Presentation Given By the Hamdard Students on SHRM Course

1. HUMAN RESOURCE ASPECT OF
MERGERS AND ACQUISITION
Presenter :
Karim Virani
Aamir Firdous Ali
Erum Naz
Nazish Hussain

2. INTRODUCTION
• Companies today need to be fast growing,
Efficient, profitable, flexible, adaptable, and future-
ready
• They want a dominant market position
• Its virtually impossible to compete today’s global
economy

3. INTRODUCTION … Cont...
• They work with smaller firms that have developed or
are developing new products
• Some firms focus on their own internal growth,
Leadership and development
• Growing or expanding through deals that result in
mergers or acquisitions

4. MERGERS & ACQUISITION

5. MERGERS AND ACQUISITION
DEFINED IN GENERAL
• When we use the term "merger", we are referring to
the merging of two companies where one new
company will continue to exist.
• The term "acquisition" refers to the acquisition of
assets by one company from another company.

7. OBJECTIVE
Objective of merger is to achieve economy of scale
and to carry on business more economically and
efficiently.
Objective of an acquisition is self-evidently growth
and expansion of the acquirer's assets, sales and
market share

8. MERGERS - TYPES
• In General, There are mergers of equals and Unequal's
• Mergers of Equals Like the merger between Ciba and
Sandoz forming Novartis Where equals often compels
Two companies to share in the staffing implications.
• Mergers of unequal like Chase and J.P. Morgan creating
JPMorgan-Chase where the staffing implications being
shared unequally

9. ACQUISITION - TYPES
There are Two major types of acquisition involving
1. Acquisition & Integration Like Cisco Systems, it has a
greater staffing implication
2. Acquisition & Separation Like Unilever and Best
Foods, not greater staffing implication as of the above
one

10. REASONS FOR MERGER
• Horizontal mergers for market dominance;
economies of scale
• Vertical mergers for channel control
• Hybrid mergers for risk spreading, Cost Cutting
• Growth for world-class leadership and global
reach
• Survival

11. REASONS FOR ACQUIRE
• Acquisition of cash, taxes, and excess debt
capacity
• Gaining a core competence to do more
combination
• Financial gain and personal Power
• Bigger asset base to leverage borrowing

12. IN ADDITION TO THESE
REASONS
Companies that are successful and inventive in
combining, not only create a value, but develop a
core competence in combination management itself
This in turn, can give the company an edge over
others who haven't been successful or have nor
learned from their past.

13. ASSUMPTIONS
• M&A’s are the fastest and easiest ways to grow
• M&A’s are likely to fall short of their initial goals
• M&A’s are difficult to do
• Creating synergies is a major challenge
• Molding cultures is a major challenge
• Difference due diligence are necessary but not
sufficient conditions
• Pre-planning can help increase chances for success

14. TRACK RECORD
• With the importance of and need for mergers and
acquisitions growing, and the base of
experience expanding, it may seem reasonable
also to assume that success is more likely to occur
than failure in these types of combinations In fact
large combinations.

15. REASONS FOR FAILURE
• Expectations are unrealistic ,Hastily constructed
strategy
• Failure/inability to unify behind a single macro
message
• Power and politics are the driving forces, rather
than productive objectives
• Requires an impossible degree of synergy
• Culture clashes between the two entities go
unchecked
• Transition management fail, underestimation of
transition costs
• Financial drain defensive motivation

16. REASONS FOR SUCCESS
• Leadership, Key talent retained
• Well-thought out goals and objectives
• Due diligence on hard and soft issues
• Well-managed M&A team
• Successful learning from previous experience
• Planning for combination and solidification steps
completed early
• Extensive and timely communications to all stake-
holders

17. THE HUMAN SIDE OF M&A
• The belief that they are too soft therefore, hard to
manage
• Lack of awareness or consensus that people issues
are critical
• No spokesperson to articulate these issues
• No model or framework that can systematically
understand
• Attentive focus in M & A activity is on finance,
accounting, and manufacturing
• People issues occur at several phases or stages
• Retention of key talent ,Communications;

19. PHASE 1- Pre acquisition review
• The first step is to assess your own situation and
determine if a merger and acquisition strategy
should be implemented.
• If a company expects difficulty in the future when it
comes to maintaining core competencies, market
share, return on capital, or other key performance
drivers, then a merger and acquisition (M & A)
program may be necessary.

