Case

Study
Series
1/2003

The Role of HR in
Mergers &
Acquisitions
 CONTENTS
Preface 1

The Current Merger and

Acquisition Environment 2

The Key Roles of the Human Resource

Professional in the New Economy 6

The Roles of HR in Mergers and Acquisitions 8

Practical Tips 16

Case Studies
Ascendas Pte Ltd 18

Keppel TatLee Bank Ltd 20

Neptune Orient Lines 22

Raffles International Ltd 24

Singapore Exchange Ltd 28

Feedback Form 31

A softcopy of this publication can be downloaded

from http://www.employmenttown.gov.sg
(under “Manage My Workforce” module)
Preface
To put it simply, the term “Merger” refers to the combination of two or more organisations
to form a new company, which often has a new corporate identity. Acquisition, on the
other hand, is the purchase of a company by another company.
Besides assessing the risk and potential of the merged entity, it is just as important to
derive synergy from the merger or acquisition so that the company can quickly transit
into the new entity and operate at its maximum efficiency. This is crucial in meeting
the various bigger organisational objectives including growth in market share. To achieve
this, it is essential for HR to play a pivotal role in ensuring the smooth integration of
HR policies and managing employees of differing work cultures all through the merger
and acquisition life cycle.
This casebook highlights the role and involvement of HR and the critical success factors
in accomplishing the objectives of mergers and acquisitions. For a better picture
of what actually goes on during mergers and acquisitions, we have incorporated
the experiences and the challenges faced by 5 companies: namely, Ascendas Pte Ltd,
Keppel TatLee Bank Ltd, Neptune Orient Lines, Raffles International Ltd and
Singapore Exchange Ltd, which had recently undergone either merger or acquisition.

1
 The Current
Merger and
Acquisition
Environment

THE CURRENT MERGER AND ACQUISITION

ENVIRONMENT
Over the recent years we have seen increasing growth in the level of merger activity
which has resulted, in part, from a spirited economy and a corporate urge to merge.
However, 2001 was a watershed year partially as a result of a lack luster economy,
weakened stock prices and the September 11 impact.
“Global merger and acquisition activity tumbled 50% from last year, while a number
of high-profile transactions were cancelled, hijacked by other bidders or scuttled by
antitrust concerns. Of the 30 biggest takeover bids announced world-wide in 2001,
five were withdrawn.” (Source: The Asian Wall Street Journal)
“Mergers and acquisitions fell 53% this year as economic growth sputtered, a study
by KPMG Corporate Finance showed… Chief Executives are focusing on cutting
costs rather than expanding business, with the world’s three biggest economies – the US,
Japan and Germany – contracting simultaneously for the first time since 1974.”
(Source: The Business Times Singapore)
2001 was one of broken promises. “Dynergy and Enron, Bertelsmann and EMI, Abbey
National and Lloyds TSB, Alcatel and Lucent - the list of jilted partners is more memorable
than the scattered instances of consolidation.” (Source: Agence France-Presse)
The volumes of global merger and acquisition activity is reflected in the table
presented below:

World-Wide Announced M&A

1997-2001 quarterly volume totals

(in billions)
$1,250 12,500

$1,000 10,000
Number
of deals
$750 7,500

$500 5,000

$250 2,500
Deal Value
including debt

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

1997 1998 1999 2000 2001

(Source: The Asian Wall Street Journal)

2
There are three chief reasons why merger and acquisition activity slowed in 2001.
“Companies hit by the global economic slump generally had less cash to buy out prey;
choppy stock markets made it hard to say how much a company was worth and sour
economic conditions made it difficult to predict how profitable takeover targets would
be in the future” (Source: Agence France-Presse). Nevertheless, there were some major
megamergers that were accomplished in 2001 as illustrated in the following table:

2001 Megamergers
largest announced world-wide deals

ACQUIRER TARGET DATE STATUS VALUE

(Country) (Country) ANNOUNCED OF DEAL
*(billions)
Comcast (U.S.) AT&T Broadband (U.S.) July 8 Pending $47.04
Hewlett-Packard (U.S.) Compaq (U.S.) Sept 4 Completed $25.26
EchoStar Comm. (U.S.) Hughes Electronics (U.S.) Aug 6 Pending $24.03
AIG (U.S.) American General (U.S.) April 3 Completed $23.40
Allianze (Germany) Dresdner Bank (Germany) April 1 Completed $19.66
Amgen (U.S.) Immunex (U.S.) Dec 17 Pending $16.90
Phillips Petroleum (U.S.) Conoco (U.S.) Nov 18 Pending $15.35
Halifax Group (U.K.) Bank of Scotland (U.K.) May 4 Completed $14.90
First Union (U.S.) Wachovia (U.S.) April 16 Completed $13.13
Citigroup (U.S.) Banacci (Mexico) May 17 Completed $12.82
(Source: The Asian Wall Street Journal)

In 2001, Singapore also saw considerable activity on the Merger and Acquisition front
such as the discussions between SingTel and Optus, Singapore Airlines and Air New
Zealand, Singapore Airlines and Ansett Australia, UOB and OUB, Hong Leong Bank
and Standard Chartered, to name just a few.
Many pundits would argue that the short term future will see an increased level of
merger and acquisition activity as opportunists seek to take advantage of weak stock
prices, and economic challenges being faced by many companies during the current
recession. “With corporate bottom lines still under pressure as a result of global
downturn, senior executives know that one way to boost profits is to cut costs, and one
of the easiest ways to cut costs is to merge businesses” (Source: Agence France-Presse).
The DBS-POSB merger has recently been highlighted as a local example of mergers
that really do benefit the shareholders. “The mergers and acquisitions that have swept
Asia in recent years do not always benefit the shareholders. But there are exceptions
and right up there is DBS Bank’s merger with POSBank. Despite being widely panned,
the Singapore deal produced the second-best outcome among Asian M&As, yielding
a hefty positive return of 212.8 per cent according to a study done by Finance Asia.”
(Source: The Business Times Singapore).
Wong Wei Kong in his article in the Business Times Singapore went on to note: “The
overall picture however, is not as encouraging. Of the Singapore deals surveyed, less
than half produced positive returns.”

3
 The Current
Merger and
Acquisition
Environment

According to the survey conducted by Finance Asia the “best and worst league table
for Singapore Mergers” can be summarized as:

Best and Worst – Singapore M&A Deals

Parties Return
DBS-POSB +212.8
GE Hldgs-OAC +31.9
F&N-Times Pub +15.1
DBS-Dao Heng +9.6
UOB-OUB -1.4
SingTel-Optus -6.3
DBS-Vickers -12.7
SingTel-AIS -17.2
OCBC-Keppel Capital -17.6
C&C-Astra -28.0
DBS Land-Pidemco -35.2

(Source: The Business Times Singapore)

In calculating the above return, Finance Asia looked at the market capitalisation six
months before a deal’s completion, on the day of completion, six months later, 12
months later, two years later and on 16 August 2002. Finance Asia then took the
latter of the five market cap values and compared it with the market cap six months
before the deal to calculate a percentage return.
Confidence in the M&A market in Singapore and the performance of the local economy
in 2003 are clouded with concerns over terrorism, a possible war in Iraq, a faltering US
economy and more recently the Bali bomb blasts.
“All bets are off ” on how Singapore will perform in 2003, Deputy Prime Minister
Tony Tan said after the Bali bombing. Many economists believe that growth can pick
up next year but concede that their growth forecasts are fragile. (Source: Asian Wall
Street Journal)

4
THE MERGER AND ACQUISITION LIFE CYCLE
There are five key phases to the life cycle of mergers and acquisitions. These can be
identified as follows:

Pre Deal Due Diligence Integration Implement Evaluate Merger

The search Reviewing Planning Merger Ensuring the success
for suitable the risk Preparation Establishing of the new entity
partners and soundness of the detailed the and the achievement
of the deal plan for the new entity of the merger
new entity objectives

Pre Deal
The first phase involves searching for suitable entities for mergers or acquisitions. During
this phase it is usual to develop a set of criteria for the selection of a suitable entity. In this
early phase the organization defines its objectives and desired outcomes of the merger or
acquisition and searches for suitable entities. This often involves extensive research and
gathering of market intelligence to assess the potential of suitable candidates.

