As per the world, Sri Lanka is also now
trending with mergers and acquisitions. As examples very recently Hutch and
Etisalat - two prominent service providers in the telecommunication industry
merged (Business Times, 2018) and one of the Global Giant in the Insurance
sector, Allianz acquired 100% stake in Janashakthi who is ranked #3 in General
Insurance sector in Sri Lanka (Wettasinghe, 2018)
Mergers and acquisitions (M&A) is a
general term that refers to the consolidation of companies or assets
(Investopedia.com, 2018). M&A can include a number of different
transactions, such as mergers, acquisitions, consolidations, tender offers,
purchase of assets and management acquisitions (Investopedia.com, 2018). In all
cases, two companies are involved (Investopedia.com, 2018).
However M&A are not the same terminologies but often it is used
interchangeably. In acquisitions, one organization
will purchase full or a part of another organization. While in merger two or
more than two organizations form one organization (Alao 2010). Merger is the
legal activity in which two or more organizations combine and only one firm
survive as a legal entity (Horne and John 2004).
The benefits arising from M&A are
extended or addition of products, services or technologies, increase its
capabilities and service offerings, improve cash flows or increased
opportunities often arise from acquiring new skills and technologies that
enhance current products (Stahl and Mendenhall,2005).
In 2017, USA M&A volume was
expected to reach its highest level since its last cyclical peak in 2007.
However, total closed M&A deals, measured in $ value are projected to drop
year over year, which signals that the market experiencing fewer M&As in
2017 (watermarkadvisors.com, 2017)
Figure 1.0: Transaction Volume of
Mergers & Acquisitions over the last 30 years.
(Source: Thomson Financial, Institute
for Mergers, Acquisitions and Alliances,2017)
Mergers and acquisitions are used by
companies to fortify and preserve their place in the market place. Human
resources assist in managing any complications or challenges linked to people
in the companies as the merger or acquisition process takes place (Stahl
and Mendenhall,2005), and an estimated 70 percent to 90 percent of all
M&As fail to achieve their anticipated strategic and financial objectives
(Christensen et al,2011). This rate of failure is often
attributed to various HR-related factors, such as incompatible cultures, management
styles, poor motivation, loss of key talent, lack of communication, diminished
trust and uncertainty of long-term goals (Christensen et al, 2011).
However many researches on successful and failed M&As have proved that
involving HR at the very early stages of any merger or acquisition is
important (Love,2000). Hence, at the beginning of any merger or
acquisition procedure, heads of the companies ideally need to reflect on
questions such as how to bring into line the cultures of the organisations, how
to converse, and how to generate sustainable staff assignation as these are
often vital to implementing the transition effectively at a very early stage of
the M&A (Lilliot,2018).
Company Culture
The clash between the cultures of the
combining organizations has received growing attention by both practitioners
and academics (Porter, 1985). Stahl and Mendenhall, (2005) states that human
resources essentially should have a steady grip on the culture of the company
for which they work and must be thorough with the culture of the other
organization prior to making such a determination. Cultural differences may
comprise of how the two organizations describe and measure accomplishment
within the organization; employee benefits (personal time and insurance), how issues
within the company are handled; the management methods of the two companies;
and the overall attitude of the employees towards business functions and the
trade in which they work.
Employee Benefit Schemes
Management team of the purchasing
company evaluate whether the M&A makes strategic and financial sense. Human
resources of the purchasing company explicitly weigh the employee benefits
schemes of the other company to discover any probable glitches, such as a
pension plan running low on funds or a health insurance package that will cost
a substantial amount for the company (Patrick,2015).
Employee Concerns
People habitually fear change, and a
merger or acquisition generates ambiguity and transformation for employees both
of the purchasing company and the purchased company. Human resources in
both companies help even out the transition for employees, helping calm any
uncertainties as well as answering questions about how the merger or
acquisition affects each employee. If the employees of both companies do
not have considerable fear over the transformation, productivity is more likely
to remain as previous. Human resources can detect and address any rumours
about redundancies, office relocation or other changes employees fear, giving
feedback to management about employee worries (Patrick,2015).
