HR in mergers and acquisition

Priya Unadkat

BASIC TERMS:
Merger: The statutory combination of two or more corporations in which one of the corporations survives and the other corporations cease to exist. Acquisitions: Direct purchase or combination of net assets of one company to form a consolidated company or a new company.

Two thirds of mergers fail Largely because of inability to merge cultural and other human factors

HR Issues & their Implications on Various Stages of M&A

Stage 1: Pre Combination Identifying, forming, searching, selecting and planning. The HR implications in this phase Systematic and extensive selection Combination which minimizes problems at a later stage.

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Stage 2: Combination Selecting, designing, creating, retaining and managing The HR implications in this phase Selecting the appropriate candidate Creating team design Communicating the benefits of merger New culture, structure, policies, procedure.

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Stage 3: Solidification & Assessment Solidifying, fine-tuning, assessing, revising and learning. The HR implications in the integration phase

Creating and evaluating a new structure Elective leadership and staffing of the new entity The new entity must learn.

Managing HR Issues in M&A

To manage organizational stress Establish performance criteria Identify who will stay and who will go Create a new organizational structure Assume the leadership of the emerging organization

Role of hr:
Facilitates transition team Educate managers Reinforce new culture Managing with dignities Emotional Support Counteraction to job insecurity Reduce level of uncertainty an fostering realistic expectations Commitment to job may be developed by showing career growth

Managing HR Challenges:
Avoid Quick changes at any levels. Avoid large scale reduction early on the process of amalgamation. Avoid Restructuring pitfalls. Do trim employees based on pragmatic reasons, way to do it, and better pay off compensation.

Due diligence:
An investigation of a business or person prior to signing a contract

Process Of HR Due Diligence

Employee benefit Compensation

HRMS

HR policy & process

HR due diligence

Employee & IR

Organizational development Resources HR operation

How HR works in M&A?

The human resource issues in the mergers and acquisitions (M&A) can be classified in two phases:
The pre-acquisition period The post acquisition period

In pre-acquisition period HR involves assessment of the cultural and organizational differences, which includes
Organizational cultures Role of leaders in the organization Life cycle of the organization Management styles

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The post acquisition activities done by human resource, these are:

The difference in organizational culture

Not only to throw out own culture, values and belief but also have to accept an entirely different/new culture Dissimilar cultures can produce feeling of unfriendliness and discomfort which can lower the commitment and cooperation
US versus THEM attitude Cultural clash , dominant culture Affects decision making, leadership, change, personal success

Cont
Job security
Divert the focus of employees from productive work to issues like job security, changes in designation, career path, working in new departments and fear of working with new teams. Increased political processes that may be underway in the organizations to sustain the importance of the various individuals and departments.

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Differences in human resource system
The human resource systems vary across organizations owing to the differences in the organizational culture, sector differences and national cultural differences.

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Compensation structure and performance appraisal system
Compensation structure and the performance appraisal system among the organizations may also differ creating troubles One of the firms may have performance based pay while other may have higher component of fixed pay.

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Differences in organizational structures
Since the organizational structures have different designations

The acquiring organizations need to develop a mechanism to remove the differences in the grading systems bring them at equal level.

Cont
Employee relations
Employee relations gain more importance in the acquisitions of manufacturing units. The power equation between management and trade unions is bound to change with the acquisition.

This require study of management-union equation, employee contracts, political linkages of the unions, compensation related clauses, number of trade union and dynamics between the unions.