Due Diligence
Once a suitable entity has been identified, usually the next step is to make an offer to
acquire or merge with the new entity. This offer is usually made conditional on the
completion of a due diligence. During this second phase, a review of the new entity is
undertaken to ensure the soundness of the deal and to assess any risks involved with the
completion of the deal. During this phase the organization will typically review the
financial statements, strategies, business plans, resources and operations of the entity to
confirm their assessment of the commercial suitability of the deal.
Often many transactions do not go beyond this phase because the due diligence highlights
the inappropriate risks associated with the deal.

Integration Planning
In this third phase detailed plans, milestones and activities are developed to ensure the
successful implementation of the deal. This phase is often conducted under very tight
time frames and requires extensive and detailed involvement from experienced personnel.
Detailed project management plans are established to ensure the smooth implementation
of the deal.

Implement Merger
Phase four requires the execution of the detailed planning conducted in phase three.
Again, this phase is usually conducted under tight time frames and requires the execution
of many complex plans simultaneously. Strong project management skills are required
during this phase. The implementation phase is very visible to shareholders, staff, clients
and competitors and is conducted under tremendous scrutiny of these parties.

Evaluate Merger
The final phase requires reviewing the performance of the new entity to ensure that
a successful integration has been completed and that the objectives of the merger or
acquisition have been achieved. Performance of the new entity is assessed against the
original objectives determined in the Pre Deal phase.

5
 The Key
Roles of
The Human
Resource
Professional

THE KEY ROLES OF THE HUMAN RESOURCE

PROFESSIONAL IN THE NEW ECONOMY
The New Economy
We work in an economy that is poised for merger and acquisition activity.
Aggressive competition, rapid change, the impact of technology, globalisation, legislative
change, consumerism and increasing workforce mobility drive the new economy.
To operate effectively in such a dynamic environment, it is essential for organisations
to harness their greatest asset – their people. Organisations need people who can
adapt, respond, anticipate and deliver, to meet client expectations. Effective organisations
seek to maximise the efficiency of their human resources by ensuring that they are well
managed and developed.

Maximising Human Capital

The term “human capital” has gained increasing popularity in Singapore as a way to
describe the people working in organisations.
Jac Fitz-enz in his book The ROI of Human Capital describes “human capital” as a
combination of factors such as:
• The traits one brings to the job – intelligence, energy, a generally positive attitude,
reliability and commitment.
• One’s ability to learn – aptitude, imagination, creativity, and what is often called
“street smarts” and savvy (or how to get things done).
• One’s motivation to share information and knowledge – team spirit and goal
orientation.
Fitz-enz goes on to describe people as the “profit lever” of the new economy and that
the organisation’s passive resources “require human application to generate value”.

The Roles Of HR Professionals

Dave Ulrich (1997) identified four key roles for the future HR manager. These roles can
be summarised as:
• responsibility for improving productivity through assisting in performance
management;
• responsibility for being a functional expert in the administrative function;
• responsibility for being a facilitator of cultural change; and
• responsibility for being a business partner through the development of a
HRM strategy.

6
The roles are multi-dimensional and involve a combination of both short and long-
term horizons, administrative and strategic duties as well as a focus on both people and
processes. They can be represented as such:

People

Productivity Facilitator
Performance Cultural
Management Change

Short Term Long Term

Functional Business
Expert Partner
Administrative HRM
Function Strategy

Process

During the 1990s we have seen the HR profession strive to move from being an
“administrative service” to become a business partner dealing with strategic human
resource issues.
Dave Ulrich (1997) describes HR champions as those who:
• turn strategic statements into organisational actions;
• meet targets and needs – both of the organisation, the customers and the employees;
• align HR plans to organisational actions; and
• identify and improve capabilities for future success.
Whilst many HR professionals have identified the need to shift their focus from satisfying
administrative requirements to becoming a strategic partner of the organisation, the
question remains as to how successful they have been in achieving this shift.
Since Dave Ulrich’s book, Human Resource Champions, there has been a growing
recognition that HR professionals of forward-looking organisations will be required to
act as business leaders. As business partners and facilitators, HR professionals are expected
to share, plan, promote and manage; as business leaders, they are expected to lead, direct,
thrive on chaos and respond to real-time issues. This is a critical role to play through all
the phases of a merger or acquisition.

7
 The Role
of HR in
Mergers and
Acquisitions

THE ROLE OF HR IN MERGERS AND ACQUISITIONS

When To Involve HR
The success rate of mergers and acquisitions is dismal. Research (Gaplin and Hendron)
has shown that during mergers and acquisitions:
• Only 30% of companies acquired their return on the cost of capital
• Close to 50% of executives leave in the first year
• 70% do not realise their projected synergies
There are many reasons that can be attributed to these results. Several of them revolve
around the people and cultural issues.
The Bureau of Business Research at the American International College (1996)
reported that the ten pitfalls which had negative impact on successful mergers and
acquisitions were:
1. Incompatible cultures
2. Inability to manage targets
3. Inability to effectively implement change
4. Non-existent or overestimated synergies
5. Lack of anticipation of foreseeable events
6. A clash in management styles
7. Excessive premium for acquisition
8. Unhealthy acquisition target
9. Requirement to spin off or liquidate too much
10. Incompatible marketing systems

The Economist (1999) reported:

“Study after study of past merger waves has shown that two of every three deals have
not worked… Look behind any disastrous deal and the same word keeps popping up –
culture. Culture permeates a company and differences can poison any collaboration.”
A survey conducted by Grant Thornton Business Owners Council across 750 business
owners and senior executives in the USA found that some of the major contributing
factors for the failure of mergers and acquisitions included:
• A poor integration strategy
• A loss of key personnel
• The lack of a compelling strategic rationale
• Inadequate communications

Raymond Stone comments:

“The clash between corporate cultures is a major cause of merger failure. For example,
it is estimated more than half of all merged companies in the United States fail to
create value for shareholders because management underestimates ‘the complexity
of corporate marriage’. Furthermore, these complexities are intensified when
organizations from different countries combine… By neglecting the human dimension,
managers can destroy the value of the acquired or merged organization. HR managers,
therefore need to take a pro-active role in educating line managers about the people
problems involved in mergers and acquisitions.”

CEO Magazine reported:

“75% of Mergers and Acquisitions are disappointing or outright failures. 50%
experience a decline in productivity in the first four to eight months. 47% of senior
executives in acquired firms leave in the first year, 75% in the first 3 years.”

8
 A survey conducted by the SHRM and Towers Perrin of over 440 HR executives worldwide
showed that there was a considerable gap between the expected and achieved synergies of
mergers and acquisitions:

Expected And Achieved M&A Synergies

82%
Grow Market Share
49%

Be Leader in 68%
Industry Consolidation 47%

Enhance Brand 55%

Strength/Reputation 32%
Synergies

Reduce Operating/ 46%

Overhead Costs 27%

Enter New Industry/Expand 44%

Product - Market Portfolio 34%

Access Talent 36%

Management Capabilities 22%

Access New Technologies/ 30%

Know-How 24%

Access Manufacturing 23%

Capacity/Expertise 15%

Expected
Achieved

Note: Percentages indicate the respondents that highly expect or substantially achieved (4 or 5 on a 5-point scale) M&A
Synergies. Sample over 440 HR executives worldwide.

From this survey it is clear that “growth in market share” and “becoming a leader in industry
consolidation” are the key objectives that organizations are striving for in mergers and acquisitions.
The research shows that less than half the participants were able to achieve those objectives.
For a successful merger and acquisition it is essential that HR play a pivotal role through
all the five phases of the process. The survey conducted by SHRM and Towers Perrin also
looked at the most significant obstacles to successful mergers and acquisitions. The results
can be summarized as follows:

Most Significant Obstacles To Successful Mergers & Acquisitions

Inability to Sustain 63%
Financial Performance 50%

Loss of Productivity 62%

45%

Incompatible Cultures 56%

37%
Obstacles

53%
Loss of Key Talent
49%

Clash of Management 53%

Styles/Egos 38%

Inability to Manage/ 52%

Implement Change 37%

Objectives/Synergies Not 52%

Well Understood 40%

Importance
Success

Note: Percentages indicate the respondents rating the obstacles as highly important (4 or 5 on a 5-point scale) to achieving
synergies versus the percentage that were highly successful (4 or 5 on a 5-point scale) in overcoming that obstacle.

9
 The Role
of HR in
Mergers and
Acquisitions

A review of these key obstacles highlights the importance of the role of the HR professional
in mergers and acquisitions. It also surfaces the range of areas where HR professionals
can play a key role. These include:
• maximizing productivity
• developing the organizational culture
• retention of key talent
• cultivating the style of the management team
• acting as a change agent
• communicating the business objectives

Typically, experience has shown that HR has been involved too little or too late resulting
as a contributing factor to the 70% failure rate in realising projected synergies.
The results of the research conducted by SHRM and Towers Perrin demonstrates in
particular the lack of involvement by HR professionals in the first two phases of the
merger and acquisition life cycle.

