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Mergers, Acquisition & HR

Objectives:

Understand what mergers and acquisitions are


Understand why they occur
Understand the key issues involved
Discuss the role of HR in integrating multiple
organizations

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What are they?


A merger is when one company is combined
with and totally absorbs another
An acquisition is the process used to
transfer assets from one company to another

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What is the difference?


Acquisition is a generic term to
communicate transfer of ownership
You can do an acquisition followed by a merger
You can do an acquisition by means of a merger
You can do an acquisition in which no merger
occurs

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Why merge or acquire?


To create added value by:
Enhancing the strategic capability of both firms
Improving the competitive position of either or
both
Leveraging existing capabilities, products,
markets, and management practices

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Legal Environment
Hart-Scott-Rodino Antitrust Improvement
Act of 1976
U.S. Department of Justice
Federal Trade Commission (FTC)

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Exercise 1:
Market Segment
Companies Within Market Segments
Potential Combinations
Within market segments
Across market segments

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M&A Categories
Rescue
Response to a raid or financial bail-out

Partnership
Both parties actively desire the combination

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M&A Categories: cont.


Adversarial
Only one firm has a strong interest in the deal

Hostile Takeover
Acquisition target actively resists the take-over

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Rescue
Usually a result of major weaknesses in
operations or management of one company
Cooperation tends to be high
Completion of audits often rushed
Significant issues not dealt with during the
negotiations

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Partnership
Goodwill and respect prevail
Management retention packages and
agreements to keep key talent is critical
Surprises are rare
Once the financial deal is done,
management often ignores integration
details
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Adversarial

Negotiations are aggressive


Resistance is extreme
Us versus them atmosphere prevails
Consolidations, layoffs and closures surface

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Hostile Takeover
Animosity toward the raider is generated
Substantial residue of ill-will remains
during the integration
Strong win-lose atmosphere prevails
Talents leaves first
Human resource failures most likely in this
type of M&A
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Visible Costs of the Deal

Profits
Assets and stocks
Customer and vendor base
Facilities

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Hidden Costs of the Deal

Cost of FTC compliance


Replacement of key talent that leaves
Productivity drop-off
Loss of competitive position
Customer attrition
Power struggles and cultural differences

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Critical HR Tasks
Integrate policies and programs from both
companies
Process retention, compensation and
benefits packages
Identify key talents and expertise
Advise leadership on organization
capability
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Critical HR Tasks: cont.


Recognize customs, symbols, language and
ceremonies needed for cultural assimilation
Design new performance and reward
systems
Create communication strategies
Educate organization on what to expect and
on new skills
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Exercise 2:
Success Case Study
Star-Excel Building Corp.

Failure Case Study


Great Southern Railroad

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Process of Integration
Five integration phases:

Due Diligence
Organize
Mobilize
Implement
Perform

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Predictable Dynamics of M&A


Stages of Resistance

Betrayal
Denial
Identifying Crises
Search for Solutions

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Exercise 3:
Planning the integration
Completed templates as examples of content
you would expect to see
Blank templates to be completed using the
information in the Success Case Study for input

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