TERM PAPER OF

HUMAN RESOURCE MANAGEMENT

ON
“Human Side of Mergers & Acquisitions”

SUBMITTED TO:- SUBMITTED BY:-

Ms. Gurneet Kaur Rajiv Kumar
A-17
Reg. No.10901437
Sec. R1902
MBA-LSB

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 LOVELY PROFESSIONAL UNIVERSITY

ACKNOWLEDGEMENT
I feel pleasure to give the credit of my term paper not only to one individual as this work
is integrated effort of all those who concerned with it. I want to owe my thanks to all those
individuals who guided me to move on the track.
This report entitled “HUMAN SIDE MEGER AND AQUISITION”.
I sincerely express my gratitude and lot of thanks to Ms. Gurneet Kaur (Lect. , Human
Resource Managemen) also thank to my friends for helping me in completing my Term
paper and give me better ideas to doing my job and making it a great success.
I would like to express my deep sense of gratitude to staff of LOVELY SCHOOL OF
BUSINESS who introduced me to the subject and under whose guidance I am able to
complete my project.

RAJIV KUMAR
A17
RR1902
MBA 2nd sem.

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 INDEX
1.Introduction………………………………………………page no.4

2.Distinguish B/W Merger & Acquisition………………..page no.4

3.Types of Merger…………………………………………page no.5

4.Motive behind M&A…………………………………….page no.5

5.Effec on Management………………………………… page no.5

6.Reviw of Litrature 0f 10 Articles……………………….page no.6

7.Managing all the HR issues……………………………..page no.11

8.Critical appraisel and summery of M&A………………page no.15

9.Bibliography……………………………………………...page no.16

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 INTRODUCTION
The phrase mergers and acquisitions (abbreviated M&A) refers to the aspect of corporate
strategy, corporate finance and management dealing with the buying, selling and combining of
different companies that can aid, finance, or help a growing company in a given industry grow
rapidly without having to create another business entity.
Acquisition-An acquisition, also known as a takeover or a buyout or "merger", is the buying of
one company (the ‘target’) by another. An acquisition may be friendly or hostile. In the former
case, the companies cooperate in negotiations; in the latter case, the takeover target is unwilling
to be bought or the target's board has no prior knowledge of the offer. Acquisition usually refers
to a purchase of a smaller firm by a larger one. Sometimes, however, a smaller firm will acquire
management control of a larger or longer established company and keep its name for the
combined entity. This is known as a reverse takeover. Another type of acquisition is reverse
merger, a deal that enables a private company to get publicly listed in a short time period.
A reverse merger occurs when a private company that has strong prospects and is eager to raise
financing buys a publicly listed shell company, usually one with no business and limited assets.
Achieving acquisition success has proven to be very difficult, while various studies have shown
that 50% of acquisitions were unsuccessful The acquisition process is very complex, with many
dimensions influencing its outcome

Distinction between mergers and acquisitions

Although they are often uttered in the same breath and used as though they were synonymous,
the terms merger and acquisition mean slightly different things.
When one company takes over another and clearly establishes itself as the new owner, the
purchase is called an acquisition. From a legal point of view, the target company ceases to exist,
the buyer "swallows" the business and the buyer's stock continues to be traded.
In the pure sense of the term, a merger happens when two firms agree to go forward as a single
new company rather than remain separately owned and operated. This kind of action is more
precisely referred to as a "merger of equals". The firms are often of about the same size. Both
companies' stocks are surrendered and new company stock is issued in its place. For example, in
the 1999 merger of GlaxoWellcome and SmithKline Beecham, both firms ceased to exist when
they merged, and a new company, GlaxoSmithKline, was created.
In practice, however, actual mergers of equals don't happen very often. Usually, one company
will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that
the action is a merger of equals, even if it is technically an acquisition. Being bought out often
carries negative connotations, therefore, by describing the deal euphemistically as a merger, deal
makers and top managers try to make the takeover more palatable. An example of this would be
the takeover of Chrysler by Daimler-Benz in 1999 which was widely referred to in the time.
A purchase deal will also be called a merger when both CEOs agree that joining together is in the
best interest of both of their companies. But when the deal is unfriendly - that is, when the target
company does not want to be purchased - it is always regarded as an acquisition.