HR Involvement In Mergers & Acquisitions

100%

80%

60%

40%

Total Sample Ideal Level

20%
Successful Companies

Unsuccessful Companies

0%
Pre-Deal Due Diligence Integration Implementation
Planning
Note: Figures represent the percentage of respondents with high levels of involvement (4 or 5 on a 5-point scale) in each
stage. Sample: over 440 HR executives worldwide.

If HR is to operate in the role of strategic business partner as described by Ulrich, it

is essential that they are actively involved in all stages of the merger and acquisition
cycle including the pre deal and due diligence stage and not just in the performance
of the traditional role as the “functional expert” in later stages of the merger and
acquisition cycle.
The obvious conclusion from the results represented in the above graph is that
successful companies have benefited from a greater degree of HR involvement than
unsuccessful companies.
With specific reference to the Asia Pacific context, Watson Wyatt in their survey across
190 companies, compared the timing and level of HR involvement between companies
in the Asia Pacific and those in the United States.

10
 When Does HR Get Involved?

50%

40%
Percentage

30%

20%

10%

0%
Initial Planning Investigative Stages Negotiation Stage Integration

Stages

Asia Pacific

United States

The results showed that in the Asia Pacific, there was little involvement of HR in
the early stages of the Merger and Acquisition life cycle. This “little involvement”
in the early stages may account for the need for extensive involvement in the
later stages. The differing results between Asia Pacific and the United States in the
earlier stages may also be partially accounted for the greater need for due diligence
requirements on accrued benefit liabilities (including retirement, redundancy, health,
annual leave, long service leave) and termination provisions in the more developed
United States environment.

The Role Of HR In The Pre Deal Phase

Typically in Asia, there is little involvement of HR professionals in the first phase of
mergers and acquisitions. However, there is a critical need for HR to be involved in
this phase.
One of the first critical areas that HR can be involved is in assessing the potential
compatibility of cultures. This involvement could also extend into phase two of the
process as part of the due diligence. This could involve reviewing an array of things
such as leadership style, mission, vision and values of the organisation, team strength,
performance and reward management systems, customer focus and organisational
capabilities.
One of the challenges that HR faces is obtaining this information in an environment
where the organisation may not want to alert other parties of their intent to acquire or
merge. As such, much of this information is usually obtained on an informal level or
through the use of third parties.

11
 The Role
of HR in
Mergers and
Acquisitions

The Role Of HR In The Due Diligence Phase

During this phase, the organization determines the associated risks and the soundness
of the deal. It is at this stage that the organization determines whether it will purchase
the entity and its correct value.
Many of the HR activities identified in the pre deal phase are continued with greater
detail in the due diligence phase to ascertain the correctness of the perceptions obtained
in phase one.
It is during the due diligence phase that potential problems and risks are often identified.
It is particularly important that the HR representatives access professional help
when dealing with acquisitions in countries outside of their own areas of expertise and
knowledge. During this phase it is important to determine any liabilities that may be
a result of partial or unfunded benefits such as retirement schemes, long service leave
and other accrued benefits.
Within the Singapore context, it is important to ensure, effective from 1 October 2000,
that all short-term employee benefits have been recognized as expenses for the accounting
period in which they were incurred and that suitable provisions have been made in the
books to fund for the future payment of such benefits. [Singapore Accounting Standard
17 (2000)].
Acquiring an organization that has not allowed sufficient provision for accrued benefits
can result in a major expense for the acquirer.
Some countries require that payroll taxes are processed on a “pay-as-you-earn” basis (PAYE).
It is important to identify that any such taxes have been paid and that there are no
outstanding liabilities.
For Singapore companies it is important to ensure that Central Provident Fund (CPF)
contributions and payments for deductions to other entities such as the Chinese
Development Assistance Council (CDAC), MENDAKI, Singapore Indian Development
Association (SINDA), etc. are current and that there are no outstanding liabilities.
It is during the due diligence phase that HR professionals are expected to review the
contracts of employment. This can include a wide range of activities such as:
• assessing the viability and costs of integrating and rationalizing HR systems as
well as determining their compatibility
• ensuring contracts are in place
• reviewing termination terms
• identifying the impact of any local laws governing employee terminations
• identifying any special terms or conditions for management
• identifying any benefit entitlement issues such as long service leave
• identifying any issues around operating hours and working days
• identifying any triggers in the contract that may result in a termination or release
from employment (such as an acquisition or merger)
• identifying any terms that relate to contracts for a specific period
• identifying the risks associated with the loss of key talent
• identifying any ownership issues regarding intellectual property
Performance management and reward systems are also items for due diligence including
the identification of any future obligations for guaranteed or variable bonuses.
HR practitioners should also value the people-related transaction and ongoing costs as
well as identify any potential people-related savings that may result from the merger.
Implications of any Union relationships or obligations are usually also explored as part of
the due diligence.

12
In summary, one of the most critical roles for HR during the due diligence process is to
identify any contractual obligations, benefit entitlements and resource savings that may
impact on the value of the deal.

The Role Of HR During The Integration Planning

It is during this phase when the HR professionals’ skills in project management and
change management are a critical asset to the life cycle of the merger or acquisition.
HR is usually involved in a wide range of planning issues such as:
• Talent management;
• Retention initiatives for key personnel;
• Determining transition strategies to move people to new roles, provide training
and reskilling;
• Outplacement processes and policies;
• Determining the new management team;
• Determining the direction for the new organisational culture;
• Determining the leadership style for the new organisation;
• Designing the communication strategy for staff and other relevant bodies such
as Unions and the Ministry of Manpower;
• Appointment criteria for new positions;
• Development of the contract terms of employment for the new entity;
• Determining the level and appropriateness of integration;
• Developing brand alignment strategies; and
• Determining work environment and work location issues.
The details and planning that are put into this phase is a critical factor in the success of
the implementation of the acquisition. For a successful implementation, quick, decisive
and focused action is needed. This can be better achieved if detailed planning was
conducted prior to implementation.

The Role Of HR During The Implementation Phase

Effectively, during the implementation phase, HR is required to deliver on the plans
developed during the integration planning phase as well as respond to unexpected and
new requirements – which are often many and unpredictable.
One of the key roles for HR professionals during the implementation phase is the
co-ordination of communications to staff. It is critical that the new organisation maximise
productivity and focus on client and shareholder satisfaction as soon as possible. HR can
play a pivotal role in maximising employee engagement through effective and timely
communications to staff.
In every case study cited in this research, every respondent highlighted the critical
impact of effective communication. Essentially through any change process, employees
want to know “what is in it for me?” (WIFM). This could include such issues as, Will
I have a job? Who will I report to? What are my rights and benefits if terminated?
What have my clients been told? What is the media saying? What will be my future
role and responsibilities? What are my new benefits and terms of employment? Who
can I talk to for help and information? The questions raised are extensive!
Until staff receive satisfactory communication and clarification on the answers to these
questions, performance and productivity can be severely impaired. During the integration
planning phase, it is advisable to develop a comprehensive Q and A sheet that identifies
and responds to likely staff issues. One benefit of providing this information in a written
format is that it helps ensure reliability and consistency of the message across the group
in times of change and uncertainty.

13
 The Role
of HR in
Mergers and
Acquisitions

An important element of the communication programme during the implementation

phase is the issue of timing and messages. Items that need addressing include such things
as what do you tell the media verses what do you tell your staff? Who do you tell first?
Experience has shown that timely releases of consistent, transparent information is an
important factor to the success of staff trusting the organization through the change
process. It is often tempting to “hide” or “soften” bad news such as downsizings and
restructures but, in reality staff expect change during mergers and acquisitions and
look towards management to conduct their communications with integrity.
In addition to the content and the timing of communications, the medium of
communications is also important. The use of tools such as email helps ensure that
consistent messages can be distributed in a timely fashion to many employees across
different locations and time zones. However, there may be the need for other forums
where two-way question and answer sessions can be held. Documenting communications
is important for ensuring staff receive a consistent message during such times of change.
As well as the important role of implementing the employee communication programme,
there are several other activities typically conducted by HR professionals during the
implementation phase. These include:
• Acting quickly to restructure the organization and select the right people for
each role including people management, assessment and development;
• Aligning business strategies with people practices;
• Establishing financial and legal liabilities and compliance management;
• Managing cultural and organisational change;
• Issuing new employment contracts with revised terms and conditions;
• Developing and harmonising HR policies and programmes across the group;
• Responding to staff queries and providing management support;
• Liaising with Unions and other bodies that may be involved in disputes;
• Establishing the new Culture including the Mission, Vision and Organisational
Values;
• Providing training and development and reskilling;
• Implementing strategies for the development, sharing and retention of knowledge
capital;
• Assisting with restructures, job descriptions, job values and organisational structure;
• Assisting in organisation and process redesign;
• Implementing retention strategies;
• Implementing brand alignment strategies;
• Implementing work environment and work location plans; and
• Implementing the other HR components of the integration programme such as
the merger of HRIS architectures, the development of new induction courses and
so forth.

