By Ayan Chakraborty Pratik Mohapatra SHRM issues in M&A
Oct 22, 2014
By
Ayan ChakrabortyPratik Mohapatra
SHRM issues in
M&A
Two-third of the big mergers and acquisitions fail
Differences in the top management
Absence of strategic planning ( For E.g. The Jet-Sahara Fallout )
Cultural disconnect
Issues and Concerns
Post Merger Risks
Post Merger Risks contd.
Pre- M & A phase assessment of differences role clarity management styles
Post-M&A phase designation for employees compensation & PMS relation between management & trade
unions
Different Phases of M & A in HR
HR Activities in the Phases of M & A
6
Acquisition strategy of GE Capital Successful model “Pathfinder” for acquiring firms1. Pre-acquisition -> integration manager(cultural
assessments, communication strategies)2. Foundation building(team of executives from GE -
acquiring company formed) 100 day communication strategy evolved 3. Integration phase(assessing the work flow,
assignment of roles)4. Assimilation (long term adjustment, internal
discussions between the teams, reaping the benefits)
Examples of M&A: Success & Failures
• In 1926, the merger of two German automobile manufacturers Benz & Co. and Daimler Motor Company formed German company Daimler-Benz. Its Mercedes cars were arguably the best example of German quality and engineering.
• In 1998, Daimler-Benz and U.S. based Chrysler Corporation, two leading global car manufacturers, agreed to combine their businesses in what was perceived to be a 'merger of equals'.
• The merged entity ranked third (after GM and Ford) in the world in terms of revenues, market capitalization and earnings, and fifth (after GM, Ford, Toyota and Volkswagen) in the number of units (passenger-cars and commercial vehicles combined) sold.
CASE: Daimler Chrysler Merger Failure
• In 2000, it suffered third quarter losses of more than half a billion dollars, and projections of even higher losses in the fourth quarter and into 2001. In early 2001, the merged company announced that it would slash 26,000 jobs at its ailing Chrysler division.
• In May 2006, after a decade of disappointing results, Daimler finally sold Chrysler to private equity firm Cerberus Capital for £3.74 billion.
• In 2006, the merged group reported a loss of 12 million euros.
• Without Chrysler, Daimler reported profits of 1.7 billion euros (£1.3 billion) for the fourth quarter and a net profit of 4 billion euros for the year (3.8 billion euros in 2006).
• Analysts felt that though strategically, the merger made good business sense. But contrasting cultures and management styles hindered the realization of the synergies.
• Daimler-Benz attempted to run Chrysler USA operations in the same way as it would run its German operations.
• Daimler-Benz was characterized by methodical decision-making. On the other hand, the US based Chrysler encouraged creativity.
• While Chrysler represented American adaptability and valued efficiency and equal empowerment Daimler-Benz valued a more traditional respect for hierarchy and centralized decision-making.
Inferences…
Train managers on the nature of change
Technical retraining Family assistance programs Stress reduction program Explaining new roles Helping people who lost jobs(Outplacement) Post merger team building
HR’s control
Early HR involvement creates synergy HR involvement increases M and A
success rates
HR’s Role in Mergers and Acquisitions3-12
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