The business world today is heavily influenced by Mergers and Acquisitions. One of the biggest business stories this year is the Mittal - Arcelor deal. But at the micro level, how does an organization manage this M & A transformation ? They are not only economic decisions but also social decisions.
Management of M & A has been researched from many perspectives:
• Strategic Management • Capital Markets • Economic Performance • Organizational theory • Human Resources While each of the above perspectives are important, a cohesive understanding of the process is required if the transformation has to occur in a smooth manner. This can be best understood using an M & A value chain. The value chain consists of the intrinsic value of acquiring and merging firms as well as the price paid for that, synergy that is required to create that value, managing the integration process, realization of the synergy that is achieved, retaining the intrinsic value, and creation and preservation of value.
The three stages in this process are: • Transaction • Transition • Integration In the transaction stage, the strategic, organizational, financial and legal objectives are analyzed. In order to manage the process, the HR should play a major role by:
• Understanding, detailing and comparing the HR practices of the parent as well as the target company • Assessing the work culture of the target company • Assessing the key people in the target company • Formulate and guide attitudes and behavior based on the above research The objectives of the transition stage are to create a constructive environment for the target and the parent company, values are preserved, integration processes and assignments are performed, and the integration planning process is commenced. The HR has to articulate the principles guiding integration, decide the components that must be integrated and how it must be done, develop an integration plan, and communicate the process to all the stakeholders.
In the integration stage, all the planning activities are completed and implemented, and the organization is accordingly rebuilt. The HR should demonstrate a strong and committed leadership, build teams, motivate people and develop them into assets, achieve cultural integration, and manage the staffing process. Mergers and Acquisitions have three phases from a process perspective, and they must be managed as such. The phases are Precombination, Combination and Postcombination. Each of the stages must be analyzed keeping in mind the learning and knowledge transfer processes too. This occurs only when proper synergy is established. The employees of the parent and the target firm must feel connected and trust each other to enhance their learning curve. While all this taken care of, one must not forget the cultural compatibility or fit. They involve four strategies, preservation of unique and positive culture, absorption of operations and identity, symbiotic blending and integration of operations, and transformation that results out of all this. Development of intercultural training and competencies are an important factor in making a success of merger and acquisition processes. The key is to pay attention to human resource management, leadership, change management, communication, cultural integration, and knowledge transfer.
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