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 Types of Merger
Business firms make use of mergers and acquisitions for consolidation of markets as well as for
gaining a competitive edge in the industry.
Merger types can be broadly classified into the following five subheads as described below.
They are Horizontal Merger, Conglomeration, Vertical Merger, Product-Extension Merger and
Market-Extension Merger.
1.Horizontal Merger refers to the merger of two companies who are direct competitors of
one another.They serve the same market and sell the same product.
2.Conglomeration Merger refers to the merger of companies, which do not either sell any
related products or cater to any related markets. Here, the two companies entering the merger
process do not possess any common business ties.
3.Vertical Merger is effected either between a company and a customer or between a
company and a supplier
4.Product-Extension Merger is executed among companies, which sell different products
of a related category. They also seek to serve a common market. This type of merger enables the
new company to go in for a pooling in of their products so as to serve a common market, which
was earlier fragmented among them.
5.Market-Extension Merger occurs between two companies that sell identical products in
different markets. It basically expands the market base of the product.

MOTIVE BEHIND M & A

The dominant rationale used to explain M&A activity is that acquiring firms seek improved
financial performance. The following motives are considered to improve financial performance:
 Economy of scale: This refers to the fact that the combined company can often reduce its
fixed costs by removing duplicate departments or operations, lowering the costs of the
company relative to the same revenue stream, thus increasing profit margins.
 Economy of scope: This refers to the efficiencies primarily associated with demand-side
changes, such as increasing or decreasing the scope of marketing and distribution, of
different types of products.
 Increased revenue or market share: This assumes that the buyer will be absorbing a major
competitor and thus increase its market power (by capturing increased market share) to set
prices.
 Cross-selling: For example, a bank buying a stock broker could then sell its banking
products to the stock broker's customers, while the broker can sign up the bank's customers
for brokerage accounts. Or, a manufacturer can acquire and sell complementary products.
 Synergy: For example, managerial economies such as the increased opportunity of
managerial specialization. Another example are purchasing economies due to increased order
size and associated bulk-buying discounts.
 Taxation: A profitable company can buy a loss maker to use the target's loss as their
advantage by reducing their tax liability. In the United States and many other countries, rules
are in place to limit the ability of profitable companies to "shop" for loss making companies,
limiting the tax motive of an acquiring company.
 Geographical or other diversification: This is designed to smooth the earnings results of a
company, which over the long term smoothens the stock price of a company, giving

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 conservative investors more confidence in investing in the company. However, this does not
always deliver value to shareholders (see below).
 Resource transfer: resources are unevenly distributed across firms (Barney, 1991) and the
interaction of target and acquiring firm resources can create value through either
overcoming information asymmetry or by combining scarce resources.

EFFECT ON MANAGEMENT
A study published in the July/August 2008 issue of the Journal of Business Strategy suggests
that mergers and acquisitions destroy leadership continuity in target companies’ top management
teams for at least a decade following a deal. The study found that target companies lose 21
percent of their executives each year for at least 10 years following an acquisition – more than
double the turnover experienced in non-merged firms.

Review Of Litrature
Article 1.Mergers and acquisitions as a human resource strategy: Evidence
from US banking firms
Absracts-
Mergers and acquisitions (M&A) is treated as a long-term strategic orientation based on
human resource advantage rather than a tactic to pursue short-term goals. Using a sample of 267
US banking firms, the main and interaction effects of M&A intensity, HR capability, and in-state
propensity on four firm performance measures were examined. The findings confirm that
banking M&A could be very effective when the firm had high HR capability. Evidence was also
found that HR capability had a direct impact on firm performance. Although in-state M&A
strategy was in general superior to out-of-state M&A strategy, a firm with excellent HR
capability might narrow the performance difference between in-state and out-of-state M&A.