Changing Roles and Structure
When one company merges with or
acquires another, some adjustments to both organizations may happen, such as
removing redundant positions or combining teams and departments. The process of
changing the two organizations they work together as one can take some time to
complete and human resources plays an important role in the changes (Stahl
and Mendenhall,2005). Employee engagement is key in this situation as they
may share their experience each other and work towards one common goal. Human
resources should communicates to employees the changes
in who they report to, what work group or team employees are
assigned to as well as any changes to different positions’ roles in the
organization (Stahl and Mendenhall,2005). Human resources may work
along with the management and to alter the job descriptions of employees in
various positions, ensuring everyone understands his role in the newly
transformed organization (Armstrong,2010). The pressures on organisations
to change will increase over the next decades and methods managers have used in
attempt to transform their companies into stronger competitors using methods
such as total quality management, reengineering, right sizing, restructuring,
and cultural change mostly fail, because they fail to alter behaviour of
employees (Kotter,1996).
Once the organisations have merged,
assessment of the staff is vital. Effectiveness leadership can vary
considerably in relation to integration, specifically the process to ensure
that employees feel equipped and empowered to talk about the M&A with
clients (Andrew1998). When
Janashakthi Insurance acquired AIA General Insurance in 2016, some of the
unsatisfied call center employees of AIA have given destructive impression on
the acquisition where it had a negative impact in retaining the AIA customers
with Janashakthi.
Therefore in conclusion it is vital for
the success of any M&A to keep employees satisfied and make them feel
secured. According to Stahl and Mendenhall (2005) several studies have
been carried out to evaluate whether Mergers and Acquisitions have been
value enhancing or destructive for organizations, and the
results are mixed. The outcome of these studies emphasise that Change will
always cause uncertainty in an organisation but, by managing that change and
ensuring good communication with employees, companies can avoid unnecessary
risk of a M&A failure. Therefore a professional Human Resource Management
System is an essential and integral part of a successful Merger or an
Acquisition for the new venture’s strong foundation (Stahl and
Mendenhall,2005).
References:
Alao, R. O. (2010). Mergers and
Acquisitions (M&As) in the Nigerian Banking Industry: An Advocate of three
Mega Banks. European Journal of Social Sciences, 15(4), 554-563.
Andrew, J.S. (1998) Mergers and
Acquisitions from A to Z: Strategic and Practical Guidance for Buyers and
Sellers.1st ed. New York, AMACOM
Armstrong, M. (2010). Armstrong’s
essential human resource management practice. London, Kogan Page.
Business Times (2018) Hutch, Etisalat
merge Sri Lanka mobile ops. Sunday Times [online] 29 April
2018, available at http://www.sundaytimes.lk/180429/business-times/hutch-etisalat-merge-sri-lanka-mobile-ops-291937.html. [Accessed on 26 May 2018].
Christensen, C.M., Alton, R., Rising,
C., & Waldeck, A. (2011, March). The Big Idea: The New M&A
Playbook. Harvard Business Review.
Horne, J. C. V., & John M.
Wachowicz, J. (2004). Fundamentals of Financial Management (12th ed.): Prentice
Hall.
Kotter, J. P. (1996) Leading
Change. Boston: Harvard Business School Press.
Lilliot, L. (2018), Mergers &
acquisitions. Harvard Law School Library. available at <https://guides.library.harvard.edu/mergers#s-lg-page-section-2070046>. [Accessed on 22nd May 2018].
Love, C. (2000), Mergers and
Acquisitions: The Role of HRM in Success, Ontario: Industrial Relations
Centre.
Merger and Acquisitions - M&A
INVESTOPEDIA [Online]. Available at <https://www.investopedia.com/terms/m/mergersandacquisitions.asp>. [Accessed on 5th May 2018].
Patrick A.G. (2015). Mergers,
Acquisitions, and Corporate Restructurings. 6th ed.
New Jersey, John Willey & Sons.
