Implications of M&As

:Is there a case for Human Values

Presentation by :
Dr. Narinder Kumar Bhasin
AXIS Bank Limited
Vice President - Retail Banking Branch Head
Scope of the presentation

 Introduction
 Change Management
 Stages in M&A process
 Reasons for Wishing away HR aspects
 Role for Union /Associations
 Human Aspects in M&A Final Integration
 Role of Key HR person
 Function of HR in M&A process
 Conclusion
M&A`s - Introduction
 Companies come and go, chief executives rise
and fall, industry sectors wax and wane , but an
outstanding feature of the past decade has been
the rise of mergers and acquisitions.
 Growth through acquisition has been a critical
part of the success of many companies
operating in the new economy .The plain fact is
that acquiring is much faster than building .And
speed to market, speed to positioning ,speed to
becoming a viable company is absolutely
essential in the new economy.
M&A`s - Introduction

 Mergers have been happening from time

immemorial but most of them have resulted in
non realization of goals . Yet they continue to
recur .Why ?
 Because market forces such as :
 1.Changing customer demands
 2.Rapidly advancing technology and
 3.Increasing globalization
 forces organization's to look for quicker growth
and thereby large profits .
M&A`s - Introduction
 Organization's attempt to acquire another
organization to get access to the latter's :
 1.High Value Customer's
 2.Large Distribution network
 3.Market tested skills
 rather than building these over time on their own.
 M&A`s have become an integral part of the
corporate finance world.
 Innumerable M&A transactions have brought
together separate companies and tuning them
into large ones .

M&A`s - Introduction

 Institutions decide to merge because they

perceive that they can together create greater
shareholder value than what they could when
they were separate.
 Merger is essentially a partnership between
equals where as acquisition is offer made by a
stronger entity of a weaker one.
 M&A`s are a part of corporate finance strategy
and often used by firm's to increase their asset
size, gain market share and diversity.
Introduction
 Corporate Restructuring of business is an integral
part of the new economic paradigm.
 As controls and restrictions give way to competition
and free trade, restructuring and reorganization
become essential. Restructuring usually involves
major organizational change such as a shift in
corporate strategies to meet increased competition
or changed. Many successful executives have
experience with mergers and acquisitions.
 With so many experienced executives, why do over
half of US mergers fail? Think about it. What lessons
we have learned about successful organizational
integration?
HR Synergy…….forgotten
Password
 Various synergies like operating , financial ,
managerial , sales are considered as the
additional benefit that can be derived from
resources of two companies
 But most important motive and synergy
which is either forgotten or given a back
seat is Human Resources Synergy which in
fact is necessary for converting the vision of
M&A through Economic Value Added and
Market Value Added .
There is always a better way
 The press release announcing any new merger
or acquisition is always quick to announce the
benefit to the consumer first, the stockholder
maybe second, and the principals (CEOs,
investment bankers, lawyers ) and employees
never.
 For employees such announcement mean loss
of job , profile , humiliation or disregard but
there can be a different and better way of
handling this issue as human being have
emotions………….
M&A announcements……..
 Times of India , 5th Oct ,2007
 India beats China in overseas M&As
 Indian companies have surprassed their
Chinese counterparts in making cross border
merger and acquisitions with a 126% annual
growth , while the Asia Pacific register a rise of
36% in overseas M&As
 Australia – Most acquisitive nation with $ 38.
billion spent on 217 deals outside the region
 China and India are the second and third with $
17.3 and $ 16.1 billion respectively.
M&A announcements………
 Business Line ,6 th OCT ,2007 :
 Bharti ,Vodafone ,Idea may merge tower Biz :
This could be one of the biggest mergers in the
telecom industry .After entering into agreement
to share their infrastructure ,GSM mobile
companies are now exploring possibility of
merging their passive infrastructure to form a
mega tower company
 Apart from leveraging an operational efficiency ,
the merger is aimed at getting a valuation for
their countrywide infrastructure .
 The three companies together own more than
70000 towers across the country
Case Study – Merger of ANZ Grindlays Bank with
Standard Chartered Bank

 Abstract of the case and Synergies :

 In July 2001, this merger helped the merged bank achieve

significant synergies through operating efficiencies and
revenue enhancements. The deal added to the strength of
Standard Chartered Bank’s management resources and
helped it become number one in India. It also helps in
create premier international banking business in Middle
East and Asia, thus emerging as a leading consumer bank
in the region.

 Benefits of Merger accrued, Synergies of combined entity

resulted in positive post merger performance – This is what
the WORLD knows but what the World donot know is
what happened to employees of the acquired entity.
Case Study – Merger of ANZ Grindlays Bank
with Standard Chartered Bank

 VRS , forced retirement , lowering of retirement

age from 60 to 58 to 55 , golden hand shake for
staff aged 53 -55 , interviews for existing staff
members for survival of their same job position
in the merged entity , pressures to opt for
management cadres for clerical staff , transfer of
clerks to Resource Management Cell ( No work
and made to sit idle) .
 Clerical staff was offered waiver of loans where
as management staff that the organization want
to throw out were labeled as non performer.
Change Management
 Change has become an inevitable part of the organizational
working , survival and continuation of an organization depends
on how it can foresee and tune its corporate objectives towards
the changing environment
 Stiff competition , impact of globalization, technology
advantages entry into new markets have made Merger's and
Acquisitions as an avenue being used increasingly by
institution's to expand their operations and position themselves
in the globally competitive market
 When the process of M & A takes place , the changes that
resonate both at the acquirer and the acquire entity are
inexplicable .
 For the entire process of M & A to be smooth , the foremost
requirement is proper “ Change Management ”
Stages in M & A process
 Primary Plan
 - Manpower pattern
 - Age profile
 - Knowledge Level
 - Organizational Structure
 - Infrastructure &
Technology
 - Territorial geographical
distribution of
branches /offices
 - Union / association
representation /
recognition
 Conduct of Due Diligence
 - Wage , Salary , &
Allowances
 - Policies , procedures ,
guidelines
 - Method of
categorization
 - Work flow patterns &
methodology
 - Dissemination of
powers & mode of
exercising
 - Infrastructure for
training & development
Primary Plan Stage