20. PHASE 2- Search & Screen Targets
• The second phase within the M & A Process is to
search for possible takeover candidates. Target
companies must fulfill a set of criteria through which
compatibility and strategic fit should be assessed.

21. PHASE 3 – Investigate & Value
the Target
• The third phase of M & A is to perform a more detail
analysis of the target company. This detail review is called
“due diligence.”
• It requires a more thorough review of operations,
strategies, financials, and other aspects of the Target
Company.

22. PHASE 4 – Acquire through
Negotiation
• Negotiation plan is based on several key questions:
 How much resistance will we encounter from the Target
Company?
 What are the benefits of the M & A foe the Target
company?
 What will be our bidding strategy?

23. PHASE 5 – Post Merger
Integration
• The deal is finalized in a formal merger and acquisition
agreement which lead us to the fifth and final phase
within the M &A Process, the integration of the two
companies.
• The integration process can take place at three levels.
1. Full
2. Moderate
3. Minimal

24. HR ISSUES
• A substantial number are human resource related, e.g.,
acquisition of key talent.
• Creation of a dedicated senior executive
• M&A failure is the lack of a capable leader
• The selection discussion of which one to choose
• A well-thought plan for managing the rest of the M&A
• Diminish the possible success of the combination
• Planning to learn from the M&A process.’

25. SUCCESSFUL LEADERS
DESCRIPTION
• Sensitive to cultural differences
• Open-minded Flexible
• Able to recognize the relative strengths and weaknesses
of both companies
• Committed to retaining key employees
• Good listeners
• Visionary

26. ROLE OF HR DEPARTMENT IN
M&A ACTIVITY
• Developing key strategies for a company’s M&A activities
• Managing the soft due diligence activity.
• Providing input into managing the process of change
• Creating transition teams, especially those that will
• Overseeing the communications
• Managing the learning processes

27. ROLE OF HR IN MERGER AND
ACQUISITION
• A company’s human resource department as well
as the human resource workers in the other
company play a vital role in the process.
• The role of HR in M&A process are:
 Company culture
 Benefits problems
 Employee concerns
 Changing roles and structure

28. COMPANY CULTURE
• Human resource 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 a
determination.
• Culture differences may include
 How organizations define and measure success
 How problems are handled
 management styles
 Overall attitude of employee and managers.

29. BENEFITS PROBLEMS
• Human resources from the purchasing company
assess the benefits structure of the other company
to uncover any potential problems.

30. EMPLOYEE CONCERNS
• Human resources can detect and address any
rumors about layoffs, office relocation or other
changes employees fear, giving feedback to
management about employee concerns.

31. CHANGING ROLES &
STRUCTURES
• When one company merges with or acquires
another, some changes to both organizations may
occur.
• Human resources communicates to employees
changes in who they report to within the company,
what team or work group employees are assigned
to as well as any changes to different positions’
roles in the organization.

32. CONCLUSION

33. AT THE COMPANY LEVEL
• It is important that business and integration
strategies be clear
• Financial expectations must be made clear
• For acquisitions or mergers in new markets, it is
essential to understand market dynamics and
customers
• Avoid ambiguity in decision making guidance

34. AT THE HR LEVEL
• Best people in charge of implementing M&A deals
• Early planning of the integration process
• Difficult decisions should be dealt with quickly
• Completion, integration of a deal should not be
underestimated
• It is important to be sensitive to cultural differences

35. REFERENCES
• European Management Journal, Vol. 19, No. 3, pp.
239–253, 2001,
2001 Elsevier Science Ltd. All rights reserved.
• http://www.washingtonandco.com/pdf/hr_issues_a
ctivities_mergers_acquisitions.pdf
• For Images : www.Google.com

36. THANK YOU