Porter, M. E. Competitive
analysis. New York: Fee Press, 1985
Stahl, G.K. and Mendenhall, M. E.
(2005) Mergers and Acquisitions: Managing Culture and Human Resources. California,
Stanford University Press.
Watermark Advisors (July, 2017) Q2 2017
M&A Market Report. Watermark Advisors [Online]. Available
at https://watermarkadvisors.com/news/q2-2017-ma-market-report/. {Accessed on 5th May 2018].
Webber, Y. (1996) Corporate Cultural Fit and Performance in Mergers and Acquisitions. Human Relations, 49(9) pp.1181-1202.
Wettasinghe, C. (2018) Germany’s
Allianz acquires Janashakthi’s general business for Rs. 16.4bn. Daily
Mirror [online] 3 February 2018, Available at <https://daily
mirror.lk/article/Germany-s-Allianz-acquires-Janashakthi-s-general-insurance-business-for-Rs-bn-145144.html>. [Accessed on 26 May 2018).
when two companies merges HR is doing a important part because when the companies join HR is should evaluate that the employees who are coning to join to the new company will not loose anything which there already getting from their prevision company and in meantime the benefits what are they getting need to be matched the new company employees benefit if not the new company will face huge issues from the employees who are already worked their for long time so HR management part is very important on this
ReplyDeleteYes That's true. But it is very difficult for HR dept to analyse each & every person's perks individually, but it has to come as a common management decision.
DeleteMerger refers to combining of two companies where one new company will continue to exist. Merger is combining of two or more companies, generally by offering the stockholders of one company securities in the acquiring company in exchange for the surrender of their stock. It can also be defined as an arrangement whereby the assets of two or more companies become vested in or under the control of one company (Patrick,2015). Acquisition refers to buying of assets of one company from another company. An action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm. Acquisition is purchase by one company of controlling interest in the share capital of an existing company (Lilliot,2018).
ReplyDeleteReasons for Mergers & Acquisition: Every merger and acquisition has its own unique reasons based on the organization goals. Here is a few of them:
• Synergy
• Acquisition of technology, assets or talent
• Increasing capabilities & sharing expertise
• Increased market share
• Diversification of products and services
Success of merger and acquisitions depends on the people who drive the business, their ability to drive, lead, and formulate strategy, execution and implementation. It is very important to involve HR professionals in merger & acquisition as it involves people and has an impact on key people issues. HR professionals play an active role in the change process by offering their interventions to help ensure a successful merger and acquisition (Andrew,1998).
Yes. True enough! Out of all above Synergy is the key and the most important factor to win the market.
DeleteIn my blog also it was mentioned in a summary:
The benefits arising from M&A are extended or addition of products, services or technologies, increase its capabilities and service offerings, improve cash flows or increased opportunities often arise from acquiring new skills and technologies that enhance current products (Stahl and Mendenhall,2005).
A merger or acquisition (M&A) is most likely viewed mainly as a means of changing the front office operations to reach revenue synergies or answering cost synergies through the size and scale of the new business. However, there’s another often-missed opportunity that can be as influential: using M&A as a catalyst to introduce new and improved HR functions on to a new path. It’s a chance to take advantage of troublesome business and employees and transform HR into an organization that creates and achieves supportable value, even in the face of disruption.
ReplyDeleteM&As are often placed with significant stress on an organization and its employees. The idea of adding HR transformation to post-deal integration activities may be daunting, however not doing so may prevent the new organization from realizing its full potential
“Human Capital Management (HCM) has recently been described as a high-level strategic issue that seeks to analyze, measure and evaluate how people policies and practices create value. Put simply, HCM is about creating and demonstrating the value that great people and great people management add to an organization” – Armstrong, 2007.
Thanks Joanne for briefing on HCM. It will definitely have a positive impact on M&As.
DeleteThis examination applies' (Ulrich D., 1997) hypothesis of the four HR parts in mix with the HR issues which are available at the distinctive phases of the IM&A procedure. This paper exhibits that HRM is a fundamental piece of M&As and that HR issues are given a considerable measure of accentuation all through the procedure. Furthermore, HR supervisors assume an imperative part in the IM&A procedure, in spite of the fact that it isn't plainly obvious for each situation.