Article 2.HR'S Role in Mergers and Acquisitions - Human Resource

Management
Abstracs
The key HR initiatives have included:-
* Development of preliminary organizational designs and identification of the top three levels of
management.
* Assessment of critical players and deployment of appropriate resources in the new company.
* Retention of key people and separation of redundant staff.
* Development of a total rewards strategy for the combined companies.
* Communications strategy development and implementation.
* Integration of payroll benefits and HR-IS.
* An ability to do all of the above with speed.
Many companies report that their mergers are successful but admit the end results aren't as
successful as they could have been. Recent studies place the success rate of merged companies at

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30 to 60 percent, depending on what criteria you measure. No matter how flawless a deal seems
on paper, the results are often disappointing. Most merged organizations lose 1 to 10 percent of
their market value in the first year after the merger. Only 28 percent of companies said they did a
good job of assessing the culture of their merging organizations before the deal, only 26 percent
said they had put the right people in the right roles during the merger, and a scant 15 percent said
they had successfully communicated the vision and goals after the union.
Some guiding principles:
* Take definitive action and make decisions quickly--the secret for holding onto good people.
* Be candid with employees, and treat them with respect. Let them know that the combined
entity will be a more valuable organization.
* Whenever possible, use ownership of the company as represented by stock options and stock
grants to get everyone pulling in the same direction.
* Be honest about the people decisions that must be made.
* Treat those leaving with the same respect and attention as those staying.

Article 3. The Impact of Culture on Mergers & Acquisitions

Abstracts-
There are following impact:-
1: Preoccupation- In countries where people identify largely with groups, people tend to look
for support within their group. In France and Italy, people caught in the midst of a merger or
acquisition often turn to unions. If unions cannot provide answers because they have been
excluded from the negotiation process, they are likely to go on strike. These strikes may do much
more damage to the organization than comparable Canadian strikes; for example, the strike by
French railroad and subway workers in December 1995 resulted in the demise of the Juppé
government. Multiply this by 65 (there are 65 working days per quarter) and compare this
number with the amount in gross sales revenue that the firm will have to generate to the bottom
line to offset this loss in productivity.
2: List-making- As soon as the merger is announced and the first calls to action proclaimed, the
reality sinks in. The "list" is overwhelming. Personal and departmental needs drive the allocation
of resources. Quickly, as the days build, there is a widening disconnect between the financial and
market-based goals of the merger and real-time allocation of effort. During the first 90 days,
focus and get everyone to focus on the 20% of the goals that yield 80% of the economic value.
Dealing with uncertainty explicitly is critical to the success of M&As.
3: Organizational Proliferation-In Canadian organizations, many task forces, committees and
integration teams are created to handle all the lists and to plan new lists. Integration structures
and transition teams designed to be all-inclusive and to represent a sign of "new partnership" will
weigh heavily on an organization seeking to keep its eye on its customers and the market. More
effort will be placed on temporary rules and reporting relationships than the work itself. . Form
small, agile, quick-acting teams, including people from both sides of the M&A, with a clear
mission and empowered integration team managers with direct access to senior management and
to their support. Transitions do not need to be demonstrations of democracy in action.
4: Infrequent and irrelevant communication-Fear and a lack of all the answers deters top
management from providing the information that customers, shareholders and employees need to
redirect their action to the value-added of the deal. Rumor fills mystery and vacuums. When
there is communication, it often lacks information and substance that explains and supports

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stakeholders' interests. . Frequent communication, repeated at least 7 times through multiple
avenues - print, voice mail, e-mail, meetings, and video. In times of stress, the "noise" of survival
and uncertainty drowns out the message. The communication strategy needs to take
communication style preferences into account, as in the Norwegian - American example
mentioned above
5: Triangulation-Without clear lines of authority and clear understanding of where they fit in,
employees and managers are caught in a web of conflicting objectives and old loyalties. This
type of organizational and personal strangulation robs the new entity of the very energy it needs
to overcome the losses in productivity
6: The relatives- Time in a merger is accelerated, compressed and merciless. In Canada, publicly
held companies need to show clear results at the end of the first quarter after the announcement.
Individuals going through a merger have to work at an accelerated pace at the very same time
that the inner adaptation of change - personal and psychological transition - weighs them down
and operates on personal, rather than linear time. Adapt to the realities of change and transition -
they are different experiences and each individual will have their own way of going through
them.
7: The guiding light- At a time when leadership and active management is most called for, the
stress and uncertainties associated with the merger causes an inward focus and a retreat to safe
and high ground. More leadership is needed, at this time, than less. One of the primary roles of a
leader is to articulate a vision and inspire others to join in that vision. Proclaiming a new vision
and handing out laminated cards, however, does not create a new vision for the new entity.

