Mergers and acquisition

MERGERS AND ACQUISITION

Mergers and acquisitions (abbreviated M&A)MERGER:

The combining of two or morecompanies, generally by offering thestockholders of one company securitiesin the acquiring company in exchange forthe surrender of their stock.

ACQUISITION:

An acquisition or takeover is thepurchase of one business or company byanother company or other business entity.Such purchase may be of 100%, ornearly 100%, of the assets or ownershipequity of the acquired entity.

The Role of Human Resources in Mergers & Acquisitions

INTRODUCTION The need for involvement of HR managers starts from the beginning

of M&A process i.e at the audit or due-diligence stage

When the acquirer’s has the maturity and experience ,it can have a greater impact on the integration phase than if HR is brought after the merger has take place.

If HR is valued by the acquiring company’s management , it made it imperative to think them that people can be greatest asset, challenge and liability.

Before the finalisation of the merger deal the acquiring company’s HR examine the different areas, evaluates different courses of action, in order to have a smooth transition.

The HR manager has to minimise the uncertainty prevaling during the merger process and must strengthen the communication channel to deal with the issues like morale and productivity.

Further , after the merger being implemented the role of HR manager becomes that of consultant to reduce interpersonal conflicts, role ambiguity and confusing procedure.

HR manager must create a smooth transition process and review the process with newly formed teams ,manager and supervisors.

The role of HR manager is also crucial when it comes to compensation related issues. This is problematic when the 2 companies have desperate systems.

Another issues the HR manager has to deal, is redundancies. In any merger there be termination which almost create hard feelings and among senior managers, crushed egos.

The HR manager has to give stress is on the examination of policies, practices and past actions of the acquired company and find some commonalities upon which the entity can be build.

Thus, in general the HR manager play a truth teller, coordinator, administrator , councellor , coach and agent of change for the leaders and organization.

Role of HRMHR plays important role at every phase in the process of international

M&A

PRE-COMBINATION:

HR is closely involved with each of these steps- initial targetscreening and pre-bid courtship of the potential target firm, the ‘due-diligence’ review of the target company , the pricing and negotiation ofthe approach the partners will take to the combination and theagreement on the contract wording of the deal.

COMBINATION PLANNING AND SIGNING OF THE AGREEMENT:

HR plays a major role in providing advice on how to implement thedeal and anticipated problems that will occur during theimplementation.

PRE-COMBINATION AND IMPLEMENTATION OF THE DEAL:

One critical aspect of HR’s role is in creating and providing employee communication about the nature of the merger and about the vision for the business that will result after the merger has been consummated.

In addition HR will perform a critical role in training employees to accept and to fit into new situation , in developing the new compensation and benefits system etc.

HR helps manage any problems or challenges related to people in the organizations as the merger or acquisition process unfolds. Company Culture Human resources helps determine if the cultures of the two companies that are

becoming one through a merger or acquisition are compatible. Human resources must have a firm grasp on the culture of the company for which

they work and must study the culture of the other organization to make such adetermination.

Cultural differences may include how the two organizations define and measuresuccess within the organization; benefits employees enjoy, such as personal timeand insurance; how problems within the organization are handled; themanagement styles of the two organizations; and the overall attitude of theemployees and managers toward business functions and the industry in which theywork.

Benefits Problems During the due diligence portion of a merger or acquisition, which comes after the

purchasing company makes its initial offer to purchase the othercompany, management from the purchasing company assess whether the dealmakes strategic and financial sense.

Human resources from the purchasing company specifically assess the benefitsstructure of the other company to uncover any potential problems, such as apension plan that is running low on funds or a health insurance package that willcost a significant amount for the company to continue offering.

Employee Concerns People often fear change, and a merger or acquisition creates uncertainty and change for

employees both of the purchasing company and the purchased company. Human resources in both companies help smooth out the transition for

employees, helping calm any fears as well as answering questions about how the mergeror acquisition affects each employee individually.

If the employees of both companies do not have as much fear over thechange, productivity is more likely to stay at previous levels.

Human resources can detect and address any rumors about layoffs, office relocation orother changes employees fear, giving feedback to management about employee concerns.

Changing Roles and Structure When one company merges with or acquires another, some changes to both

organizations may occur, such as eliminating redundant positions or combining teamsand departments.

The process of altering the two organizations so they work together as one can takemonths to complete, and human resources plays a vital role in the changes.

Human resources communicates to employees changes in who they report to within thecompany, what team or work group employees are assigned to as well as any changes todifferent positions’ roles in the organization.

Human resources may work with management and employees to alter the jobdescriptions of various positions, ensuring everyone understands his role in the newlyaltered organization.

Human Resources can add value to the M&A life cycle in the following ways:# Pre-deal

- help to identify issues/planning due diligence

- plan due diligence for people/organization cultural fit

- help to educate the “deal” team

- help to develop acquisition guidelines

- Due diligence

- estimate people-related transaction costs

- estimate people-related ongoing costs

- identify/assess cultural differences

- estimate people-related savings

- recommend HR policies and programs

- validate intangible assets

- assess costs of integrating HR systems

# Integration planning

- develop strategies for employee communications

- design programs to retain key talent

- plan and lead the integration effort

- develop total rewards strategy for new entity

- help new organization cope with change

- define organization blueprint and staffing plan

- monitor employee attitudes and engagement

- manage selection and placement process

- manage de-selection/outplacement process

- outline people goals and guiding principles

- form people-integration teams

- help to manage labor relations

- advise on productivity

- selection method

# Implementation

- align HR policies, programs, and practices with business practices

- monitor progress of people-related synergies and ensuring workforce

momentum is sustained

- ensure incentive programs are designed to reward executives and key

employees for achieving the goals of the merger

# HR should also encourage the new company’s leaders to do the following:

- recognize and reward behaviours that support the new culture

- consider cultural behaviours that support the new culture

- align culture with the vision and business strategy of the combined

organization

- identify the desired culture and gain agreement from senior management and

opinion leaders of both organizations

Concepts in role of HR in M&A1. Due deligence should be very clear2. Employee dis-satisfaction to be avoided3. Conduct common understanding programmes with the executive level employees of the company which you are going to takeover.4. Negotiate and make the Union Leaders understand about the entire issue and their future positions after M&A.5. Clear assessment of Manpower to be done6. Understand the Org. Structure/Salary Structure and try to reduce the parity between the two companies.

7. Understand all the legal cases pending with the acquiring company and take full accreditition of the cases to take nextsteps

8. Information to sent to all the bodies as per statute.9. Proper Audit with related to Fixed and Tangible asset to bedone and accordingly value to be determined.10. Proper retrenchment policy to be implemented for excessstaff