By

Purnima Kumar Amit Madkar Rahul Raje Prachi Patil Prajakta Malwad

Merger ?
When two or more existing firms combine together and form a new entity

It occurs through 2 ways :

Merger through Absorption absorption of TFL into TCL Merger through Consolidation combination 2 or more companies
forming a new company - Hindustan Computers Ltd., Hindustan Instruments Ltd., and Indian Reprographics Ltd., to an entirely new company called HCL Ltd.

SICA(Sick Industrial Companies Act) provided for establishment of BIFR (Board for Industrial and Financial Reconstruction) and AAIFR (Appellate Authority for Industrial and Financial Reconstruction ) in 1985

Acquisition?
Acquiring of ownership rights in the property and asset without any combination of companies Firms have independent and separate legal entity change in control of company affairs

Takeover ?
Series of transacting whereby a person, individual, group of individuals or a company acquires control over the assets of a company It takes place :
Directly becoming owner of the assets Acquisition by buying majority of shares Indirectly Obtaining control of the management

Takeover of a sick unit for its revival Bank is the agent

Takeover of Modi Cements Ltd. By Gujarat Ambuja Cement Ltd. was an arranged takeover after the financial reconstruction Modi Cement Ltd.

Difference between Takeover and Acquisition ?

Takeover is used to reference a hostile takeover where the company being acquired is resisting. In contrast, acquisition is frequently used to describe more friendly acquisitions, or used in conjunction with the word merger, where both companies are willing to join together
Infosys is close to acquiring the health care business of Thomson Reuters in a $700-750 million deal. This will be the largest acquisition by India's second largest information technology services firm

Difference between Takeover and Merger?

In takeover, control of the assets of the acquired company passes to acquirer Merger Decision made by two equals Takeover purchase of smaller company by larger one hostile takeover Distinct legal identity of companies is maintained

TATA-CORUS takeover - Tata was one of the lowest cost steel producers in the world and had self sufficiency in raw material. Corus was fighting to keep its productions costs under control and was on the look out for sources of iron ore.

Often, executives are so focused on the financial and procedural aspects of the takeover that they ignore so-called "intangible assets," such as business culture, human capital, company structure and corporate governance. In essence, they are so obsessed with numbers that they forget about people Research shows that consistently 65% of mergers and acquisitions that fail do so because of people issues cultural issues, communication issues.

Lack of Communication
most critical need people resist mergers, acquisitions, and especially takeovers at a personal level. The reason why they resist at a personal level is because they have not been told why things must change or how they are going to change.

Lack of Training
As companies merge and acquire one another, they tend to merge technologies. They also merge policies, processes, and procedures. Unaware of the current changes in technologies, policies, processes and procedures due to lack of training which ends up negative influence.

Loss of Key People

Good people key people tend to leave organizations at this particular point in time.Many people are afraid of losing their jobs. It is a wellknown fact in the business world that mergers and acquisitions usually cause staff reductions. Weve already addressed that. Its true. That is one of the reasons why they do it. People who are talented the exact kind of people whom you want to retain in the organization are exactly the kind of people who are going to put their resumes out and probably go to your competitor. That is a tremendous loss for an organization.

Corporate Culture Clash & Power Politics

Corporate culture, as we know, is a fundamental asset for organizations. If one company with one style takes over a company with another style, that is indeed a difference and it is a huge difference.Some people feel comfortable in the one setting and some do not issue of national cultures

 continued

Multiple waves of anxiety and culture clashes Employee adjustment

Communication suspicion, demoralization

Emotional and intellectual cost incurred Employee insecurity loss of identity, key people, unequal compensation, lay off Leadership

Stages of recognition of HR problems in M&A

McCann and Gilkey (1988) have developed a seven-step model of the merger process that provides a useful framework for considering the difficult human resource problems that may arise in any M&A.

THE PRE-MERGER STAGE

First Step - Strategic Planning Acquiring firm develops its mission statement. Second Stage Firm primarily concerned with Organization. Creating a specific team to manage M&A activity Third Stage - Searching Searching for potential acquisitions and thoroughly investigating the merits of each is the third step of the merger process.

Fourth Step Analysis and Offer Primary objective is to evaluate the fit of the two firms. Three types of fitfinancial, business and organizational fit.

The Post-Merger Transition

The last two stages in a M&A are the transition and integration The transition stage is in fact the most poorly managed of all, and consequently it is the stage where most failures occur Management of the transition stage requires a delicate balance between providing a stabilizing influence and creating a climate for change.

HR Interventions
Interventions target emotional support. Activities in this phase are focused on providing stability. Other techniques are intended to create a positive environment for change by decreasing the level of uncertainty and fostering realistic expectations for the future.

The Post-Merger Integration

Changes that are designed to capture synergies are implemented in the integration stage. Procedural Integration Procedural integration is designed to standardize work procedures and improve productivity

Socio-cultural Integration Socio-cultural integration is the final and most difficult task in a merger or acquisition

Managing HR issues

Both sides should be open to new possibilities Co-operation, flexibility and accurate channels of information flow Planning and assessment process Employee participation Top management receptive, generate consensus and win acceptance of employees

Role of HR in Mergers & Acquisitions

Facilitate transition teams Educate managers and employees educational seminars

Reinforce the new culture

What they want to keep? What they dont want to keep? What they want to introduce?

Planning, Transition and Integration teams Handling redundancies and communication Effective HR integration
HR practices Remuneration Career development Employee relations Employee retention

HR due diligence

Employment policy and compensation Understand the skills of present HR team Understand organization strategy, structure and culture Manpower planning existing & required Identify key personnel retain them Job descriptions existing & required Working style of management Union

THANK YOU