Article 4. Mergers and Acquisitions in India

Abstracts-
The merger and acquisition business deals in India amounted to $40 billion during the initial 2
months in the year 2007. The total estimated value of mergers and acquisitions in India for 2007
was greater than $100 billion. It is twice the amount of mergers and acquisitions in 2006. Till
recent past, the incidence of Indian entrepreneurs acquiring foreign enterprises was not so
common. The situation has undergone a sea change in the last couple of years. Acquisition of
foreign companies by the Indian businesses has been the latest trend in the Indian corporate
sector. The Indian IT and ITES sectors have already proved their potential in the global market.
The other Indian sectors are also following the same trend. The increased participation of the
Indian companies in the global corporate sector has further facilitated the merger and acquisition
activities in India.
Recently the Indian companies have undertaken some important acquisitions. Some of those are
follows:
Hindalco acquired Canada based Novelis. The deal involved transaction of $5,982 million. Tata
Steel acquired Corus Group plc. The acquisition deal amounted to $12,000 million. Dr. Reddy's
Labs acquired Betapharm through a deal worth of $597 million. Ranbaxy Labs acquired Terapia
SA. The deal amounted to $324 million. Suzlon Energy acquired Hansen Group through a deal
of $565 million. The acquisition of Daewoo Electronics Corp. by Videocon involved transaction
of $729 million. HPCL acquired Kenya Petroleum Refinery Ltd.. The deal amounted to $500
million. VSNL acquired Teleglobe through a deal of $239 million.

Article 5.International Mergers and Acquisitions-

Abstracts-
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 International mergers and acquisitions are performed for the purpose of obtaining some
strategic benefits in the markets of a particular country. With the help of international mergers
and acquisitions, multinational corporations can enjoy a number of advantages, which include
economies of scale and market dominance. International mergers and acquisitions play an
important role behind the growth of a company. These deals or transactions help a large number
of companies penetrate into new markets fast and attain economies of scale. They also stimulate
foreign direct investment or FDI.
Methods of Financing International Mergers and Acquisitions
 Financing (or taking loans)
 Cash
 Factoring
 Hybrid Financing
Instances of the major international mergers and acquisitions:
 The merger of British Petroleum (BP) with Amoco (erstwhile Standard Oil of Indiana)
 The acquisition of Mannesmann AG by Vodafone Airtouch PLC
 The merger of Exxon with Mobil (The name of the company formed as a result of the
merger is ExxonMobil)
 The acquisition of AirTouch Communications by the Vodafone Group
 The acquisition of Compaq by Hewlett-Packard
 The acquisition of Shell Transport & Trading Company by Royal Dutch Petroleum
Company
 The merger of Bank One Corporation with JPMorgan Chase & Company
Factors Affecting International Mergers and Acquisitions
 Corporate governance
 Company acts
 The capacity of average workers
 Expectation of the consumers
 Political features of a country
 Tradition and culture of a country

Article 6.Mergers and Acquisitions in Banking Sector

Abstracts-
Mergers and acquisitions in banking sector are forms of horizontal merger because the
merging entities are involved in the same kind of business or commercial activities. Sometimes,
non-banking financialinstitutions are also merged with other banks if they provide similar type of
services. Through mergers and acquisitions in the banking sector, the banks look for strategic
benefits in the banking sector. They also try to enhance their customer base. Mergers and
acquisitions in the banking sector have the capacity to ensure efficiency, profitability and
synergy. They also help to form and grow shareholder value.
Major Mergers and Acquisitions in the Banking Sector of the United States-
 The merger of Chase Manhattan Corporation with J.P. Morgan & Company. The name
of the new company formed as a result of the merger is J.P. Morgan Chase & Company.
 The merger of Firstar Corporation with U.S. Bancorp. The name of the resultant entity is
U.S. Bancorp.

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  The merger of First Union Corporation with Wachovia Corporation. The name of the
newly formed company is Wachovia Corporation.

