hrm in mergers & acquisitions - copy

7/30/2019 HRM in Mergers & Acquisitions - Copy

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International Human

Resources Management

HRM in cross border Mergers and

Acquisitions


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A merger occurs when two organizations of

equal size unite to form a new unit.

Mergers are usually voluntary and involve

stock swaps or cash payments to the target

Amalgamation is a another term used to

describe a merger, but the usage isconfined to the accounting subject

Nature of M&As


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Mergers may be

Horizon tal Merger: when two

organization producing a similar product

combine.

Like GAP Inc. controls 3 distinctcompanies..

Banana Republic

Old NavyGAP brand itself


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Vert ical m ergertakes place when twoorganizations working at different stages in the

production of the same product combine.

Like Carnegie Steel, which controlled not only themills where the steel was manufactured, but the

mines where the iron ore was extracted, the coal

mines that supplied the coal, the ships that

transported the iron ore and the rail roads thattransported the coal to the factory, the coke ovens

where the coal was coked and the like


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Conglomerate mergerstake place when two

organizations operate in different industries. A

conglomerate is a large company that consists of

divisions of often seemingly unrelated businesses.

The first British conglomerate was Hanson.

The era pf Licence raj ( 1947-1990) in India

created some of the Asias largest conglomerate

like Tata group, Reliance Industries and the AdityaBirla group.


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Conglomerates are called differently in

different languages

Chaebols (Jaebeol): South Koreas

business conglomerates. Refers to the

several dozen large, family controlled

Korean corporate groups assisted by

government financing, which became

well-known international brand nameslike Samsung, Hyundai and LG


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Conglomerates are called differently in

different languages2

Zaibatsu : a Japanese term meaningwealthy clique and refers to large family

controlled banking and industrial and

industrial combine. Four major zaibatsus

are Mitsubishi, Mitsui, Sumitomo and

Yasuda.

Keiretsu : is a set of companies with

interlocking business relationships andshareholding. It is a type of business

group.


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Acquisition .

Takes place when a large company buys

out a small unit or vice versa. Unlike merger

no new organization comes into being,

instead the small unit loses its identity and it

becomes one with the large company,

which continues to function in its name.

Where the buyout is forced on the target it

becomes a hostile take-over


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Motive behind M&A

M&A are preformed in the hope of realizing economic

gains

To provide improved capacity utilization

To make better use of the existing sales force

To reduce managerial staff

To gain economies of scale

To smooth out seasonal trends in sales To gain access to new suppliers, distributors,

customers, products and creditors

To gain new technology

To reduce tax obli ation


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Pitfalls of mergers

Undue focus on financial aspects

Employees lose personal effectiveness as a

result of rumours, misinformation and worry

Infrequent and irrelevant communicationPerceived lack of authority and

understanding of the employee when the

new organization forms

Leadership challenges and failure to

articulate the communicate the vision and

inspiration to the employees


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People-related factors that contribute

to acquisition success

Retention of key talent

Effective communication

Executive retention and

Cultural integration


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Strategies of post-merger

outcomesAbsorptionAcquired company

conforms to acquier

cultural

assimilation

Transformationboth the companies

find new ways of

operating cultural

transformation

Best of Both

Additive from bothsides Cultural

integration

Preservation

Acquired company

retains itsindependence

cultural autonomy

Reverse Merger

Unusual case

acquired companydictating terms

cultural assimilation

Degree of change in

acquiring company

LOW HIGH

LOW

HIGH

Degree of

change in

acquired

company


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HR interventions

Cultural and people issues that have amajor impact on success / failure of cross-

border M&A deals:

Composition of new board

Who will occupy which job?

Accessing culture

Undertaking a human capital audit and

selecting the management team


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HR interventions2

Cultural and people issues that have amajor impact on success / failure of cross-

border M&A deals:

Effective communication Retaining talent

creating the new culture

Aligning performance evaluation and

reward systems

Managing the transition

Integration

hrm in mergers & acquisitions - copy

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