ReplyDeleteA merger or acquisition is one of the most important events in the life of an organization, and can be affected dramatically for all of firm's shareholders, directors, employees, customers, and communities. Hence, the HR can be played a major role to handle this situation carefully. HR can identify the problematic areas which the employees are worrying about (Patrick, 2015). According to Armstrong (2010), after the merger or acquisition, the HR department should ensure that everyone realizes their job role in the new organization.
ReplyDeleteDuring the budget proposal of year 2016, the Sri Lankan government proposed to merge several small banks in the future with a view to have a well-capitalized banking system in the country which has the scale and the potential to protect funds from diversified sources and fund large-scale developments in both public and private sectors. The government believed that the merge of several small banks will be beneficial in the long run due to enhanced capital base after the merge. If this happen in the future, the HR of particular banks will have to play a vital role to build the confidence among the employees and retain them.
In 2016 Government took that decision in order to stabilise the financial market in Sri Lanka. Many organisations were successfully merged where it eventually created more customers security.
DeleteAccording to Armstrong (2014), laying-off takes place following mergers and acquisitions. HR usually has the heavy responsibility of handling the redundancy. HR has to plan ahead seeking and implementing methods of avoiding redundancy as far as possible, making arrangements for voluntary redundancy and helping people to find jobs.
ReplyDeleteArmstrong, M., 2014. Armstrong's Handbook of Human Resource Management Practise.
Yes agreed. The issue is more at the top level rather than the lower level as after 2 or more companies merged, there is less importance to have many CEOs, GMs, SMs etc. But the operational staff may have different roles to play when the organisation become larger after a M&A
DeleteAcquisition and merger. Although in the literature, acquisitions and mergers are often treated synonymously, they are legally different transactions. When an organisation acquires sufficient numbers of shares to gain control of another organisation, acquisition is in question. Merger, on the other hand, is often agreed in co-operation with the merging partners. However, the degree of co-operation differs. Consequently, mergers are not always a combination of two equal partners. Acquirer or acquiring organisation is an organisation which acquires another organisation, and acquired or target organisation is the one which has been acquired by another organisation. Integration refers to the combining processes and activities of the acquiring and the acquired organisations and can take place at different levels.(Jokisalmi, 2000)
ReplyDeleteThanks for your input Dilakshan. In this, HRM strategy is the key. They should lay down proper guidelines to ease the M&A.
DeleteThe critical issue for financial services enterprises is whether HR is up to the process of handling a strategic role in a merger or an acquisition. If HR has usually operated as a methodical professional, its leaders are not apt to be tending or organized to perform a strategic role. If HR management is not strategic sufficient to contribute early in M&A preparation, the organization should ruminate how to transform HR into a strategic player (Gary, 2010).
ReplyDeleteThis may involve divesting HR of its more average chores profits enrolment and important regulatory allocations that can be subcontracted or altered into a self-benefit employment over the Web (Elms and Low, 2013). This would enable HR to attention giving counsel to senior administration on such themes as strategic staffing, long-term encouraging plan and techniques for building up a world-class workforce. To meet these commitments, senior HR experts must see how the business capacities, its objectives, financial tasks, promotion and improvement, and additionally how the business fits into the competitive advantage. Just when HR is as business sagacious as whatever the senior initiative and methodologies its capacities from a strategic perspective will it acquire a seat at the management (Stahl and Mendenhall, 2005).
Shyamika, Since People are one of the most important aspect in an organization, in order to achieve sustained business success is considered as the core philosophy of HRM (McGregor and Cutcher-Gershenfeld, 2008). This creates strategic management of HRM and philosophy is based on the confidence that human resources are the most important asset in achieving and sustaining business success. This emerged HRM resulting in organizations taking a strategic approach to manage their employees.