14
Employee retention through the integration phase is often cited as a key role for HR
professionals. A study conducted by Right Management Consultants that included
interviewing a number of executives involved with the people side of mergers and
acquisitions produced six important principles for making the transaction more successful:
1. Decide how critical employee retention really is – this will vary considerably
depending on the nature of the business.
2. Look for talent in unexpected places – some of your key resources may not be top
management.
3. Recognise that nothing is forever – some retention strategies are only appropriate
for the short-term transition phase.
4. Don’t be too desperate to retain any one person – for key management, short term
contracts with severance bonuses may be all that is needed for the integration phase.
5. Retention bonuses often backfire – sometimes good people leave because they are
not part of such a scheme.
6. Be open to creative approaches that earn trust – its not just all about cash bonuses.
Consider options such as career management and new skills development.
The critical role for HR professionals during the implementation phase is to help ensure
the organisation maximises employee engagement to assist in achieving the initial objectives
of the merger or acquisition through a successful integration.

The Role Of HR In Evaluating The Merger

It is often tempting for management to get caught up in the excitement of searching for
and acquiring new business opportunities. An important phase in the merger and
acquisition cycle is the post merger phase when a review of the achievements of the
merger can be assessed against the original or revised objectives.
The failure rate for successful mergers is high at around 70%. (Source: Gaplin and Hendron)
It is important for the management team to review the progress and success of the
implementation phase.
Our research in preparing the attached case studies highlighted that even after some
years there are several organisations in Singapore who have not really achieved successful
implementation from the HR perspective. Benefit programmes have not been harmonised,
different performance management systems are still operating, economies of scale have
not been achieved through re-engineering and repositioning of the operations and a
unified sense of purpose, mission, vision and direction have not been obtained.
In addition to comparing the achievements of the new organisation against the original
objectives, often HR professionals will use a range of tools such as cultural surveys to
benchmark and monitor the success of establishing the new organisational culture.
In maximising the engagement of the human capital in the new organisation, it is
important that this review process is conducted and appropriate remedial action is
identified and taken to ensure the successful outcome of the integration.

15
 Practical
Tips

PRACTICAL TIPS
Factors Which Influence Success And Failure
The London Business School and Egon Zehnder International (Hunt et al. 1987) researched
60 organisations within the UK and USA to identify factors which influence success and
failure. The key success factors identified were:
1. Conducting prior auditing
2. Assurances given to the selling organization at the stage of implementation were
rigidly adhered to
3. A clear vision of the directions by the new owner existed
4. Credibility and respect needs to be earned by the buying organization (through
observing such things as thoroughness, technical knowledge and behaviour of
key executives)
5. Offering a perceived benefit to the selling organization (for example, access to a
bigger market)
6. Interaction between buying and selling organizations was clear and non-ambiguous
7. People must know where they stand
8. Appropriate employee benefits and incentives

Summary Of Practical Tips

This summary is taken from the experiences shared in the five cases featured as well as
the author’s extensive experience in mergers and acquisitions with Buck Consultants and
its clients.
• Recongnise that HR has key role to play in
- Assisting the organization capture the expected merger synergies
- Creating a new competitive and integrated company
- Keeping customers satisfied
- Retaining key staff and maximizing performance of all employees
• Recognise that HR should be involved in all stages of the merger and acquisition
life cycle – in particular, they should participate in the early phases.
• Regular open and two-way communication between the management and staff
or interested parties, through several mediums.
• Where HR lacks the internal expertise such as dealing with mergers and acquisitions
in a foreign country, they should seek professional help to ensure that contractual
liabilities and employment obligations are fully appreciated and costed into the
value of the deal.
• Effective, timely, transparent, two-way communications is required in all phases
of the deal to all relevant parties.
• Failure to recognise accrued and non-accrued benefit and contractual obligations
during the due diligence phase can impede the financial success of the deal.
• During the merger and acquisition phase, staff and clients will be critically assessing
the leadership skills of the new management team – in particular they will be
looking for good communication skills, decisions made with a sound business
acumen that also demonstrate human concern, perceived fairness, openness,
integrity, sound and timely decision making, and good listening skills.
• Move quickly to get the new structure in place and the right people in the right
jobs – avoid making decisions based on “politics, history and baggage”. Ensure
responsibilities and accountabilities are clear.
• Set a 100-day plan and celebrate early wins – proceed with a sense of urgency.
• Consider the impact and involvement of third parties such as clients, prospects,
suppliers, unions and government regulatory bodies.
• Maintain an external focus with a close eye on client satisfaction and competitor activity.

16
Case Study
Public
Service

• Ensure the steering committee has strong skills in planning, project management
and change management.
• Anticipate staff questions and prepare standard question and answer sheets.
• Identify critical competencies required and key staff for retention and put in place
an appropriate retention strategy.
• Move swiftly on retrenchment and outplacement plans and ensure a revitalization
programme for remaining staff.
• Consider the use of “fresh blood” to help instill the new organizational culture.
• Identify and instill new cultural values demonstrated through all the leadership
activities including the establishment of a mission and vision for the new business.
• Recognise that during the period of change, staff will be under additional stress
and provide appropriate short term support.
• Harmonise employment terms swiftly.
• Develop career and succession paths for the new organisation.
• Check that expected merger synergies are being realized and captured – if not,
adjust and review activities or objectives as appropriate.
“Coming together is the beginning.
Keeping together is progress.
Working together is success”
- Henry Ford -

CONCLUSION
Indeed, it is a business imperative to merge and acquire companies. Despite every intention
to derive synergy from the mergers and acquisitions, only one third of all such deals are
successful. To fully gain the benefits of mergers and acquisitions, it is important to
restructure the organisation and quickly induct the employees to its new goals and culture.
The experiences of the 5 companies featured in this casebook suggested that in a merger
or an acquisition, open communication between the management and the staff level is
one of the major success factors. It is understandable that employees want to be kept in
the light as to where they stand and how they can continue to contribute and grow in the
newly emerged establishment. As such, careful planning and execution of plan with the
involvement of HR is crucial, as a majority of the strategies introduced would have impact
on the organisation’s most important stakeholder – its valued employees.

Useful Reference Material

- Cairnes, Margot “Surviving Super Mergers”, Human Resources, Asia Pacific, October 2001
- Fitz-enz, Jac The ROI of Human Capital, Jac Fitz-Enz, AMACOM, 2000
- Gaplin and Henron, The Complete Guide to Mergers and Acquisitions(1999)
- Kay, Ira and Shelton, Mike “The People Problem in Mergers”, Human Resources, Singapore Volume 4:3
- Neiger, David “Merging Interests”, HR Monthly, Australia, October 2001
- Powell, Mark “Managing the Asian M&A wave”, Economic Bulletin, Singapore, January 2002
- Rubis, Leon “Merger Mania Means Much Work for HR”, editorial director of SHIRM
- Schmidt, Jeffery Making Mergers Work, The Society for Human Resource Management, October 2001
- Shea, Thomas H. “Employee Retention Through Mergers and Acquisitions”, Workforce Website
- Sidel, Robin “Volatile U.S. Markets Cool Desire for Mergers” The Asian Wall Street Journal. January 6, 2002 p.S6
- Ulrich, David The Human Resource Champion, Harvard Business School Press, 1997
- Weatherseed, Stephen “What makes a successful merger”, Insight Newsletter, May 2001
- CFO Magazine, April 1996, Bureau of Business Research at American International College
- “After the Deal”, The Economist, January 1999
- “Asian financial services M&A wave”, Human Resources, Singapore Volume 4:10
- “Big gains vindicate DBS-POSB merger:poll” The Business Times, October 30 2002
- “Mergers and Acquisitions”, Andersen Website, May 2001
- “Mergers and acquisitions down 53%:KPMG”, Bloomberg, The Business Times, December 11, 2001
- “Riding the Global Tide”, The Asian Wall Street Journal, October 28, 2002
- “Success of M&As Depends on Early HR Involvement,” M&A Asia, December 2000

17
 Ascendas
Pte Ltd

Ascendas Pte Ltd

Created on 8 January 2001, Ascendas is the result of a synergistic merger between Arcasia
Land and JTC International (JTCi). The merger combines the strengths and resources of
JTC Corporation’s two subsidiaries engaged in the same business of developing, managing
and marketing science, business and industrial parks, and related businesses.