Article 7. 450 jobs go as Vodafone, Hutch merge Down Under-

Abstracts-
The fresh merger between Vodafone Australia and Hutchison Australia’s 3 has revealed its
first round of casualties with the announcement that it is off-shoring its call center operations to
India. Up to 450 jobs have been made redundant as a result of the decision. Vodafone Hutchison
announced that it will relocate the bulk of those 450 call center jobs to India. Around 100 jobs
will stay in Australia but will be moved to another company in Tasmania.
The joint venture has a call center located at Malad in Mumbai jointly run by 3UK and 3
Australia. The Mumbai operation employs 1800 people, Vodafone Hutchison Australia (VHA)
said.Lawyers have warned that it may result in reduced competition.
Article 8. HR Issues in Mergers & Acquisitions
The ability to succeed in a merger depends entirely on the people who are driving the business
- whether they have creativity, capacity to innovate and ability to execute, and more importantly,
whether they can do these things collaboratively.
Stage 1: Pre Combination - The HR issues in the pre merger phase are: -
Identifying reasons for the M&A
 Forming M&A team leader
 Searching for potential partners
 Selecting a partner
 Planning for managing the process of M&A
 Planning to learn from the process
The HR implications in this phase are: -
 Knowledge and understanding need to be disseminated
 Leadership needs to be in place
 Composition of team's impact success
 Systematic and extensive pre-selection and selection
 Conducting thorough due diligence of all areas
 Cultural assessment
 Planning for combination which minimizes problems at a later stage
 Creating practices for learning and knowledge transfer
Stage 2: Combination - The HR issues in this phase are: -
 Selecting the integration manager
 Designing / implementing teams
 Creating the new structure strategies and leadership
 Retaining key employees
 Managing the change process
 involving the stake-holders
 Deciding on HR policies and practices
The HR implications in this phase are: -
 Selecting the appropriate candidate
 Creating team design and selection which are critical for transition and combination
success
 Communicating the benefits of merger

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  Deciding on who stays and who goes
 Establishing a new culture, structure, and HR policies & practices
Stage 3: Solidification & Assessment - The HR issues in the integration phase are: -
 Solidifying the leadership and staffing
 Assessing the new strategies and structure
 Assessing the new culture
 Assessing the new HR policies & practices
 Assessing the concerns of stakeholders
 Revising as needed
 Learning from the process
The HR implications in the integration phase are: -
 Elective leadership and staffing of the new entity
 Creating and evaluating a new structure
 Assessment revision required for melding two cultures
 The concerns of all stakeholders need to be addressed and satisfied
 The new entity must learn
Article 9. Mergers and Acquisitions in Vodafone and Hutch
When a company decides to take over the other, several factors need to be kept in mind.
Considering that such actions are taken to increase the popularity, growth and market reach of a
brand, one has to be aware of the consequences of the deal. How much technological know-
how and expertise exists with the company to actually go ahead and ensure such a process.
Mergers and acquisitions are an important part of brand building. It could also show how
powerful you are as compared to your rival.Hutch and Vodafone,in process Vodafone
acquired Hutch for a whopping 10 billion USD!
Article 10. M&A: The Bridge Over Troubled Waters
It is given by Mr. Dirk Van Dyke,President of valuation services.He believes that in many
areas of technology that there will eventually be a few really big winners and that midsize
companies will have a difficult time competing. That is, there will be either more monopolies
like Microsoft or oligopolies with a few big players with 70-80% market share of an industry.
The desire for companies to become one of the big players will drive a lot of M&A activity, in
his view.
This is another reason that much fewer M&A deals are taking place, because owners of
privately held companies don't want to do deals at lower values than their most recent financing.
He gave an example of a company that had what he thought was a good offer on the table and
walked away because it was less than what it got at its last round of financing. Consequently, the
company recently had to close its door because it ran out of cash.