DeleteSherman and Hart (2006) define Merger as "a combination of two or more companies in which the assets and liabilities of the selling firm(s) are absorbed by the buying firm. "An acquisition", according to Krishnamurti and Vishwanath (2008) "is the purchase of by one company (the acquirer) of a substantial part of the assets or the securities of another target company. According to Bitstream (2009) There are basically two broad issues responsible for success or failure of M&A transactions. These two issues are ‘Fit’ issues and ‘Process’ issues. ‘Fit’ issues are those which assess the position of the acquirer and the target. The acquirer has limited ability to influence the fit issues; however there are some factors over which control can be asserted. ‘Process’ issues are those over which the acquirer can exert a large degree of control. The main reasons for mergers failure are “autonomy, self-interest, culture clash” all included or lies in leadership. To make merge and acquisition Successful organization should Involve HR at the earliest possible juncture, Develop a cultural assessment that helps the two groups identify their differences, Develop forums – in all areas and at all levels - for sharing, Identify expectations and problems and design a realistic process for addressing them, Develop a new strategic plan and unified goals, objectives and overriding messages that reflect the newly formed organization. (Arora and Kumar. 2012).
ReplyDeleteAgreed on your comment Malitha. Even Mendenhall & Oddou (1985) have identified the following 4 dimensions of expatriate adjustment in their study. It is a tool to assist the selection process to focus explicitly on candidate’s strengths and weaknesses: -
Delete1. Self-orientation dimension
2. Other’s orientation dimension
3. Perceptual dimension
4. Cultural toughness dimension
According to Nayyar(2015) Merger and Acquisitions success entirely depends on the people who drive the Business, their ability to Execute, Creativity, and Innovation. It is of utmost importance to involve HR Professionals in Mergers and Acquisitions discussions as it has an impact on key people issues. As Mergers and Acquisitions activity continues to step up globally, Companies
ReplyDeleteinvolved in these transactions have the opportunity to adopt a different approach including the increased involvement of HR professionals. By doing so they will achieve a much better outcome and increase the chance that the overall deal is a total success. HR professionals can play an active role in the change process by offering interventions that will help ensure a successful merger.
Yes Yasiru, Price (2011) further clarifies that HRM is an extensive expression relating to a number of exceptional approaches to the administration of employees. It is defined as the process of coordinating an organization's human resources to meet organizational goals. Entrusting that the most important asset of a business is the people in order to achieve sustained business success is considered as the core philosophy of HRM
DeletePlenty of attention from executives, employees, and consultants is paid to the financial, legal, and operational components of the M&A. But, executives who have been through an M&A, especially the post-merger integration (PMI) process, now realize that in today’s economy, the management of the human capital side of change is the real key to the creation of value in the M&A.
ReplyDeleteThe management of human capital in the M&A, based against the high failure rates of M&As, appears to be a somewhat neglected concern during various platforms of the deal. It seems that executives see the human factor as too soft and therefore difficult to manage. It is much simpler to deal with numbers about the M&A value and price, opportunity to save money from operational integration, and so on. Therefore, because the focus is usually on finance, accounting, and manufacturing which can be relatively easy to measure, the human side is neglected from M&A consideration until after the deal is confirmed. According to the Weber, Tarba, Oberg (2013) Top managers, including HR managers, are not conscious of the possibility to measure cultural differences and predict cultural conflict and HR challenges before the agreement is confirmed. Therefore, HR managers are usually not involved in the planning and negotiation stages. In some cases, there is a lack of awareness that people issues are critical. As a result, for most top management teams that are involved in M&A, there is no framework or any model that serves as a tool to systematically manage human capital issues.
True Melan. Appreciate your input on another side of M&As. How not to fail on M&As...
