Download - HRM in Mergers & Acquisitions
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International Human
Resources Management
HRM in cross border Mergers andAcquisitions
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A merger occurs when two organizations of
equal size unite to form a new unit.
Mergers are usually voluntary and involve
stock swaps or cash payments to the target
Amalgamation is a another term used to
describe a merger, but the usage isconfined to the accounting subject
Nature of M&As
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Mergers may be
Horizontal Merger: when two
organization producing a similar product
combine.
Like GAP Inc. controls 3 distinctcompanies..
Banana Republic
Old NavyGAP brand itself
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Vertical mergertakes place when twoorganizations working at different stages in theproduction of the same product combine.
Like Carnegie Steel, which controlled not only themills where the steel was manufactured, but themines where the iron ore was extracted, the coalmines that supplied the coal, the ships that
transported the iron ore and the rail roads thattransported the coal to the factory, the coke ovenswhere the coal was coked and the like
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Conglomerate mergerstake place when twoorganizations operate in different industries. A
conglomerate is a large company that consists of
divisions of often seemingly unrelated businesses.
The first British conglomerate was Hanson.
The era pf Licence raj ( 1947-1990) in India
created some of the Asias largest conglomerate
like Tata group, Reliance Industries and the AdityaBirla group.
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Conglomerates are called differently indifferent languages
Chaebols (Jaebeol): South Koreas
business conglomerates. Refers to the
several dozen large, family controlled
Korean corporate groups assisted by
government financing, which became
well-known international brand nameslike Samsung, Hyundai and LG
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Conglomerates are called differently indifferent languages2
Zaibatsu : a Japanese term meaningwealthy clique and refers to large family
controlled banking and industrial andindustrial combine. Four major zaibatsus
are Mitsubishi, Mitsui, Sumitomo andYasuda.
Keiretsu : is a set of companies with
interlocking business relationships andshareholding. It is a type of businessgroup.
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Acquisition .
Takes place when a large company buys
out a small unit or vice versa. Unlike merger
no new organization comes into being,
instead the small unit loses its identity and it
becomes one with the large company,
which continues to function in its name.
Where the buyout is forced on the target it
becomes a hostile take-over
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Motive behind M&A
M&A are preformed in the hope of realizing economic
gains
To provide improved capacity utilization
To make better use of the existing sales force To reduce managerial staff
To gain economies of scale
To smooth out seasonal trends in sales To gain access to new suppliers, distributors,
customers, products and creditors
To gain new technology
To reduce tax obli ation
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Pitfalls of mergers
Undue focus on financial aspects
Employees lose personal effectiveness as aresult of rumours, misinformation and worry
Infrequent and irrelevant communicationPerceived lack of authority and
understanding of the employee when thenew organization forms
Leadership challenges and failure toarticulate the communicate the vision andinspiration to the employees
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People-related factors that contributeto acquisition success
Retention of key talent
Effective communication
Executive retention and
Cultural integration
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Strategies of post-mergeroutcomes
AbsorptionAcquired companyconforms to acquier culturalassimilation
Transformationboth the companiesfind new ways ofoperating culturaltransformation
Best of Both
Additive from bothsides Culturalintegration
PreservationAcquired company
retains itsindependencecultural autonomy
Reverse MergerUnusual case
acquired companydictating termscultural assimilation
Degree of change in
acquiring company
LOW HIGH
LOW
HIGH
Degree ofchange inacquiredcompany
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HR interventions
Cultural and people issues that have amajor impact on success / failure of cross-
border M&A deals:
Composition of new board
Who will occupy which job?
Accessing culture
Undertaking a human capital audit and
selecting the management team
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HR interventions2
Cultural and people issues that have amajor impact on success / failure of cross-border M&A deals:
Effective communication Retaining talent
creating the new culture
Aligning performance evaluation and
reward systems
Managing the transition
Integration