Impetus Of The Merger

The merger is a marriage of two powers: it combines the strengths and resources of two
organisations engaged in a similar business. Arcasia Land brings with it the strength of its
local presence in Singapore; while JTCi, through its regional projects, offers the gateway
to expand regionally and globally.

The Beginnings
In August 2000, the decision to merge JTCi and Arcasia Land was made known to the
management teams of both companies. The news was then officially announced to all
employees shortly after. During the announcement, the apprehension of a possible staff
redundancy exercise was addressed. Employees were assured of continual job security.
It was also made known that the targeted launch date of the new organisation would be
January 2001. The management believed that the organisation must transit as quickly as
possible into its new identity so as to reduce business-downtime and to help employees
focus on company’s performance rather than prolonging teething issues from the merger.

The Process
In addition to the appointment of a business consultant and formation of a Steering
Committee, seven other sub-committees were quickly formed to drive the following key
directives of the new organisation:
1. Communications
2. Human Resources
3. Readiness Building
4. Business Units
5. Finance
6. Management Information Systems
7. Strategic Planning
The sub-committees toiled relentlessly to continue the daily operations of their present
companies while working on initiatives and decisions of the merger. They had weekly
meetings as well as monthly meetings with the Steering Committee. Initially, the staff felt
that the timeline of four months for the merger to happen was indeed aggressive. In retrospect,
the staff recognised it as a positive and acceptable move. The swift transition reduced
downtime and allowed the management and employees to speedily focus their energies on
business and weathering the global economic downturn, which were more important issues.
The committees decided on two guiding principles for change management. These were:
• Employee ownership
• Open communication
A HR consulting firm was engaged to conduct a study of the various HR issues of both
companies such as:
• Compensation and benefits
• Salary structures
• HR policies and administration
• Job grades and titles
The purpose of the study was to produce a “gap fit analysis” to facilitate the harmonization of
HR issues of both companies. The HR consulting firm’s role was confined to that of providing
information while the Steering Committee reserved the decision-making responsibility
to drive the project from within.
The Steering Committee and the HR Committee understood that harmonisation entailed
delicate decisions that would affect the lives of employees and had serious consequences
18
 Case Study
Yamaha Music
(Asia)
Pte Ltd

that would influence the performance of the new Ascendas. Thus it was unanimously
agreed that employees must not be worse off in their compensation packages, status or
life styles. With this basic guiding principle, Flexible Benefits was implemented to harmonise
the employee benefits. Salary structures were carefully adjusted to equality. In the process,
extensive and numerous communications were conducted to ensure optimal level of employees’
acceptance and buy-in. Some of the communications techniques adopted included:
• Dialogue sessions
• Newsletters
• Emails
• Workshops
• Brainstorming sessions
• Teambuilding activities
• Feedback channels
Interestingly, the sub-committees included a “Feedback Box” for its employees to drop
anonymous mails. The “Feedback Box” proved to be popular as it provided an open
channel for honest and unreserved feedback – without confrontation or emotional
influences. Further communications would then follow to address these feedbacks.

Challenges
One of the main challenges that Ascendas encountered was the adjustment of job titles as
a result of the harmonisation of job grades. There were pockets of employees who expressed
dissatisfaction with the new job titles applied to them, particularly when the adjustment
reflected a perceived retrograde. After conducting a few open communication sessions
with the affected employees, further adjustments were made as the sub-committees
considered necessary.

Success Factors Of Their Merger

Angie Lai, the Senior Manager of HR, and Linda Chee, VP of Corporate & Marketing
Communications, believed that it was the two guiding principles i.e. employee
ownership and open communication that helped resolved the challenges encountered
during the transition.
These two guiding principles also helped the committees and employees to steer clear of
unproductive political entanglements that often plagued many mergers and acquisitions.
Above all, these principles helped the committees to navigate through many tough decision-
making processes to establish One Company, One Mission, One Vision. One such example
of a tough decision was in the selection of an appropriate company name to fit the new
identity after the merger.
Although a communications consultant was appointed to help define the new identity of
the merger, the name “Ascendas” was a direct result of these two guiding principles. It was
through teambuilding workshops and intensive brainstorming sessions that the name
“Ascendas” was voted for, out of the hundreds of names contributed by staff. Through
these open communications and workshops, Ascendas also forged its mission to create total
business environments that inspire people to excel, and its vision is to be Asia’s leading
provider of total business space solutions. Ascendas’ seven core values were collectively
formed as well with staff participation.

The Birth Of A New Brand

On 8 January 2001, a grand launch at the Fullerton Hotel was organised with the theme,
“Partnering With You in Asia”. All the employees were attired in colourful Asian costumes,
to signify Ascendas’ commitment to Asia. All employees had a role in the event, which
enhanced team bonding upon the merger.
As a single entity, Ascendas represents enhanced competitiveness and a stronger regional
presence, putting the new company in a better position to facilitate customers’ expansion in Asia.
Ascendas now has business operations in Singapore, China, India and the Philippines;
regional investments and eight representative offices in Asia. It serves over 1,000 customers
from all over the world, including MNCs and global technology giants. They come from
leading-edge industries such as info-communications, biomedical sciences and electronics.

19
 Keppel
TatLee
Bank Ltd

Keppel TatLee Bank Ltd

A Brief Overview
In January 1998, the intention to merge Keppel Bank and Tat Lee Bank was announced.
Keppel Bank and Tat Lee Bank obtained approval from the Monetary Authority of
Singapore for a merger that involved a share swap.
It was decided that the new name should reflect the long established history and character
of both banks. Thus, it was renamed Keppel TatLee Bank Limited with the stakes held by:
• Keppel Capital Holdings
• The Goh family, (major shareholders of Tat Lee Bank)
• Temasek Holdings
• Members of the investing public
In August 1998, seven months after the announcement, Tat Lee Bank became a wholly-
owned subsidiary of Keppel Bank. The new Keppel Bank shares and warrants were listed
and quoted on the main board of the Stock Exchange of Singapore on 17 August 1998,
while the existing Tat Lee Bank shares and warrants were delisted on the same day. However,
both banks continued to operate separately.
On 26 December 1998, the merger took effect and the new Keppel TatLee Bank was born.
On 11 January 1999, 293 employees were retrenched and a $9.5 million in redundancy
payments were made.

How The Process Began

The Merger Steering Committee was headed by the CEO of Keppel Bank and comprised
seven selected members - 4 from Keppel Bank and 3 from Tat Lee Bank.
Sub-committees were also formed to labour through tough decisions pertaining to the
consolidation of business, integration of IT, harmonisation of HR matters and a host of
administration issues and policies.
An external business consulting firm was appointed to assist with the change management
of the business. However, the Steering Committee decided that the harmonisation of
HR issues would be driven internally and as such there was no involvement from external
HR consultants.

The Role Of HR
It was imperative that the merger should result in a consolidation of resources and cost,
especially headcount cost as there were obvious duplication of jobs and functions. The HR
Team, headed by Kuang King Khoong, the HR Director, was responsible for issues such as:
• Alignment of salary structures
• Harmonisation of employee benefits
• Consolidation of HR policies, administration and systems
• Identification of duplicated job roles
• Development of an employee redeployment process
• Planning of an inevitable retrenchment exercise
The HR Team was also engaged in the extensive negotiations with two separate unions:
• Singapore Bank Employees’ Union (SBEU)
• Singapore Bank Officers’ Association (SBOA)

The Biggest Impact On Employment

Keppel Bank’s Managing Director and CEO, Benedict Kwek said at that time, “The merger
of Keppel Bank and Tat Lee Bank has resulted in job redundancies. Where possible,
employees will be redeployed to relevant fields where they can continue to contribute
effectively. Retrenchment will follow when this is not possible.”