DeleteEmployee benefits plans are important acquisition points. The buyer should require the target to disclose all information about the different benefit plans during the due diligence process to see if these plans are necessary after the plans are completed and to identify the risks or unresolved issues that need to be corrected before closure or problems occur in the future. Employee relationships also play a part because the buyer will want to manage the expectations of the target employees as they concern employee benefits. (Andrea L. Bailey and Nicholas C. Tomlinson, ASPPA’s Quarterly Journal for Actuaries, WINTER 2011 VOL 41, NO 1)
ReplyDeleteThanks Lakmal. Yes in order to have a proper M&A, it is necessity to have a firm HRM Strategy
DeleteAs per AMARA (2014) HR plays a vital role in following areas in Mergers and Acquisitions,
ReplyDelete• Employees coping up with change and culture
• Organizational hierarchy structure,
• Maintaining the productivity by placing of right people at right place
• Alignment of compensation, benefits and welfare schemes
• Job security
• Relocation
• Compliance of local labour laws
• Employee communication
• Taking care of personal records
As Amara (2014) has stated following could be some Best practices which could be used by HR during and after mergers and acquistions,
• Identify leaders from both the companies for effective implementation, transition and communication of the same to employees.
• Train managers on the nature of change
• Explain new roles to the people
• Orientation programs on policies and procedures
• Orientation programs on performance management, compensation, benefits and welfare schemes
• Identify the skills of people and mapping them appropriately
• Town halls & Team building activities
Your contents are well noted. Many of the aspects which you have highlighted are addressed in my blog. But thanks for the additional info
Delete5 Key Challenges HR Faces during a Merger or Acquisition
ReplyDeleteIdentifying and communicating the reasons for the M&A to employees. Often employees see change as dislocating and upsetting. HR must communicate effectively and openly with all employees throughout the transition. Specifically, HR must communicate with employees about the necessity for the change, explain how the change will benefit them, and manage the stresses that accompany change.
Forming an M&A team and choosing and coaching an M&A leader. The team leader must focus solely on the M&A rather than be involved in running the business, be sensitive to cultural differences, lead the change process, and retain and motivate key employees.
Assessing the corporate cultures. One company may be driven by a sales mentality while another may be focused on innovation. Or decisions in one company may be top down while the other may be used to more participative decision making. HR must anticipate cultural challenges and take steps to integrate the two cultures.
Deciding who stays and who goes. HR must determine the new organizational structure, and retain and motivate key talent. Our workforce planning template can help you better assess this issue. Download it here.
Comparing benefits, compensation and union contracts and deciding on HR policies and practices.
( by Raymond Lee, 2017)
Thanks for your addition Saman. Your details are an additional aspect for my blog.
DeleteAs people‐management issues are considered to be responsible for between one‐third and one‐half of all failures (Cartwright & Cooper, 1993), the human side has become quite prominent in recent M&A researches (Angwin, Mellahi, Gomes, & Peter, 2014).
ReplyDeleteIt has long been recognized that communication plays an important role in M&A processes where HR responsibility is. Communication distributes information about the extent and implications of organizational change, controls organizational member behavior, fosters motivation and commitment, promotes a sense of belonging (Welch & Jackson, 2007), and provides a release for emotional expression.
In terms of practical implications, HR managers need to develop awareness for people and their emotions. Those who ignore their responsibility to manage emotions will be faced with employee withdrawal behavior from disappointed, unsatisfied, uncommitted, and ultimately demotivated employees. This may lead to lower levels of productivity, and/or increases in absenteeism and turnover. Beyond the level of awareness, the knowledge that communication triggers emotional reactions allows management to better design communication policies for M&A processes.
The creation of internal and external information and communication processes allows for consistently and openly informing employees within appropriate timeframes about changes. Most researches confirms that this creates transparency and thus a sense of integrity and trustworthiness (Goleman, Boyatzis, & McKee, 2002; Marks & Mirvis, 1992)
However, some research findings revealed that employees’ re-action mainly depends on how bad news is communicated and how individuals are treated by the management. Management needs to accept that emotions play a critical role in M&As where HR involvement is highly important.
