Mergers Acquisition HR Objectives Understand what mergers and

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 Copyright 2000 - South-Western College Publishing 1

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 Copyright 2000 - South-Western College Publishing 2

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 Copyright 2000 - South-Western College Publishing 3

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 Copyright 2000 - South-Western College Publishing 4

Legal Environment • Hart-Scott-Rodino Antitrust Improvement Act of 1976 • U. S. Department of

Exercise 1: • Market Segment • Companies Within Market Segments • Potential Combinations –

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

M&A Categories: cont. • Adversarial – Only one firm has a strong interest in the deal • Hostile Takeover – Acquisition target actively resists the take-over Copyright 2000 - South-Western College Publishing 8

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 Copyright 2000 - South-Western College Publishing 9

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 Copyright 2000 - South-Western College Publishing 10

Adversarial • • Negotiations are aggressive Resistance is extreme “Us versus them” atmosphere prevails

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 Copyright 2000 - South-Western College Publishing 12

Visible Costs of the Deal • • Profits Assets and stocks Customer and vendor

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 Copyright 2000 - South-Western College Publishing 14

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 Copyright 2000 - South-Western College Publishing 15

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 Copyright 2000 - South-Western College Publishing 16

Exercise 2: • Success Case Study – Star-Excel Building Corp. • Failure Case Study

Process of Integration • Five integration phases: – Due Diligence – Organize – Mobilize

Predictable Dynamics of M&A • Stages of Resistance – Betrayal – Denial – Identifying

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 Copyright 2000 - South-Western College Publishing 20