20
Case Study
A Small -
Medium
Enterprise

Plainly, a staff redundancy exercise was unavoidable. The merger brought together a
total workforce of 2,000 employees. The desired final figure was about 1,300. There
would be 700 casualties, which triggered insecurities among employees. This took its
toll and resulted in a natural attrition of about 400 employees as the merger transition
stretched over twelve months.
After the Division and Department Heads had interviewed and assessed all employees
and selected the candidates to form the new team at Keppel TatLee Bank, the remaining
employees were placed in a “Redeployment Pool”. As and when a vacancy arose, a name
in the “Redeployment Pool” would be “saved”.
The imminent retrenchment led to long negotiations with the unions. Eventually, on
11 January 1999, 293 employees comprising 106 management and 187 non-management
employees were made redundant.
A $9.5 million redundancy payment was paid out. Depending on their length of service
with the Bank, retrenched employees received a severance package ranging from 0.75
month to 1.25 months’ salary for each year of service. They also received their notice
pay in accordance with their employment terms. The Bank also paid $225,000 to
NTUC as a Training Grant for the retraining of retrenched union members.

Other Challenges Faced By HR

One of the main challenges faced by the HR Team was the rationalisation of salaries
and benefits of the two banks. From the analysis of the employees’ pay and benefits,
gaps were identified and solutions proposed. The HR Team had to overcome much
resistance from the affected employees. A lot of effort and time were spent in
communication and negotiation.
Another major challenge was to retain the people it wanted. Some IT personnel for
example were critical to the transition but only for a limited period of time. It was
difficult to hold them, although the economic crisis at that time helped to control the
situation. The HR Team considered adopting a “retention bonus” plan. The concept
was to retain them for the transition period with an incentive, which would be paid if
they stayed for the agreed period to successfully complete their tasks. This plan was
not adopted eventually. The affected employees were subsequently either redeployed
or retrenched.

Key Lessons Learned

Kuang was quite relieved that apart from the news of its retrenchment, there were very
few unfavourable reports from the press. The HR Team ensured that if there were news
affecting employees, they should hear it from the Bank first.
Throughout the merger exercise, employee newsletters were distributed periodically.
Three Communication Sessions were also conducted by the senior management to brief
the department heads and other employee representatives on the progress of the merger.
In retrospect, Kuang feels that the communication could be even more extensive, regular
and with greater openness. He stressed that communication is one of the most important
factors of a successful merger, especially when the public and the press were watching
it closely.
Kuang’s advice for a successful merger is for the management team to keep an open
communication channel with the employees. Apart from focusing on the business and
economical aspects of a merger, priority should be given to both the tangible and
intangible human resource issues. In his view, human capital is one of the most important
assets of an organisation. How it is managed, particularly during a merger or acquisition,
will have lasting impact in the newly merged organisation.

21
 Neptune
Orient
Lines

Neptune Orient Lines

Neptune Orient Line (NOL) is the largest shipping company listed on the Singapore
Exchange with a market capitalisation of S$1.27 billion as of March 2002. The NOL
Group provides services in more than 100 countries and operates one of the largest
containership and Aframax tanker fleets worldwide. As part of its core business, the
NOL Group operates a network of container transportation services on major international
trade routes.
In November 1997, NOL’s container transportation division merged with APL Ltd to
create one of the world’s largest container shipping lines and now the new entity operates
under the APL brand name.
The merger was a direct result of NOL’s aggressive plans to go global. With offices in
more than 80 countries around the world, APL provides customers with container
transportation services through a network combining high-quality intermodal operations
with state-of-the-art information technology. NOL believed that the merger with
APL would catapult the organisation into the global marketplace with greater speed and
effectiveness and without having to “reinvent the wheel”.
Apart from container transportation in the trans-Pacific, Asia-Europe, trans-Atlantic,
Latin America, intra-Asia and Australia markets, NOL also provides supply chain
management services for international shippers through its subsidiary, APL Logistics.
It also provides crude oil transportation services through subsidiary American Eagle
Tankers (AET).

The Journey Begins

The merger of NOL and APL is believed to have been one of the most challenging in the
shipping world. While NOL was based in Singapore and in its thirty-year history had
built a strong reputation for quality and service in both its tanker and container
transportation businesses, APL had more than a century and a half of solid history as an
American company, a strong brand name, innovative technology, a logistics business
and an extensive network across 80 countries. It was also twice the size of NOL.
There were therefore issues to be dealt with in terms of size and in terms of culture. As
integration progressed, the exchange of people and ideas between the two benefited
the new organisation.
But in addition to the work involved in integrating two so different companies, the timing
created more pressures: NOL purchased APL just as the Asian crisis hit.

The Challenges
In 1997, the economic crisis seized Asia and, compounded with the stress of the merger,
NOL suffered substantial losses.
On 3 June 1999, Mr Flemming R Jacobs was appointed NOL Group President and
CEO. Mr Jacobs had a sound track record of more than three decades with Danish shipping
giant Maersk, and brought a fresh approach to the recently merged NOL/APL. He realised
that the integration had merely brought two conglomerates to the stage of co-habitation
and there were considerable benefits still to be derived. A dramatic change was required
to re-shape the organisation if those benefits were to be realised. This led to a major
review of NOL’s strategic direction and its structural make-up – a job undertaken in
consultation with an international management consultancy.
The consultant helped NOL to chart candidly the performance levels and work history
of its management team, identify the appropriate management structure for the new
organisation and the strengths and talents required to fill new and existing roles. This
helped NOL to leverage on the depth and breadth of the talents available in the
organisation as well as looking to the global marketplace to fill some of the positions.
With this underway, NOL then focused its attention on the needs of its customers,
managing operational costs, and critical areas and markets that generate the most value
for the company.

22
“NOL has an uphill task of generating profits particularly after two years of heavy losses
as a result of the Asian economic crisis, the merger of two different organisations and
NOL’s debt burden,” said Mr Jacobs at the time. He added that, “We are making good
progress in our organisational restructuring plans and other initiatives to ensure sustainable
profitability for the future.”
Getting the people of both organisations to expand their thinking into a wider world, to
step out of their comfort zone and venture into the world was a major mindset hurdle
that had to be overcome. Mr Jacobs initiated the critical move to inject new blood into
the organisation to increase its leadership skills. The new management team now enjoys
a healthy mix of people with more than 20 nationalities at various levels. Some come
with NOL experience while others are drawn from around the world, both from inside
and outside of the industry.
With the appointment of Mr Jacobs, the culture progressively has become more open
as a direct result of the CEO’s leadership and personality. Initially, people who were used
to a hierarchical organisation found the more open culture somewhat uncomfortable.
However, the management team thrived on the challenge of developing an organisation
that was prepared and ready to take on the world. It was not easy and credit has to be
given to the people who believed and invested their time and effort to making things
work. Compared with the 1999 employee survey, the survey results of 2000 showed a
marked increase in some key indicators on employee satisfaction. This has been a result
of positive changes in the business conditions in the marketplace as well as the leadership
of its management team.

A Global NOL
Today, NOL has gone through a series of global business ventures while still managing
the merged NOL as one entity. This includes the purchase of GATX Logistics in early
2001, the second largest warehouse-based contract logistics company in the US and one
of the top logistics players throughout North and South America.

NOL Invests In Its People

At the heart of NOL’s corporate strategies is the Group’s commitment to HR management
and development. NOL recognises that people are its most valuable asset to foster growth,
diversification and expansion of global businesses. The key to the company’s effective
management of its business operations is to maintain the high quality and calibre of
its employees.
Thus, NOL is committed to investing in the training and development of its employees
at all levels, which led to the launch of the NOL Global Campus in 2001. Its structured
HR development programme ensures that capable employees are provided with the
opportunities to upgrade their knowledge and skills relevant to their work. NOL continues
with its philosophy to sponsor outstanding staff for postgraduate studies overseas.

Tips From NOL

Ms Anne S Benbow, Chief HR Officer considers the three key success factors of a merger
or acquisition are: Preparation, Communication, and Project Management. Ms Benbow
remarked, “The management team must be sensitive, inclusive and willing to listen.”
She believes that a strong global HR leader should be involved in the merger even before
starting the process of due diligence to help identify the people-related issues to a merger.
“The HR leader must advise management on the human side of things related to change,”
she stressed.

