Impact of Mergers and Acquisitions on Employees

Understanding the Impact of Mergers and Acquisitions on Job Performance of Employees

Synopsis and Research Proposal on Organisational Change due to Mergers and Acquisitions

Study of organizational culture change due to Mergers and Acquisitions in Airline Industry in India

 

Introduction, Importance and Significance of the Study:

An entrepreneur may grow its business either by internal expansion or by external expansion. In the case of internal expansion, a firm grows gradually over time in the normal course of the business, through acquisition of new assets, replacement of the technologically obsolete equipments and the establishment of new lines of products. But in external expansion, a firm acquires a running business and grows overnight through corporate combinations. These combinations are in the form of Mergers, Acquisitions, Amalgamations and Takeovers and have now become important features of corporate restructuring. They have been playing an important role in the external growth of a number of leading companies the world over. They have become popular because of the enhanced competition, breaking of trade barriers, free flow of capital across countries and globalization of businesses. In the wake of economic reforms, Indian industries have also started restructuring their operations around their core business activities through Acquisition and Takeovers because of their increasing exposure to competition both domestically and internationally. Mergers and Acquisitions are strategic decisions taken for maximization of a company's growth by enhancing its production and marketing operations. They are being used in a wide array of fields such as Information

technology, Telecommunications, and Business Process Outsourcing as well as in Traditional businesses in order to increase their market power, gain strength, expand the customer base, cut competition or enter into a new market or product segment. In M & A, the concerned firms pool all their resources together to create a sustainable competitive advantage.

Yet most Mergers or Acquisitions are not successful, primarily because the “merger of two organizations is actually a merger of individuals and groups.” In the midst of all the hype, a well documented fact is that most merger and acquisition activity rarely delivers the highly anticipated synergies between companies. Throughout a merger or acquisition, people in an acquired company often complain that they don’t know what is happening, express fear about losing their jobs, and feel demoralized as to the future of their contributions. Unfortunately, only few M &As make efforts to integrate different cultures and workforces, even though   M&A  activities bring about significant change involving employees, organizational entities, systems, shareholders, customers, and many other stakeholders.

Mergers and Acquisitions immediately impact organizations with changes in ownership, in ideology, and eventually, in practice. Of the three root strategic assets noted above, ‘cultural cohesion’ is most often the critical asset in the

eventual success or failure of the overall deal and the one that impacts the extent to which qualitative talent retention can be attained. Despite the fact that it is increasingly common these days for companies to publish their cultural traits or values, what is listed does not always reflect the actual culture of the place. Thus understanding the depth of cultural influences that are practiced over time within a specific group or organization is very important for both the acquiring as well as acquired organization.

Rationale:

The traditional M&A approach has included financial and legal evaluations of the acquisition target with little attention paid to the people and culture. Successful M&A strategies acknowledge and honor the importance of human assets and organizational culture as critical elements in the long-term integration success and there comes the effectiveness of change management.  The greatest barrier to successful integration  is cultural incompatibility. According to Edgar Schein, “The poor performance of many Mergers, Acquisitions, and Joint ventures can often be explained by the failure to understand the depth of cultural misunderstanding that

may be present.”  Thus, it is important to closely examine cultural cues, before and after any organizational marriage which forms the major changes in both the organizations. Thus, with such dynamic moves of undertaking series of Mergers/Acquisitions, it is bound to face the problem of ‘organization culture integration’. Also it would provide exposure to the initiatives taken up for managing change to facilitate culture transition for the acquired organization. It would therefore provide apt grounds to undertake study of the impact of Mergers/Acquisitions on the employees and the organizational culture of the concerned organizations.

Objectives of the Study

Primary objective –

·        To study the impact of Merger/Acquisition on the Employees

·        To study Organizational Culture change in Merged/Acquired Organizations.

Secondary objective –

·        To do a comparative study between the pre-merger/acquisition and post-merger/acquisition organizational culture in the organization and assess their culture compatibility with the other/acquiring organization

·        To identify the initiatives taken by Acquiring Organization to develop their own culture in the acquired organization and suggest more probable initiatives to bring about culture cohesion between the two.

Hypothesis :

Ho: Significantly, in organizational marriage, after acquisition, the adjustments for culture integration are always made by the acquired organization.

H1: Significantly, in organizational marriage, after acquisition, the adjustments for culture integration are not always made by the acquired organization.

Research methodology :

Research method: A qualitative research approach would be adopted in this study. The benefit of qualitative research would be that, it will give me an ability to carry out my research in depth and detail. This methodological design would be particularly useful in expanding our understanding and knowledge of acquisitions and the culture integration/cohesion and employee related issues surrounding the process. Since the research would be based on the employee understanding of organizational culture and their point of view towards it, which is not measurable, hence qualitative instead of quantitative approach would be adopted.

The form of research would be descriptive in nature. Formerly, it would include describing the culture and then analyzing the effects of culture integration initiatives taken up by Acquiring Organization. This would be done by collecting first –hand data from the H R and other staffs of the Organizations.

Data Collection: The data would be collected through semi-structured interviews with the H.R personnel, the already existing employees of the Acquiring Organization and the employees of the Acquired Organization. It would also involve collection of secondary data from the Company hand-book and journals. This would help creating a strong database for the project, which will assist in proper interpretation and analysis using appropriate analytical tools.

Expected contribution from the project :

This research would provide clear alignment in the cultural differences between two organizations and their effect on each other after one is acquired by the other. It would help review the cultural impact of the acquisition on the existing as well as the acquired employees. This research would also be underpinning the significance of managing the culture integration effectively to avoid the possibility of failure after acquisition. It would help understand the precautionary measures management takes while acquiring any organization.

Chapterisation

The Project Report will consist of 5 chapters:

1. Introduction

2. Literature Review

3. Research Methodology

4. Data Analysis and Interpretation

5. Conclusion and Recommendations.

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