Effect of Merger &

Acquisition on
Organizational Behaviour

NATIONAL INSTITUTE OF CONSTRUCTION MANAGEMENT AND RESEARCH, PUNE

Merger &
Acquisition
What is it..?

When
two
or
more
companies combines into
one company

MERGER

may merge with existing

co,
form new company
in India merger is called
Amalgamation

ACQUISITION

An Acquisition may be an act of acquiring

effective control by one company over assets
or management of another company without
any combination of companies..
Companies may remain independent, separate
But there may be change in control of
Companies..

Vodafone-Hutchison Essar: $11.1 billion

Effects of Merger and

Acquisition

Motives for Mergers & Acquisitions

Economies
of large
scale
business

Elimination
of
competition

Desire to
Adoption of
enjoy
modern
monopoly
technology
power
Lack of
technical
and
managerial
talent

Benefits of Mergers and

Acquisitions
Greater Value Generation.
Mergers and acquisitions generally succeed in generating cost efficiency through the implementation of
economies of scale. It is expected that the shareholder value of a firm will increase after mergers or
acquisitions.
Gaining Cost Efficiency.
When two companies come together by merger or acquisition, the joint company benefits in terms of cost
efficiency. As the two firms form a new and bigger company, the production is done on a much larger scale.
Increase in market share - An increase in market share is one of the plausible benefits of mergers and
acquisitions.
Gain higher competitiveness - The new firm is usually
more cost-efficient and competitive as compared to its
financially weak parent organization.

10

Merger & Acquisition

Effect on employee morale and commitment ?

No Matter How Exciting the Merger Is

There is always a Sense of Loss

The sense of loss triggers three emotional
stages :
Shock and
Numbness

Suffering

Resolution

The Psychological Shockwaves

No Matter How Competent People Are
Expect an Increase in Uncertainty and Ambiguity.

No Matter How Well the Merger Is Planned and Executed,

Expect the Loss, Uncertainty, and Ambiguity to Lead to a...
Deterioration of Trust.

Expect the Deterioration of Trust and the Ambiguity to Lead

to
Self-Preservation.

Effect on employee morale and

commitment?
Mergers and acquisitions impact the employees or the
workers the most. It is a well known fact that whenever
there is a merger or an acquisition, there are bound to be
lay offs. It results in..

Attitudinal Declines
Stress
Fear of Job Loss
Competitiveness
Loss of Identity
Cultural Shifts

CASE STUDIES

Flipkart & Myntra Acquisition

The huge and most talked about takeover or acquisition of the year.
The seven year old Bangalore based domestic e-retailer acquired
the online fashion portal for an undisclosed amount in May
2014.
Industry analysts and insiders believe it was a $300 million or Rs
2,000 crore deal.
Myntra will continue to operate as a separate entity with its cofounder and CEO Mukesh Bansal joining Flipkart board and heading
the fashion business.
Together, both company heads claimed, they were scripting one of
the largest e-commerce stories.

Flipkart & Myntra Acquisition

Effects of the Acquisition on the Organization
Flipkart shuffled top executives in biggest organizational overhaul to
consolidate its management structure.
Mukesh Bansal heading Flipkarts fashion retail business, in addition
to his role as the head of Myntra.
Realigning of roles and responsibilities at Flipkart to keep pace with
aggressive growth and the dynamic environment.
A collaboration team to look for deeper synergies.
As the initial public offering by Flipkart seems on the horizon, all
Myntra employees will also receive stock options in Flipkart.

Microsoft & Nokia Acquisition

Deal

Microsoft Corp. has completed $7.2 billion acquisition of Nokias devices

and services business in 2014.
Nokia confirmed the completed transaction in a noting that it has completed
the sale of substantially all of its Devices & Services business to Microsoft.
The completion of the acquisition marks the first step in bringing these two
organizations together as one team.
Microsoft will take over Nokia's Devices and Services business, which
includes both Smart Devices and Mobile Devices. In other words: The
Lumia, Asha and X series are now all under Microsoft's umbrella.
Additionally, Nokia also retains its Solutions and Networks division, its CTO
office and a large number of patents.
Stephen Elop, who served as Nokia's president and CEO, is now executive
VP of Microsoft's Devices Group and will report directly to CEO Satya
Nadella.
Additionally, 25,000 Nokia employees will make the transition over to
Microsoft.