Yes true Dilini.... Communication is key for any aspect to be successful. In a M&A it is more vital as their is a culture gap which HRM should fill
Deletewith the likelihood of continued merger and acquisition activity around the
ReplyDeleteworld for the next several years, the future seems bright for a significant positive
contribution to be made by the HR department and its professionals, in partnership with line
managers and the employees and their representatives. This impact occurs through: 1)
ensuring that company executives consider whether M&A activity is really essential;
and 2) if companies go ahead, that success is more likely than has been the track
record of combinations. This contribution will be beneficial to the employees,
shareowners, communities, suppliers and customers of the companies involved in the
merger or acquisition activity
Thanks Sonali for your input. Even Briscoe and Schuler (2004) further explained that there are two forms of IHRM: the operation of parent-country firms overseas; and the operation of foreign firms in the home country. The first one involves the situation of working as a parent-country HR professional in the main or regional headquarters of the traditional MNE. On the other hand, the second situation (foreign firms in the home country) involves the HR manager working at home in the foreign subsidiary of a foreign MNE.
DeleteDue to acquisition and mergers taking place it becomes important for the HR Manager to develop the work culture because the whole organization is to be restructured after mergers. Organization’s now are adopting more flat and simple structure. Globalization will impact HR managers by requiring new skills such as language capabilities because the manager will have to speak to other nationals while recruiting them. Global M&A market has shown in 2014 the largest growth since 2007. Furthermore, the environment surrounding these deals has significantly changed. Global economic developments are changing landscape of M&A and identifying new targets that indicate a shift with significant impact to global practices. It is being remarked that global economic uncertainty highlights the value proposition offered by M&A. Grave et al (2012), examined the increased complexity and challenges that cross-border acquisitions need to address in their effort to succeed globally in an environment of instability fueled by ongoing financial turmoil.
ReplyDeleteYes Dakshan, it is more complicated when its an International assignment where it has more cross-culture differences. In the current global economy, worldwide interdependence of resources, markets and business competition succeeds (Schermerhorn, 2001).
DeleteAccording to Armstrong (2010), It is important that the HR ensures the job description of all employees after a merge or a acquisition.The whole organisation structure will have to be restructured and would require new skills when organisation is globalised.According to Bitstream (2009) There are basically two broad issues responsible for success or failure of M&A transactions. These two issues are ‘Fit’ issues and ‘Process’ issues. ‘Fit’ issues are those which assess the position of the acquirer and the target
ReplyDeleteYes Aneesha, strategic management of HRM and philosophy is based on the confidence that human resources are the most important asset in achieving and sustaining business success. This emerged HRM resulting in organizations taking a strategic approach to manage their employees in M&As.
DeleteMerger and Acquisitions success entirely depends on the people who drive the Business, their ability to Execute, Creativity, and Innovation. It is of utmost importance to involve HR Professionals in Mergers and Acquisitions discussions as it has an impact on key people issues. As Mergers and Acquisitions activity continues to step up globally, Companies involved in these transactions have the opportunity to adopt a different approach including the increased involvement of HR professionals. By doing so they will achieve a much better outcome and increase the chance that the overall deal is a total success. HR professionals can play an active role in the change process by offering interventions that will help ensure a successful merger.
ReplyDeleteThusha, Your contents are well noted. Many of the aspects which you have highlighted are addressed in my blog. HRM is a key aspect in any M&A
DeleteThe need for corporate firms to gain competitive advantage in a highly competitive global environment has necessitated the adoption of innovative strategies, one of them being mergers and acquisitions. Selden and Colvin (2003) have stated that 70 - 80% of acquisitions fail, meaning that they create no wealth for the share owners of the acquiring company. Schmidt (2003) has identified five major roadblocks to merger and acquisition (M& A) success, three of which are human resource (HR) issues. It has been established that there is a strong direct correlation between human resource involvement and ‘success’ in mergers and acquisitions. A positive association was found between human capital indicators and organisational performances. It was found that human capital development and enhancement in organisations contribute significantly to organisational competencies which in turn became a great boost for further enhancing innovativeness.
ReplyDeleteThank you Salinda. Appreciate your input on another side of M&As. The failure aspect of M&As...
DeleteThis comment has been removed by the author.