23
 Raffles
International
Ltd

Raffles International Ltd

As the owner and operator of fine hotels and resorts, Raffles International consistently
delivers its promise of not only meeting but also regularly exceeding expectations. This
plays a key role in fulfilling its credo of a hotel being more than its location, décor and
amenities – a place where guests are treated so well that they want to come back. With its
established brand name and excellent reputation, Raffles International is well recognised
for providing the highest quality products and services.
Raffles International Limited is the hotel management subsidiary of public-listed Raffles
Holdings Limited. Its vision is to be the world-class Singapore-based company in the
investment, operation and management of hotels and resorts, supported by a strong
customer base and developing strong brand architecture under the Raffles International
master brand.
In support of this vision, Raffles International Limited began to develop an international
expansion strategy focused on obtaining a presence in capital and gateway cities in regions
outside Asia. To this end, it decided to acquire Swissotel Holdings AG at a cost of S$420.1
million. Through this acquisition, Raffles International gained ownership of the Swissotel
brand and its trademarks and management contracts for 22 hotels including those of
6 majority or wholly owned hotel properties and minority interests in 3 hotels.
The acquisition fits the Group’s strategic vision of obtaining a global footprint through
an enlarged portfolio of 38 hotels in 33 destinations that are business capitals, cultural
centres and major leisure destinations.
The acquisition of Swissotel achieves several Raffles Holdings strategic thrusts:

Increased Global Reach

The acquisition complements Raffles Holdings portfolio in Europe and provides a
significant presence in key North American gateway cities. It provided Raffles Holdings
with strategic entry via established operating hotels in North Asia, the Middle East and
South America.

Enhanced Brand Equity

Swissotel has strong brand recognition in Europe and the Americas and complements
Raffles Holdings’ Merchant Court hotels that are represented primarily in Asia Pacific.
Swissotel’s portfolio of deluxe hotels integrates well within the Raffles International’s
master brand architecture. The Raffles brand of hotels and resorts caters to affluent
leisure and business travellers who require something beyond five star accommodations.
The Swissotel and Merchant Court brands of hotels are aimed at modern business
travellers with an emphasis on quality and comfort. The acquisition strengthened Raffles
International two-tiered brand architecture and provided the scale and scope to reach
and tap wider market segments.

Operating Benefits Of Scale

The acquisition resulted in the following benefits arising from increased scale:
• “network effect” on customer equity and loyalty of the increased number of
hotel locations
• ability to spread IT, reservations and sales & marketing investments over a
broader base
• improved purchasing power
• growth in management contract base by another 20 hotels
• improved competitive advantage for securing management contracts

24
Achievement Of Strategic Business Goals
The increased focus on management contracts business raised the income level from
S$18m to S$48m in Year 2000. This achievement was in line with the Group’s strategic
goal to become a pure hotel player.

Enhanced Human Capital

Swissotel’s key executives brought with them in-depth hotel management experience,
institutional knowledge and operational excellence. These were integrated with the
Raffles experience.

How It All Began

Pre-deal Stage
Armed with a clear business expansion plan, Raffles Holdings set out to identify potential
hotel operators for acquisition to complement its existing business. Extensive research
was conducted to determine the suitability of hotel operators who could be a strategic fit
to Raffles business goals and financial objectives.

Due Diligence
Once the target hotel operator was identified, Raffles Holdings immediately set up
two task forces to conduct due diligence on the target hotel operator. The Task Forces
were assigned according to specific tasks required in a due diligence exercise to ensure
effective results.
The first Task Force was specially assigned to look into the legal issues of each functional
areas and their implication on the overall acquisition. This team, made up of key
personnel from Business Development, Finance, Human Resource, Legal and Sales
and Marketing locked themselves with a myriad of files, documents, contracts,
agreements, correspondence and notes to conduct detailed paper searches for any
material evidence that would have an impact or implication on the acquisition whether
financially or operationally or legally. As this was a very daunting and challenging task,
only the best people were deployed to this team.
The other Task Force was divided into Project Teams to gather as much information as
possible on Swissotel in the respective functional and operational areas to aid the acquisition
process. The Project Team comprising of the following functional representatives and in
some cases, Technical Specialists were despatched to the various Swissotel operations
spread across USA, Europe/Middle East and Asia Pacific:
• Human Resource
• Operations
• Marketing
• Finance
• Legal
These project Teams were further complemented by Swissotel’s Senior Regional Vice
President and the local General Manager of the hotel in question.

25
 Raffles
International
Ltd

To facilitate the process of information gathering, all the functional representatives each
had a Raffles International Limited proprietary M & A template for their use when on
site. The template helped them to acquire the right information, ask relevant and pertinent
questions and remain focussed during the entire due diligence exercise.
In the case of the HR function, the following areas were carefully analysed and studied:
• Employees’ Employment Contracts and Terms e.g. notice of termination, severance
pay, duration of contracts, etc
• Employees’ demographics, qualifications, skills, experience and competencies
• Employees’ remuneration details, costs of benefits and related costs
• Pension and retirement plans and company’s contractual obligations
• Employer’s liability – both written and implied
• Agreements with Unions and Work Councils
During the due diligence exercise, it was not uncommon to find protection clauses
such as “golden parachute” put in place. Such findings together with all the above
findings have significant impact on the overall acquisition strategy including the bid
and offer price.

The Integration
Once the deal was concluded, management moved swiftly to integrate the Swissotel’s
business, philosophies, people, policies, practices, systems and processes with that of
Raffles International.

Communication
To drive the integration process, a communication team was formed to ensure that
messages to the employees were delivered the way they were meant to be. Mr Tommy
Ng, Senior Vice President of Corporate HR believes that “over communication is better
than no communication” particularly during a period of extensive change. Every piece
of communication was painstakingly crafted to avoid misinterpretation. Tommy cited
one example where two different groups of employees interpreted the meaning of clear
contact lens according to their own perception. One group defined “clear contact lens”
as the lens being clear and not coloured whereas the other group thought that the lens
should be washed clean and therefore clear. This incident confirmed the importance of
good communication and as such efforts were made to ensure that all messages carry
the same meaning throughout the 3 regions of operation, these being USA, Europe/
Middle East and Asia Pacific.
Tommy Ng said, “we used e-mails, posters, dialogue and feedback sessions, committees
and task forces, video tapes, telephone conferencing, state of hotel presentations and
many informal settings to communicate our message but nothing beats a face-to-face
delivery”. To this end, the Corporate HR team organised regular site visits, weekly
teleconferences and quarterly video conferences to gather feedback and roll out systems,
processes and initiatives. More importantly, Corporate HR used these visits and
conferences to strengthen relationships and create employee bonding. To further
facilitate the communication process, messages were structured with consideration to
sensitive issues such as culture, religion, anxiety, apprehension, language differences,
different time zones and union and employees expectations.

26
Systems And Processes
From a business standpoint, the Group consolidated its global sales, distribution and
marketing network and implemented uniform hotel operating standards and procedures.
The integration of Swissotel allowed the Group to realise synergies and create opportunities
for shared services. The integration process further acted as a catalyst for the establishment
and implementation of various systems and processes such as the Customer Relationship
Management (“CRM”) system, Human Capital Management System (“HCMS”) and
Financial Management Information System (“FMIS”). These systems are the vital
infrastructure to support the Group’s medium to long-term growth business objectives.

People
The acquisition was that of an ongoing operating hotel and as such the employees in
each operation were much needed to keep the operations functional and going. However,
there was duplication of jobs in some areas such as Human Resource where a team exists
in both organisations. Raffles International was keen to promote a system of meritocracy
and drove this philosophy by not making jobs redundant immediately. Job holders who
held duplicate jobs were reassigned and a period of 6 months was allowed for the
incumbents to demonstrate their competence level, skills and know-how. Being a
Singaporean was not a criterion for retention and the final selection criterion was based
purely on merit.

Compensation & Benefits

As much as it would like to streamline and harmonise policies and practices on
compensation and benefits across the Group, these were not always practical or feasible
due to the differences in laws, cultures and norms. It was accepted that there would be
differences across the Group but still, efforts were made to streamline practices within
each SBU for control purposes. In one such streamlining exercise, it was discovered that
some senior managers were paid above market. This was subsequently streamlined to the
standard of the Company.

Other Policies And Practices

While it is preferred to keep HR policies and practices standard, the reality prevents such
standardisation. Tommy Ng clearly understood this and issued a working strategy across
the Group to “think global but act local”. This sensible approach helped made the
integration process more seamless and lessened the resistance to change among employees.

Key Success Factors

And what are the 3 key success factors of a merger or acquisition? “Strong leadership,
communication and consistency on deliverables” replied Tommy.