Managing All The HR Issues

Many M&As fail to achieve the desired synergies because the HR issues are not given the
importance they deserve. This article explains the importance of HR issues for successful M&As
and suggests a few points for companies to ponder on.
In 2003 the value of M&A business in the US was worth $510,866.4. This is much less when
compared to the value of merged and acquired businesses in 1998, amounting to $1.2 trillion.
Though there are still a large number of companies worldwide that believe in the philosophy of
"growing through acquiring", the percentage of failures in M&As has been pulling back quite a

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few. The decade of 1990s saw a spate of mergers and acquisitions in all the important sectors of
business.
However, the success rate of these M&As is estimated to be a mere 30 - 40%.
Companies do announce that their mergers have been successful, but they also accept that
they have not been able to derive the kind of benefits that they expected to, from a merger
or an acquisition.
1.View the merger from the HRM Angle
People issue is one of the most sensitive but often ignored issue in a mergers &
acquisitions scenario. When a decision is taken to merge or acquire, a company analyses
the feasibility on the business, financial and legal fronts, but fails to recognize the
importance attached to the human resources of the firms involved.
Organizations fail to realize that people have the capability to make or break the
alliance. Therefore, it is important for organizations on the verge of integration to analyze
the feasibility of the integration on the human resources front.
Organizational culture and the national culture become two important factors in
determining the feasibility of integration. For example, the organizational culture of
company A might be very open and transparent with free flow of communication in all
directions. People enjoy their freedom of working in an informal and friendly atmosphere.
On the other hand, company B might be known for its stringent privacy system and strict
rules and regulations with marked hierarchical roles. People in this company are used to
work in a bound and regulated environment. A blind eye to these differences would render a
merger between these two companies, disastrous.
Similarly, when it comes to cross-border mergers and acquisitions, care should be taken
to see that the national cultures of the two companies are not drastically different. Hofstede
identified a set of cultural attributes that define and differentiate cultures. They can be
studied under Uncertainty Avoidance, Power Distance, Individualism Vs Collectivism, Future
Orientation and Gender Differentiation. For example, a country like Sweden, which is ranked
high on uncertainty avoidance, would prefer a structured and orderly work environment.

On the other hand, a country like Russia, which is ranked low on the same attribute would
thrive under uncertainty. If a company from Sweden, characterized by orderliness merges
with a company from Russia characterized by uncertainty, it can lead to chaos and
confusion. Therefore, a complete feasibility study on the human resources front is important
while going for a merger or acquisition.
2. Develop the 'HR' Project Plan
A project plan is a critical document that directs and supports the whole process of
integration and should be continuously updated to include the latest developments. The project
plan should define the tasks to be performed in order of their priority. The owner for each task
has to be identified and the responsibilities assigned. It is also important to note that the owner
enjoys the authority to carry out the task successfully. Each task has to be given a due date of
completion and the owner should keep track of the developments and record them. There should
be common forum for exchange of information among the different task owners. In all
probability, these tasks would be interrelated and the success of the project depends on effective
coordination among all the task owners. Project plan is designed for any merger or acquisition.
But, how many HR departments take the pains of designing a project plan exclusively for the HR
activities planning.The project plan should also take into consideration some unavoidable hurdles
that may arise and provide for contingencies.
It is also important to note that the support of other departments like the Finance and the Legal
departments is essential for the successful implementation of the integration plan. Therefore, the
inputs from these departments should be taken into consideration while working on the plan.

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• Organizational culture and structure
• Employee compensation & benefits
• Industrial relations
• Pending employee litigations
• HR policies and procedures
• Key talent analysis
Conduct the 'HR' Due Diligence Review Contd...
In June 1999, Shaw's Supermarkets acquired Star Markets for roughly $500 million. Shaw's at
that time had 126 stores and about $3 billion in volume; Star had 54 stores and $1 billion in
sales. That acquisition was Shaw's largest to date, growing revenue by roughly 50 percent and
increasing its workforce from 20,000 to 32,000. It took eight months from signing the agreement
to Federal Trade Commission approval. Completion of the acquisition and integration--
operationally and culturally--of the two companies required human resources to play a major
role.
The key HR initiatives included:
• Development of preliminary organizational designs and identification of the top three levels of
management
• Assessment of critical players and deployment of appropriate resources in the new company
• Retention of key people and separation of redundant staff
• Development of a total rewards strategy for the combined companies
• Communications strategy development and implementation