ReplyDeleteMergers & Acquisitions are very common in the world today & the problem comes when handling people or employees reactions because as Dinuka mentioned, people are habitually fear change. But people's negative or positive reactions can never be ignored. But communication plays a major role in minimizing the way people negatively react to such a drastic change. Most of these M&S happen in organizations that has a long history & are pioneers in the business they do, But most of these organization do not announce such decisions well in advance to the employees or relevant people so this becomes a surprise to most of them, creating a chaotic situation. Such Information should Include all the benefits the organization will gain with this change & the positive effects an employee will have with this change, this will give time for employees to process this information & decide what steps they need to take with this change. Also I assume identifying people who are willing to accept the change & using them as "Change Agents" would be the ideal way to handle such a situation.
ReplyDeleteTrue Veranga.... People are very resistant when it comes to change. In M&As it is more as there are many changes happening in every aspects of the organisation including strategies, systems, workforce, etc. Therefore change management & culture management is vital in M&As
ReplyDeleteMerge is most of the time a management decision. Weber (2015) maintains that the most important factor of failure in mergers and acquisitions is that there is no provision for the human factor during this process. Sometimes employees have to accept it and have little participation. If an M&A takes place, this fact means that two different companies or organizations have to cooperate and employees have to work together. An M&A brings on many changes will uncertainty (Davy et al., 1988). According to Scott & Jaffe (1988), the biggest challenge comes after the merger or change of workplace. A change is a fact and its acceptance requires much more energy and effort than many managers probably think. Bhansing (2010) states that managers often focused on the technical aspects of a change, while they don’t give importance on the human side of the change like guiding and supporting the employees during a process (Demers et al., 1996). Human resource issues can reduce mistakes that are made during an M&A process (Schuler & Jackson, 2001).
ReplyDeleteYes Skandakumar, Price (2011) further clarifies that HRM is an extensive expression relating to a number of exceptional approaches to the administration of employees. It is defined as the process of coordinating an organization's human resources to meet organizational goals. Entrusting that the most important asset of a business is the people in order to achieve sustained business success is considered as the core philosophy of HRM
ReplyDeleteA merger or an acquisition in a company sense can be defined as the combination of two or more companies into one new company or corporation. The main difference between merging and acquisition depends on the way in which the combination of the two companies is implemented. In merging, there is usually a process of negotiation involved between the two companies prior to the combination taking place (Roberts et al., 2003). In an acquisition the negotiation process does not necessarily take place. Completion of the merging and acquisition of two companies operationally and culturally have required human resources to play a major role because the human side of the integration continues to evolve after implementing the integration plan. HR sector has to develop preliminary organizational designs and identify the top three levels of management, assess critical players and deploy appropriate resources in the new company, retain key people and separate redundant staff, develop a total rewards strategy for the combined companies, develop and implement communication strategies, integrate payroll benefits and ability to implement above tasks efficiently (Bramson, 2000).
ReplyDeleteMerging with a another business tends to be a strategic decision as this involves two or more companies working under one name, like for example in the 1999 merger of Glaxo Wellcome and SmithKline Beecham, both firms ceased to exist when the merged, a new company GlaxoSmithKline, was created. Merging with another another company or companies would have certain drawbacks as there would be cultural problems two different cultures tends to be a problem then due to this, merger taking place, there maybe job losses taking place which can create a negative impact on the image which has been created by the organization.
ReplyDeleteBut due to merger and acquisition enterprises are allowed to grow or downsize and change the nature of the organization or the competitive position.
Merger and acquisition are not the same terminologies but often it is used interchangeably. In acquisition one organization purchase a part or whole another organization. While in merger two or more than two organizations constitute one organization (Alao 2010).The success of the merger and acquisitions depends on the personalities who drive the trade, their ability to drive, steer, and formulate strategy, execution, and implementation.
ReplyDeleteMerges and acquisitions fail in an organization if there is no space for human resource. (Weber, 2015). In the beginning of any M&A process the leaders should be concerned of the questions how to make the culture of an organization, effective communication and the way to create sustainable staff engagement.
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