27
 Singapore
Exchange
Ltd

Singapore Exchange Ltd

Singapore Exchange (SGX) is the first demutualised, integrated securities and derivatives
exchange in Asia Pacific. It offers a diverse array of securities and derivatives products via
its global network of broking members.
SGX was formed on 1 December 1999 by the merger of two well-established and respected
financial institutions of Singapore – the Stock Exchange of Singapore (SES) and the
Singapore International Monetary Exchange Limited (SIMEX).
Together, the two exchanges serve a wide array of international and domestic investors,
including many of the world’s largest financial institutions, and have been among the
most innovative exchanges in the world in technological and new product development.
On 23 November 2000, after the merger, SGX was public-listed and propelled to
seize the opportunities of the future. It is now able to benefit from the flexibility
available to any listed company in terms of capital structure, corporate finance, mergers
and acquisitions.

History Overview Of SES

The Stock Exchange of Singapore (SES) was incorporated in May 1973 under the
Companies Act and licensed under the Securities Industry Act, administered by the
Monetary Authority of Singapore (MAS). It had established a reputation in Singapore
and internationally as a securities exchange where investor rights are protected and
transparency and integrity prevail.
Over 370 companies are listed on SES’ mainboard and SESDAQ which lists small to
medium-sized companies. It has a total market capitalisation of about S$434 billion as at
the end of December 1999.

History Overview Of SIMEX

The Singapore International Monetary Exchange (SIMEX) was the first financial futures
exchange to be launched in Asia in September 1984. SIMEX traded a broad range of
international interest rate, fixed income, equity and energy derivatives on its floor. It was
complemented by a global, state-of-the-art electronic trading system, SGX ETS (SGX
Electronic Trading System). Trading activity had remained consistently buoyant
throughout, and in 1999, SIMEX achieved its second highest annual volume of 25.8
million contracts.

What’s The Impetus Of The Merger?

The Answer: Globalisation
The decision to merge SES and SIMEX was driven by global trends. The previous structure
of both SES and SIMEX were “mutuals”, i.e. they were legally owned by their members.
In response to the forces of globalisation and technology, exchanges are liberalising access
and deregulating brokerage commissions to maintain their competitiveness.
It is in this very fluid environment that exchanges often need to make strategic choices to
serve the broader interests of the financial sector, and it is not always possible to align
those interests with the member-owners.
Demutualisation allows SGX to better serve the needs of its valued customers. The
combined entity will be able to align more closely the securities and derivatives business
strategies, minimise operating costs by sharing overheads and increase its value-positioning
vis-à-vis other foreign exchanges.

28
The New SGX
Although the merger was formed on 1 December 1999, it took 10 months for the
integration exercise to complete. One of the key steps of the integration exercise was
building the cohesion of the management team, of which one-third comprised of new
members. Many integration activities were organised to act as “melting pots” to unite the
management team. Less formal sessions like management workshops helped intensify
the level of communication and interaction within the team.
The new management team in turn played a pivotal role in selecting their team members.
The newly integrated SGX emerged with 5 Market Divisions and 5 Service Divisions,
reporting to the Office of the CEO:
Five Market Divisions:
• Securities Trading
• Derivatives Trading
• Securities Clearing & Depository
• Derivatives Clearing
• IT Solutions

Five Service Divisions:

• Corporate Strategy & Marketing
• Finance & Administration
• Human Resources
• Information Technology
• Risk Management & Regulation

The Impact On Employment

The Office of the CEO and the management team strongly believe in the value of its
people – and valuing its people. The merger brought together a total of 660 employees.
The management team mandated that a smooth harmonisation and retention of key
talents must be observed throughout the integration. And one of the first people-issues
to deal with was the assurance of job security.
Thus, during the announcement of the merger in end-1998, the CEO and the
management team assured the people of employment. In fact, it was clearly articulated
that the merger would give birth to more employment opportunities and existing
employees are welcome to apply.

The Role Of HR
A new HR team was formed to drive the harmonisation initiatives of HR. A strategic HR
team was virtually non-existent before the merger. The then Personnel Department was
merely playing an administrative role. With the new HR team and the assistance of HR
consultants, investigative studies were conducted to prepare for the harmonisation of
policies, salary structures, employee benefits, job grading and titles, and a range of HR
administration processes.
Very quickly, the new HR team recognised that establishing the core competency of its
workforce was the fundamental move from which other HR integration activities would
flow. Its extensive works involved the department heads to help chart the core competencies
of the organisation. This core competency strategy springs forth a series of other HR
initiatives such as streamlining of HR processes and the implementation of an appraisal
system that is in tandem with the global market of exchanges.

29
 Singapore
Exchange
Ltd

Some Challenges Encountered

In harmonising the compensation and benefits structure of the merger, the HR team
made a decision to pay market rates. However, there are no other exchanges in Singapore
to look to for comparison or salary survey per se. The “market” literally covers the Asia
region. SGX had the challenge of obtaining reliable data to help align its reward strategy
with the market. It was resolved through engaging external consulting resources to obtain
market comparison that help forged an integrated rewarding structure closely linked to
the core competency system.
The HR team was faced with the task of restructuring employees’ benefits and in some
cases there were some emotional moments when the employees expressed dissatisfaction
with the restructuring. Fortunately, the management team was closely involved in the
communications with the employees and the chairman being involved in the process
managed to close this issue in an amicable manner. This strong involvement and support
from the top were instrumental and important to the success of the harmonisation exercise.

Communications
The management team and the HR team believed in communications and worked to
drive the message home. It is critical that communications must be open, yet timely.
“And listening is a significant expression of being receptive and understanding on the
part of the management,” emphasised Lew Seng Huat, the Senior Vice President of
HR Division.
Two months into the integration process, apart from announcement meetings which
sometimes involved the external consultants, dialogue sessions with employees were
strategically organised to address any concerns of the staff.
Communications and training exercises were also organised before the implementation
of projects that directly impacted the lives of the employees. In addition to dialogue
sessions, the HR team also leveraged on their email system as feedback channels, and
communications were regularly posted on their electronic bulletins that welcomed any
suggestions and questions.
With the assistance of external consultants, the HR team also took the pulse of employees’
satisfaction and understanding through formal surveys on four HR people-related issues:
Culture, New Benefits, Performance System and Job Grading System.
When asked what are the key success factors of the SGX integration exercise, Seng Huat
replied, “Communications, commitment of the top management, focus on the mission
to compete globally.” He added, “Tips for companies about to enter into a merger or
acquisition are: keep the integration process simple, recognise that changes takes time
and listen to the people.”

30
 Attn: Human Capital Development Division
Ministry of Manpower
18 Havelock Road
#04-02
Singapore 059764
Fax : 6535 4811
FEEDBACK FORM Email : mom_hrps@mom.gov.sg

Case: The Role of HR in Mergers and Acquisitions in Singapore

We value your feedback. Please take some time to fill in this feedback form & fax it back to us.

1. How useful is this case study in providing you with some suggested approaches to deal with the HR issues / problems
faced by your company?
Very useful Useful Moderately useful Not useful

2. How do you rate the presentation and user-friendliness of this case study?
Very good Good Neutral Poor

3. Would you consider implementing at least one of the strategies / approaches highlighted in the case study?
Yes No

4. For future case studies, what other topics would you suggest?
Recruitment
Employee Stock Option Scheme
HR Outsourcing / eHRM
Managing Older Worker
Performance Management
Others ____________________________

Other comments:

My Particulars:
Name: (Mr / Mrs / Mdm / Ms / Dr) Designation:
Organisation: Tel No:
Address:

Email:

31
32
The Role of HR in Mergers and Acquisitions
A case study commissioned by the Ministry of Manpower
Written by: Buck Consultants

Acknowledgement:
Our special thanks to Ascendas Pte Ltd, Keppel TatLee Bank Ltd, Neptune Orient Lines,
Raffles International Ltd and Singapore Exchange Ltd for their inputs.
Enquiries can be directed to: Human Capital Development Division
Ministry of Manpower
18 Havelock Road
#04-02
Singapore 059764

Printed in Singapore, Jan 2003

ISBN 981-04-8059-8
©Ministry of Manpower

All rights reserved. No part of this publication may be reproduced in any form or by any
electronic or mechanical means, photocopying, including information storage and retrieval
systems without permission in writing from the publisher.
Information correct at the time of print

33
MINISTRY OF MANPOWER
Human Capital Development Division

18 Havelock Road
#04-02
Singapore 059764
Tel: 6539 5192
Fax: 6535 4811
Email: mom_hrps@mom.gov.sg
Website: www.mom.gov.sg
OneCall Centre: 6438 5122 ISBN 981-04-8059-8