 The seed is planted and the germination starts

 The acquirer organization in case of acquisition
or the entities in a merging process scouts for a
suitable takeover in the case of former or for a
matching partner in the case of the latter
 Meeting of minds , an offer and initial schedule
or plan
 This stage can be correlated with the present
state in the change management process
Conduct of Due Diligence
Stage
 Where the financial and other audit are
conducted to estimate and forecast the
overall health of the organization and its
relevant impact after the M & A process
 This stage can be correlated with the
transition stage in the change
management process though a small
portion in this state can also be related
to the primary plan stage
Final Integration Stage
 Combines the two entities resulting in the genesis of an
integrated efficient new organization
 This stage can be correlated with the desired state in the
change management process
 The primary and plan stage and the due diligence stages
are the important stages in M & A
 In these stages attention is more towards financial ,
infrastructure , operational and legal elements of M & A `s
 In spite of best attention and synergy these elements are
taken adequate care , in final integration it is found that
there are delays in the integration that the integrated
entity has not come in its desired shaped , revealing
deviations.
Reasons for Wishing away HR
aspects
 Emphasis is more on the other functions such as
finance , infrastructure technology etc.
 The hypothesis that the human issue is more sensitive
but will settle in due course after initial resistance
 The ignorance of the fact or taking for granted that the
people related issues are less critical
 The absence of proper representation to give voice to the
people related view in M & A team
 Recognition of human resource issue as one of the
indicators for the success or failure of any M & A process
is therefore imperative
 The importance of this factor is not limited to any stage in
the M & A process but is omnipresent in each of this
stage
Role of Unions and
Association
 U & A have played an important role in the sustenance of
banking as well as public & private sector industries in India
 Industrial relations have been cordial because of the concept of
participative management built into the system.
 U & A `s should be taken into confidence in total M & A process
 They can play a very effective role in allying fears in the minds
and also assist the management to overcome resistance .
 They will have to act as an important vehicle of movement
towards the acceptability of merger by understanding the
concern of staff of both the organization
 On the part of the management of both the organizations ,
involved in the proposed merger process , it is they who will
have to explain and drive home the fine points of the win win
scenario of the merged entity
Disparities
 The multifaceted dimension of the human
resource aspects in banks and corporate
reflects the following disparities :
 Work methodology and work flow
 Individual and cultural aspects
 Policy and technology
 Structural aspects
 Salary structure
 Representation and recognition difference of
employees ( small ) unions / association
Human aspects in M & As – Final
Integration – Coming together
Final Integration
 Retaining and enhancing the confidence of
employees
 Synergy of staff
 Rationalization & redeployment of manpower
 Rationalization of wage structure
 Culmination of policies / procedures and
guidelines
 Technology matching
 Adoption of new work pattern & its uniform
implementation
Role of Key person or Core
Group by HR Person
 First point of contact as regards HR issues
 A compass to provide necessary direction to the top
management
 Strategy makers to come out with appropriate organizational
structure
 An analyst to study the personnel policies , procedures and
guidelines in both the entities without any bias or halo effect
 Abridge between the representatives of the workforce i.e.
unions and associations and the management and serve as an
advocate / arbitrator / negotiator
 An catalyst or as a main functionary in the relationship building
process
 An conduit and a shock absorber in chalking a smooth road
map for the people related issues in the M& A process
 Mode of selection of HR personnel who will be a pert of M&A
team
Distinct Traits of HR person or
team
 Unbiased Attitude : Both entities are represented
 Flexible Mind : Best of practices in various processes for
new entity
 Sensitivity to needs : Emotions and mind set or
employees to carefully addresses without conflicts
 Commitment :Integrate HR systems and processes in the
new entity
 Good communication skills
 Knowledgeable
 Result orientation
 Vision orientation
 Analytical orientation
 Ability to mentor
Functions of HR personnel
/Team in the M&A process
 Initiation of new System : Integration of HR system of both
companies
 Assessment of HR related functions : SWOT analysis or a
diagnostic study
 Chalking out initiatives
 Creating new organizational structures
 Defining job and responsibilities
 Formation of appropriate forums / teams to oversee the
transition process
 Formulating plans for communication
 Structuring training and development
 Creating the HR Structure
 Competency , mapping and management development of skill
sets
 Correlation of technology and HR
Conclusion

 People need growth and wish to move

ahead through training and development,
promotions and job rotation.
 They contribute to the success of the
organizations and in fact they are partners
so caring from them during important
decisions like M&Aas, they should be taken
care off for successful vision of achieving
synergy and at least there is a better way to
manage M&As based on Human values…….
While dealing with human resource during the M&A
process requires an empathetic approach giving respect
to sentiments and human angle …………..feeling and
healing process.
Thank You

.
Dr Narinder Kumar Bhasin

nkbhasin@rediffmail.com,
dr.narinder.bhasin @ gmail.com
mobile no : 09910110182