Microsoft & Nokia Acquisition

Deal
Effects of the Acquisition on the Organization

Microsoft has announced that it will fire around 18,000 employees over the
next year, or almost 15% of its global workforce of 1,27,000.
The bulk of the layoffs 12,500 will be former Nokia employees who are
no longer needed after the acquisition.
13,000 employees will be fired immediately, or at least notified of their
imminent removal in the next six months.
To put those 18,000 layoffs into perspective, the only other big layoff in
Microsofts history was in 2009, when Ballmer fired 5,900 employees during
the financial recession.

How can companies

create a culture of trust
in such a situation?

Barrier to Acquisitions and

Mergers
Cultural compatibility is the primary concern for Mergers &
Acquisitions.
All things being equal, whether the acquisition actually works seems
to have more to do with how well the two organizations cultures
match up.
Mergers have an unusually high failure rate, and its always
because of people issuesin other words, conflicting
organizational cultures.
A survey by consulting firm A. T. Kearney revealed that 58 percent of
mergers failed to reach their financial goals.

America Online (AOL) and Time

Warner Merger in 2001
The $183 billion merger between America Online (AOL) and Time
Warner in 2001 was the largest in U.S. corporate history.
It was also a disaster. Only 2 years later, the stock had fallen an
astounding 90 percent, and the new company reported what was
then the largest financial loss in U.S. history.
To this day, Time Warner stocktrading around $32 per share in
late 2011remains at a fraction of its former price (around $200 per
share before the merger).
Culture clash is commonly argued to be one of the prominent
causes of AOL Time Warners problems.
The cultures were vastly different. There were open collars and
jeans at AOL. Time Warner was more buttoned-down.

Cultural Barriers
Leaders tend to underestimate the impact of culture on the actual
success of the venture not just in morale, but also money.
Leaders may not be able to comfortably deal with sensitive and
personal issues that come with culture change, especially the
feeling of loss that is often present in both organizations.
People not having the skills or the focus required to effectively
manage through a process that considers culture for the entire
population of the new entity.

Handling Cultural Shifts

Well-defined communications and behaviors.
Norms that define the most appropriate conversations.
New and shared behavior standards to bring all leaders together.

Clearly articulated future state.

Defining what success looks like in the future for the new organization from a
customer, competitive, and internal point of view.
Effective team management to create a compelling future state for the business to
increase the odds of hitting merger and integration goals on time.
Identifying the behaviors, beliefs, and rules of the road that everyone from leaders
to managers to the frontline must demonstrate to evolve the culture in a way that
supports the strategy.

Handling Cultural Shifts

Employee engagement is paramount.
Actively engage everyone in how the merger or integration relates to new norms,
processes, and behaviors.
Common mental model or clear picture of what the new culture and strategy
should hold.
New organizational objectives to individual goals and action.
Effecting the change.

Effective Leadership
1. Meld leadership teams
Bringing together new leadership is challenging. This involves:
- Building Trust
- Mastering Conflict
- Achieving Commitment
- Embracing Accountability
- Owning the Whole
2. Get clear and aligned on future state culture and strategy.
3. Create a clear line of sight for the business

Handling Employees

Employees and staffing

Focus on training
Prepare employees for a culture shift
Motivate your employees during this difficult time
Employee engagement
Reduced job security
Changes to terms and conditions
New opportunities

Five Important Points

1.

Have a well-articulated strategy that identifies how the

merger will be integrated.

2.

Establish a full-time integration team with ample

resources and strong leadership.

3.

Communication from senior management should be

constant and consistent.

4.

Speed in integration is critical.

5.

Create a set of financial and non-financial measures to

track
the
overall
performance
of
the
new company.

Group Opinion
A merger can always be done faster & efficiently, if planned
properly.
Keeping people engaged.
Aligning the people with the culture you want for the
business.
Thinking about the future, not just the present.
Being consistent in your messages.
Keeping leaders visible throughout the process.
Having an overall plan for the entire process.
Using a balance of your people and experts.
Focus on the people first and remember that
technology is just a tool.

Conclusion
The effect of merger or acquisition on the
employees can be negative or positive
depending upon the
Genre of companies
Type of Merger/Acquisition
Rank of Employee
To be in a winwin situation mutually shared
objectives need to be followed by the
organizations.

THANK YOU!