executives who have lived through a merger, DaimlerChrysler executives now understand that it is not enough to manage the legal, financial, and operational elements of mergers and acquisitions. Maximizing the value of a deal requires that the human side of organizational change must also be managed well “.

32. BIG Animation Shifted from Bangalore to Pune -2007
250 Employees shifted - Only 6 refused.
Choice for Housing , location , school, children , Domestic Connections, Licenses, bank loans for vehicles.
Two Special task force teams -8 to 10 members (one each in Pune and Bangalore)
Identifying good properties in each location (coordination with around 75 estate agents )
distributed forms to every team member wherein they were asked to specify their budgets, what features they were looking for in a location, whether they preferred to stay alone or as a group and other such details.
Every Friday, the company arranged to fly a batch of 20 artists from Bangalore to Pune. Each batch had the mandate of choosing and finalizing their accommodation in Pune in five days time post which they would return to Bangalore and continue with the production work.

33. arranged for vehicles that would be with the artists right from the time they landed till they took off, and also arranged for well endowed Service Apartments for their five day stay
Artist (employees) would then tour the locations, first two days would be spent in zeroing in on the choice of location, the third and fourth day on freezing on apartment of choice and day five in finalizing the deal with the agents
Team had also arranged for Sample L&L Agreements, on-board Lawyer, Printers and Computers at the Service Apartments, to facilitate the deals in a quick and secure manner

34. the entire process of each artist finalizing residence took about 3 months and one additional month for the actual relocation to happen wherein the company hired an official Mover & Packer agency that took care of the shifting logistics for each artist.
Schools, Ration Cards, Driving Licenses, Gas Connections, Bank Accounts, Vehicle Loans, and Mobile Connections, all had been taken care of .
In more than 6-7 cases, the company actually took the bio-data of the spouses of their artists and went about securing jobs for them in Pune

35. THANK YOU !!