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By Ayan Chakraborty Pratik Mohapatra SHRM issues in M&A
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HR Issues in Mergers & Acquisitions

Oct 22, 2014

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This presentation shares the importance of human resource in mergers and acquisitions and discusses the cases of Daimler-Chrysler failure, and others.
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Page 1: HR Issues in Mergers & Acquisitions

By

Ayan ChakrabortyPratik Mohapatra

SHRM issues in

M&A

Page 2: HR Issues in Mergers & Acquisitions

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

Page 3: HR Issues in Mergers & Acquisitions

Post Merger Risks

Page 4: HR Issues in Mergers & Acquisitions

Post Merger Risks contd.

Page 5: HR Issues in Mergers & Acquisitions

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

Page 6: HR Issues in Mergers & Acquisitions

HR Activities in the Phases of M & A

6

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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

Page 8: HR Issues in Mergers & Acquisitions

• 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

Page 9: HR Issues in Mergers & Acquisitions

• 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).

Page 10: HR Issues in Mergers & Acquisitions

• 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…

Page 11: HR Issues in Mergers & Acquisitions

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

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Early HR involvement creates synergy HR involvement increases M and A

success rates

HR’s Role in Mergers and Acquisitions3-12

Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall

Page 13: HR Issues in Mergers & Acquisitions

THANKYOU