3. Compare and develop the strategy to integrate

The next step is of course to compare the structures and systems, and polices and procedures of
the two merging organizations. Standardized systems and structures and policies and procedures
have to be developed to suit the changed needs of a merged organization. The management has
to take an unbiased view while choosing the best suitable systems and procedures. The interest of
the organization, which would presumably be bigger in size, with an expanded business, has to
be the main consideration for any decision. No ego hassles should prevent the management from
taking the most desirable decision for the organization.
The most common issues for comparison and integration would be employee compensation,
administration, benefits and incentives, employee performance management and rewards system,
training and development policy, career advancement prospects, organizational reporting
channels and decision-making levels. The acquiring company might feel that its policies and
systems should be continued with.
4.On The Employee Front
Organizations need to employ a little tact when it comes to handling human resources. There
are two important steps to be taken by the management of both the companies. Identifying the
key resources in both the organizations is the first step. Key resources does not necessarily mean
the top people in the management cadres, but those, who have a following in the company as
knowledgeable and trustworthy colleagues. They can manage a hold on at least some groups of
employees in the organization. It is important to recognize them, take them into confidence and
groom them as the change leaders. They should be given the responsibility of informally
preparing the employees for the merger.

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 Employees should be informed of the decision and the reason behind taking the decision
through a proper channel. The implications of the decision for the employees and the company
should also be conveyed to them. Any queries or apprehensions of the employees should be
taken seriously and properly responded to. Retaining and motivating employees is another major
challenge for the HR department of the organization. One important point to note here is that it is
the most talented resources of the organization that leave it first. Therefore, prompt and timely
action (and not reaction) is essential on part of the HR department. A wait and watch attitude can
only spell doom as the employees wouldn't think on similar lines. They have their career at stake
and they wouldn't want to take any risks on that front. The minute they get the information of
their company going in for a merger or an acquisition, they start looking out for opportunities.
Speed, alacrity and discretion on part of the HR department therefore become very critical.
5.From the horse's mouth
This is what an employee of an acquired IT company had to say:
Treat even the 'acquired employees' with dignity and respect. Give them a reason to believe that
they are valued in the company.
• Keep your communication channels open in all directions. Let the employees know what's in
store for them. Clear all employee apprehensions.
• If downsizing is part of the integration plan, convey the same to the employees, well in
advance. Show your concern for the laid-off employees by providing employment
assistance.believe that they are valued in the company.
• Keep your communication channels open in all directions. Let the employees know what's in
store for them. Clear all employee apprehensions.
• If downsizing is part of the integration plan, convey the same to the employees,well In advance.
Show your concern for the laid-off employees by providing employment assistance.
• Concentrate on retaining and motivating the key talent. Key resources would be the first people
to leave organizations as they have the best opportunities outside.
• Respect the allegiance of the employees to their former employer. In this case, the acquiring
company, which failed to follow these basics, lost nearly 70% of the workforce and struggled to
win the confidence and trust of the rest.
All these initiatives should ensure a company involved in a merger or an acquisition, a successful
integration, from the HR angle.
6.Size matters
Inorganic growth is the fastest way to scale up. Aasif. A. Khan, Director, Fabtech
Technologies International Pvt Ltd shares his views, “Inorganic growth is necessary for those
who believe that a lifetime is too short to realise their ambitions. It is a great strategy for those
who believe that big is beautiful as in some industries small is easy to emulate. Such growth is
also a sure shot formula to get out of the crab and herd mentality which eventually kills!
However, one must never acquire a company with a view to create economies by cutting jobs.
Instead, an acquisition should facilitate the use of skill sets in expanding the existing markets and
creating new markets.”
Apart from the benefits of size and scale, mergers and acquisitions also lead to infusion new
talent into the organisation and add new perspectives and growth possibilities. However, one
needs to have honest intention to avail these benefits. Khan elaborates, “An acquisition is not
merely an acquisition. It is a declaration of your intentions, announcing that you mean serious
business and you are hungry for growth. This itself is enough to inspire talent. Success is the

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byproduct of your intentions and passions. Identifying a particular target establishes your liking
for that company and also for its people, who are an inherent part of it and who have made the
target worthy of your attention. With genuine intention, you can meet any challenge and
succeed.”

