International Human Resources Management

HRM in cross border Mergers and Acquisitions

Nature of M&As

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 is

confined to the accounting subject

Mergers may be
Horizontal

Merger : when two organization producing a similar product combine. GAP Inc. controls 3 distinct companies.. Republic Navy

Like

Banana Old

GAP

brand itself

 Vertical

merger takes place when two organizations working at different stages in the production of the same product combine. Carnegie Steel, which controlled not only the mills where the steel was manufactured, but the mines where the iron ore was extracted, the coal mines that supplied the coal, the ships that transported the iron ore and the rail roads that transported the coal to the factory, the coke ovens where the coal was coked and the like

Like

 Conglomerate

mergers take place when two organizations 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 Aditya Birla group.

Conglomerates are called differently in different 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 names like Samsung, Hyundai and LG
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Conglomerates are called differently in different languages2

Zaibatsu : a Japanese term meaning wealthy clique and refers to large family controlled banking and industrial and industrial combine. Four major zaibatsus are Mitsubishi, Mitsui, Sumitomo and Yasuda. Keiretsu : is a set of companies with interlocking business relationships and shareholding. It is a type of business group.

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. the buyout is forced on the target it becomes a hostile take-over

Where

Motive behind M&A

M&A are preformed in the hope of realizing economic gains
To To To To To

provide improved capacity utilization make better use of the existing sales force

reduce managerial staff

gain economies of scale smooth out seasonal trends in sales

To

gain access to new suppliers, distributors, customers, products and creditors

gain new technology

To

To

reduce tax obligation

Pitfalls of mergers
Undue

focus on financial aspects Employees lose personal effectiveness as a result of rumours, misinformation and worry Infrequent and irrelevant communication Perceived lack of authority and understanding of the employee when the new organization forms Leadership challenges and failure to articulate the communicate the vision and inspiration to the employees
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People-related factors that contribute to acquisition success

Retention
Effective

of key talent

communication

Executive Cultural

retention and

integration

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Strategies of post-merger outcomes

HIGH

Degree of change in acquired company

Absorption Acquired company conforms to acquier cultural assimilation Best of Both Additive from both sides Cultural integration Preservation Acquired company retains its independence cultural autonomy

Transformation both the companies find new ways of operating cultural transformation

LOW

Reverse Merger Unusual case acquired company dictating terms cultural assimilation
HIGH

LOW

Degree of change in acquiring company

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HR interventions
Cultural and people issues that have a major impact on success / failure of crossborder M&A deals:
Composition

of new board

Who

will occupy which job?

culture a human capital audit and

Accessing

Undertaking

selecting the management team

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HR interventions2
Cultural and people issues that have a major impact on success / failure of crossborder M&A deals: Effective communication Retaining talent creating the new culture Aligning performance evaluation and reward systems Managing the transition Integration
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