7.Coping with challenges

For companies, inorganic growth comes with significant costs. Human resources constitute an
important cost in the process of growth because ignoring the human factor can cause great
damage. While it is the people that drive growth, they can also affect the deal adversely, if not
properly cared for. Before and during the acquisition process, there is constant fear among
employees regarding changes in job, including new roles and assignments as well as possible
loss of job. There is a natural resistant to change, be it the change in corporate culture leading to
a loss of identity within the company, a change in the compensation and benefits or a change in
career path.
How best can HR managers tackle these issues? Rahul Kulkarni, Head, HR at Kale
Consultants advises, “Every merger and acquisition deal boils down to the people. The greatest
challenge on the people front is to integrate two different cultures. In cross border mergers, this
challenge is much more pronounced. Typically, integration should involve a close scrutiny of the
organizational design, the processes, policies, systems and practices. Due diligence should be
applied at the pre-assessment stage with the HR playing a key role in identifying organisational
design, retaining key people, managing their expectations and appropriately utilising resources.
Reward and benefits should also be worked out by the HR in an objective manner. Lastly,
integration cannot be a long drawn process. It should be done with speed, precision and clear
communication. Since HR is at the frontline of organisational change, it is important to be
honest, to hear people out and respond to their anxieties appropriately.”

Critical Appraisal and Summery

After several years of declining activity, mergers and acquisitions (M&As) are making a
comeback in the United States. Yet recent research suggests that many firms are not as prepared
as they should be to manage HR issues related to mergers or to involve HR early in the due
diligence process.
More deals are occurring, and the value of those transactions is also on the rise. Year-end
totals for 2003 marked the first upswing in U.S.-based merger and acquisition activity since the
turn of the century, according to Mergerstat. Nearly 8,000 deals were reported, compared with
7,874 the previous year. What's more, aggregate deal value is on the rise, jumping to $528 billion
from $461.3 billion in 2002.
Mega-deals (those valued at over $1 billion) have had significant impact, but some analysts
have noted that their popularity may be short-lived. In 2003, U.S.-based mega-market deals
jumped to 87 transactions totaling $286.7 billion, up from 68 deals valued at $218.3 billion in the
previous year. Such transactions also boomed in the first quarter of 2004. As many as 30 such
deals were reported, with a total value of more than $214 billion, Mergerstat notes. However,
firms are beginning to question the profitability of such transactions, and deal sizes have
diminished for now.
Regardless of size, many firms are not prepared to meet the people management challenges
that M&As often introduce. A study conducted by Accenture, a global management consulting,

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technology services and outsourcing company, found that only 48% of surveyed firms believe
their post-merger integration practices are sound. The same study suggests that performance
management systems are not adequately tied to merger successes; just 37% of respondents
reported that executives are evaluated according to ongoing integration metrics.
Pre-planning can help firms avoid pitfalls that would otherwise doom a deal, whether a
merger is cross-border or domestic. Mergers fail for three primary reasons, according to a poll by
Thomson Financial and the Association for Corporate Growth: inadequate post-merger
integration, too high a price paid for the acquired business and insufficient communications.
Due diligence is key in pre-planning, but some firms are not doing all they should. Slightly
less than two-thirds of companies surveyed conducted due diligence in the M&A process,
according to a 2004 survey by Corporate Finance magazine. What's more, Bain & Company
reports that half of the 250 senior managers polled noted that their due diligence efforts missed
major M&A problems.
One solution may be to involve HR early in the process. For example, Schneider Electric is
"committed to making the HR function a fully fledged partner at the M&A table" and assures
participation in the M&A operations and processes, notes Jean-Luc Santerre, vice president of
corporate social development for the French firm, which operates in 130 nations. "To achieve
this we have a defined HR process for due diligence and are building one for integration," he
explains. Three areas must be evaluated early in the M&A process - cultural fit, organizational
design and change management.
It's never too early for an organization's HR function to develop some expertise in M&As.
After all, based on current trends, the likelihood of a company's becoming involved in a merger
is increasing. By making basic preparations, HR can help firms update their processes and
procedures and decide if a future M&A would be in their best interest.

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